Whole Foods Stretches Low-Income Strategy

By venturing into a down-and-out Chicago neighborhood, the upscale food chain makes its biggest gamble yet

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Seven miles south of Chicago’s bustling downtown area is the neighborhood of Englewood, a community known for vacant buildings, stretches of empty lots and crime.

The residents of Englewood, almost 1 out of 4 of whom is out of a job, heard a surprising announcement last month: Whole Foods is coming, planning to bring its aisles of heirloom tomatoes and costly organic cheer, by 2016. Although Whole Foods has built in gentrifying neighborhoods, betting on an 18,000-sq.-ft. store in Englewood marks its biggest gamble yet.

The famously upmarket chain’s move into Englewood isn’t without precedent. Whole Foods opened a store in Detroit’s transforming Midtown neighborhood, where the company received $4.2 million in tax credits. In 2011, Whole Foods opened a store in Boston’s Jamaica Plain, drawing complaints from some neighbors. But Midtown’s Wayne State University and medical and art centers broadened the grocery’s professional clientele, while Jamaica Plain had already seen rising real estate sales and obvious signs of gentrification before the Austin-based company arrived.

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Englewood, however, is far from a community on the rise. Almost a quarter of the neighborhood’s declining population is unemployed, with 44% living below the poverty line. The most recent census data revealed that annual income per capita was $12,255.

“This is a bit of a stretch for us, but it’s the next stretch. And it’s one that makes sense,” said Whole Foods co-CEO Walter Robb. “We can keep taking on new challenges as long as we do it respectively and inclusively within a community.”

Robb said the store will be somewhat less expensive than other locations in the city, but he still expects it to turn a profit while broadening food choices in a community with limited access to fresh produce.

“We’re not running a charity,” he said. “But we’re running a business that has a real purpose-focus at the same time.”

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The move to Chicago’s South Side was made in conjunction with Mayor Rahm Emanuel, who worked with the company for more than a year to help pick the location. Of Whole Foods’ 322 U.S. stores, 17 are in Illinois, with plans to open three more locations in the Chicago area through 2015. Emanuel has aggressively courted businesses, and the city helped lure Whole Foods to Englewood with $10 million in tax-increment financing, a locally controversial gambit that allows the city to divert property-tax revenue to incentivize economic development. The Whole Foods store will be part of a 13-acre mixed-use development in the Englewood Mall TIF district, which was set up to revitalize the former shopping district at the intersection of 63rd and Halsted streets. The posh grocery chain has agreed to spend $3.5 million on the interior construction and equipment once the store is built.

Whole Foods has been quietly rolling out in underserved areas — a new store is expected in a low-income part of New Orleans in December — as a part of a greater strategy to open 1,000 smaller-format stores in smaller markets. Some experts say the strategy may signal new market growth for the company, which raked in $11.7 billion in sales last year, a 15.8% increase from 2011.

“Whole Foods in Englewood is a game changer. It would be interesting if this works out,” said Mari Gallagher, an independent Chicago-based consultant who analyzes the city’s food accessibility. “To figure out how to make it viable in a different prototype market; that would be a whole new customer base for them.”

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Robb said that low overhead makes the project financially feasible, allowing the store to focus on initiatives like offering lower-priced items compared with other locations, more of its in-house 365 Everyday Value brand, and pricing fresh food individually rather than per pound as well as accepting the state’s food stamps — a companywide policy.

“They’re going into the middle of one of the largest and most segregated urban areas in the entire country,” Chad Broughton, an associate professor of public policy at the University of Chicago, said of the South Side.

Whole Foods has tried to ensure a warm welcome in Englewood. The Whole Kids Foundation, the company’s nonprofit, has donated $20,000 toward cultivating urban gardens in Englewood’s Chicago Public Schools. The company has promised to work with students at a local community college located across the street from the Englewood store and add 100 jobs to the neighborhood. Whole Foods spokesman Keith Stewart said the company is unsure of how many jobs will be full time, but added that 70% of the Detroit staff is employed full time.

Earlier this month, Robb and regional president Michael Bashaw presented $100,000 on behalf of the company to Growing Home, a transitional job-training farm program that includes three urban farms on the South Side.

“It’s not your typical marriage in terms of economic development,” Asiaha Butler, a community leader and president of the Resident Association of Greater Englewood, said of the Whole Foods plan. “We’ve had a lot of mixed reactions and concerns about the affordability of the food and the motives behind the project.”

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The city hopes that Whole Foods’ impending presence on the South Side will spur retail development. The store’s investment in up-and-coming areas tends to accelerate gentrification. In fact, a 2007 study found that property values in proximity to specialty grocery stores like Whole Foods typically rise about 17.5%. But Englewood is far from up-and-coming. One of the city’s most vibrant local business districts before World War II, Englewood’s retail options are now mostly liquor stores and fast-food outlets. While there have been several attempts to revitalize parts of Englewood over the past several decades — including a $254 million new campus for Kennedy-King College in 2007 — private investment has never materialized in a substantial way.

The meeting of a down-and-out neighborhood with a brand known as “Whole Paycheck” could prove to be a significant event in the latest effort at revival.

“There’s always going to be a community agenda, a business agenda and a political agenda,” Gallagher said. “But it will take all of these agendas to make Whole Foods in Englewood work.”

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