Change is Coming: An In-depth Look at Hy-Vee's New Store Formats

After decades of building sprawling, cookie-cutter stores in the suburbs, American grocers are turning their attention to smaller, more targeted locations that better fit current needs. One center of this transformation is Iowa—a state known for its agricultural bounty, not as a testing ground for the future of grocery.

Hy-Vee, known for continuously experimenting with innovations across its roughly 250 stores, is leading this trend with a series of purpose-driven store formats, aiming to win consumers with highly relevant and convenient shopping experiences.

Just a few miles from the company's headquarters sits Hy-Vee HealthMarket—an expanded version of the natural and organic food sections found in its traditional stores—and Hy-Vee Fast & Fresh, an upgraded convenience store where customers can buy everything from pizza and prepared meals to a $75 bottle of whiskey.

In downtown Des Moines, Fourth + Court Hy-Vee is the company's answer to the demand for smaller urban stores, targeting young professionals and empty nesters, many of whom live in the apartments above the store.

Hy-Vee opened its fourth Fast & Fresh location just this August and operates a HealthMarket concept store in West Des Moines, with plans to open more locations for both brands. The company has not yet publicly announced plans for additional Fourth + Court stores.

Grocery Dive recently visited all three store formats and spoke with store leaders to gain insight into their layout logic, design philosophy, and how they cater to today's evolving grocery consumer.

Fourth + Court Hy-Vee: An urban small-format 'grocerant' experiment

Hy-Vee opened this roughly 36,000-square-foot 'grocerant' in February 2017, just blocks from the Iowa State Capitol. Its product mix and layout target health-conscious, on-the-go customers who shop two to three times a week rather than stocking up all at once.

Upon entering Fourth + Court, customers first see the standard shopping cart corral next to the sliding doors. But these gray carts are much smaller than those in traditional stores, designed to hold just about the same amount as the small plastic hand baskets many people carry. Their compact size allows them to navigate the narrow center aisles stocked with items like Starburst candies, batteries, and portable fans.

"That's just our style. We're the company that says, 'Okay guys, clear your minds, think outside the box, nothing is going to be laughed at or considered not viable,'" Jeff Mallory told Grocery Dive. He served as store manager of Fourth + Court until August, when he was appointed to oversee another company store. "I think that's the reason this store exists, honestly. Change is coming, and it's coming fast, and it's not going to slow down."

Fourth + Court stocks a wide array of items geared toward convenience, health needs, and smaller package sizes. With few children in the surrounding area, the store does not sell diapers and carries only two types of infant formula. Its juice section is small and focused on specialty varieties like cherry.

Fourth + Court devotes more shelf space to categories like alcohol. The store features six aisles of shelves displaying rum, bourbon, vodka, tequila, and wines from France, Germany, New Zealand, Chile, and Spain; endcaps prominently feature Tito's vodka, Woodford Reserve whiskey, Camarena tequila, and six different Iowa craft beers. Nearby is also a growler station with 12 beers on tap.

Throughout the store, numerous display racks and coolers hold beverages such as teas, flavored waters, ready-to-drink coffees, kombucha, sodas, and energy drinks. Fourth + Court has strategically placed more than a dozen coolers throughout the store.

The store also prominently features a variety of snack bars and other convenience foods, many of which are located at the front of the store; its frozen pizza selection is nearly double the typical inventory for a store of its size. There is a large selection of ready-to-eat prepared meals, as well as fresh pizza, sushi, and salad stations where customers can order on the spot.

"I've had to completely rethink how I do my job," Mallory said. "The way we schedule, the way we stock—it's all completely different."

Unlike most Hy-Vee stores, which are busiest on Saturdays, Fourth + Court sees its peak traffic on Monday evenings—when many consumers who commute to downtown Des Moines for work stop in on their way home. Although the downtown farmers market draws roughly 25,000 to 30,000 people on weekends, the store itself is typically quiet on Saturdays.

Because it caters to grab-and-go customers, Fourth + Court does not sell gallon tubs of ice cream, dozen-count packages of cookies, or gallon jugs of milk. Instead, it offers pint-sized ice cream, half-dozen cookie packages, and half-gallon milk. La Croix is the store's best-selling 'soda,' whereas at other Hy-Vee locations, Coke or Pepsi typically tops the list. Organic black beans outsell conventional ones, and the top-selling tortilla chips are Hy-Vee's own brand, not Frito-Lay products.

Avocados are the best-selling produce item, and sweet potatoes outsell russet potatoes. In most stores, meat sales far exceed produce, but at Fourth + Court the opposite is true. The store initially had an open seafood counter but found that customers preferred single-serving frozen tilapia or salmon fillets they could use immediately, so it switched to frozen sales.

Hy-Vee HealthMarket: A standalone, amplified version of healthy living

When Hy-Vee opened its first HealthMarket store in West Des Moines in 2018, the concept was not unfamiliar to the Midwestern grocer. The roughly 15,700-square-foot store is a standalone version of the healthy lifestyle section the company introduced in its traditional stores in 2001.

The larger footprint allows HealthMarket to intensify its health-focused assortment, with more than 11,000 SKUs. Although the majority of products lean toward healthier options like cauliflower pizza crusts, kombucha, and gluten-free cereals, the store also carries conventional items such as grab-and-go sandwiches, soups, pizza, and a shelf displaying Hershey's chocolate bars, graham crackers, and marshmallows (for making s'mores).

