Target grocery makeover is in progress

Kavita Kumar
Star Tribune (Minneapolis)

Minneapolis — Amid all of the moving parts at Target Corp., one of the biggest question marks is an upcoming food makeover.

The overhaul aims to make Target’s grocery department into more of a destination instead of an afterthought. But it’s already taking longer than expected to figure out.

Take-and-prepare food items are easy to locate in the grocery area of the Target in Minnetonka, Minnesota, as are bulk food items.

When executives unveiled a strategic road map in March, they set an ambitious timeline for the food overhaul, telling analysts they would roll out the most substantial changes in 2016.

Now, Target officials say they need more time to hash out and test ideas — 2017 is the new rollout time.

“We want to get it right,” Target spokeswoman Katie Boylan said. “It’s less about how fast we go and more about making sure we implement the right kind of changes.”

Some of the questions on many analysts’ minds: How serious is Target in investing to improve its fresh produce? How far will it go in becoming a specialty grocer that focuses in organic, gluten-free and other artisanal products? And how radically different will the department look and feel?

“Everyone has the question: What the heck are they doing?” Amy Koo, an analyst with Kantar Retail, said at a recent workshop in Minneapolis.

She added that if what Target comes up with drives more trips to stores, it would be a huge success. Target executives have said that if a revamped grocery department could help drive each shopper to make one more visit to a Target store every three months, it would translate to $2.5 billion in additional sales a year. Food now accounts for about $20 billion of Minneapolis-based Target’s $73 billion in annual sales.

Target CEO Brian Cornell held executive posts at Sam’s Club, Safeway and PepsiCo.

To help guide the long-term plan, Target has been rolling out a series of small tests in select stores across the country, including a SuperTarget in suburban Minneapolis, which is finishing a $10 million remodeling.

When shoppers enter that store, they see a new kiosk on wheels that displays boxes of multicolored pasta, jars of premium marina sauce, bottles of white truffle oil, white bowls and sleek place mats, and cooking utensils.

It’s one of 450 Target stores with a bigger assortment of gluten-free, organic and healthier items.

Target execs have said that if a revamped grocery department inspires shoppers to make one more visit every three months, it would generate $2.5 billion in additional sales a year.

The SuperTarget features many of the new 150 items Target has introduced this year in its better-for-you, private-label line, called Simply Balanced.

In addition, the store is testing a much larger selection of bulk nuts, trail mixes and grains in serve-yourself bins. And the produce is laid out in wood-paneled receptacles and wicker barrels that aim to give it a fresh-from-the-farm look.

“It feels more like a refresh than a revolution,” said Sean Naughton, a Minneapolis retail analyst for Piper Jaffray & Co., “But I think it’s a step in the right direction for Target.”

Naughton and his colleagues have tracked a 49 percent increase in organic items at Target in the last year. Many have been from Target’s private brands. But he’s found that Target