"When we first opened, we thought we'd see our target HealthMarket customer, but we found that wasn't the case," Matt Pertzborn, store manager of the West Des Moines HealthMarket, told Grocery Dive. "Customers come in wanting to grab beef or chicken enchiladas from our Mealtime case, but someone else might genuinely want organic grass-fed beef. Our assortment has to span those different needs, making sure we have a little bit of everything."

In designing this new healthy lifestyle format, Hy-Vee had to make it distinctive enough not to cannibalize sales from nearby stores—there are already three Hy-Vee locations within two miles of HealthMarket—but not so niche that it only appeals to a narrow customer base. Pertzborn said the goal was to create a format that would attract consumers who shop multiple stores each week.

The store brings together a range of health-related services, including a full-service pharmacy, an Orangetheory Fitness studio, a hearing center, and an in-store dietitian. On a Friday evening this summer, the store hosted an event themed around sports nutrition, highlighting gluten-free, paleo, and keto products. HealthMarket also frequently hosts in-store events. Last month, the store offered free biometric screenings and organizes weekly diabetes nutrition walks, during which customers discover foods suitable for diabetics.

Just outside the Orangetheory Fitness entrance leading into HealthMarket, customers are greeted by Bevi flavored sparkling water, nitro coffee, bottled wine, energy drinks, and even chocolate, as well as a tap station offering eight locally brewed kombuchas. Around the corner, an entire wall displays more than 200 different energy bars from over 50 brands; there is also a 16-foot cooler stocked with chilled kombucha and probiotic drinks.

The novelty food section is stocked with Halo Top—the ice cream brand known for being low-calorie, low-sugar, and high-protein—as well as lighter versions from Ben & Jerry's and So Delicious (the latter made with cashew milk). Plant-based ice cream Wink, Rebel's low-sugar version, and Outshine fruit bars were added after customer requests. But recognizing that some consumers still want to indulge, Hy-Vee commissioned a local Des Moines ice cream maker to produce a special line of ice cream sandwiches, stored in a small freezer near the checkout.

Jennie Hiyani, who lives a few miles away in West Des Moines, said she prefers HealthMarket over traditional Hy-Vee stores because there is less junk food. The store has also prompted her to try new foods like kale for the first time. "I try to eat healthy, and I love that I can find almost everything I want in one store without spending a lot of money or having to search hard," Hiyani said. She purchased Angie's Boomchickapop popcorn and Blue Diamond nut thins that day. "Everything is right here, just right."

Hy-Vee Fast & Fresh: An upgraded model of the convenience store format

Convenience stores have long been viewed as pit stops for gas and greasy food. However, that is changing as operators realize the profits to be made from foodservice and upgraded store experiences.

The Fast & Fresh in Altoona, just 19 miles from the company's West Des Moines headquarters, is Hy-Vee's attempt to further elevate the concept. Its product range spans from salty snacks to premium spirits. Four aisles of wine and spirits, a walk-in beer cooler, and 12 local craft beers on tap make up what Hy-Vee says is a liquor selection comparable to any large grocery store—including many of its own locations that are nine times larger.

While most convenience stores are busiest during the workweek, store manager Antonio Romeo told Grocery Dive that his busiest days are Friday evening, Saturday, and Sunday.

"We have everything, just on a much smaller scale," said Romeo, a 20-year Hy-Vee veteran. "(Fast & Fresh) is convenience amplified. Convenience is probably the biggest thing on people's minds these days, and we're trying to solve a lot of that and give it a cool, modern feel."

Walking into this brightly lit, roughly 10,000-square-foot Fast & Fresh store, customers are greeted by the sight of donuts, coffee, lemonade, and the enticing aroma of hot dogs, jalapeño cheddar sausages, cheesy buffalo ranch chicken, and ranch steak cheese taquitos rotating on heated rollers.

But the store also carries fresh corn on the cob, tomatoes, pineapples, and pre-packaged nuts and trail mix. Some produce is even available pre-diced or chopped. Initially, meat offerings were geared toward winter oven or slow-cooker meals, but were later adjusted to include more summer grilling items like stuffed pork chops, stuffed chicken, and ground turkey.

An entire wall of prepared meals—from lasagna and pulled pork tacos to meatloaf and sweet potato kale chicken bowls—are all ready-to-go. The popular Mia Pizza wood-fired pizza station's sales outperform the same branded pizza stations at the company's other 14 traditional Hy-Vee stores, including a 95,000-square-foot flagship location 26 miles away.

The Altoona Fast & Fresh currently has little surrounding development, but the empty land outside the store is expected to eventually become an outdoor shopping center, a hotel, apartments, and restaurants. To attract customers and keep them coming back, Romeo posts about new craft beer arrivals on Facebook, offers 10-cents-per-gallon gas discounts on Fridays, and periodically runs buy-one-get-one-free pizza promotions.

He recalled a family that came in and purchased six custom-topping pizzas—originally $8 each, reduced to $5 at the time—and then stacked a half-price discount because they held season passes to a nearby amusement park. The family ended up paying only about $15 for the entire meal, which was a loss for the store—but in Romeo's view, the transaction was worth far more than that.

"That's basically giving it away, and my employees ask, 'Do you really think we should do this?' My answer is, honestly, I just want people to get into the habit of coming here," he said. "I'm not just planning for the long-term success of this store; I'm planning for the long-term future of the Fast & Fresh brand."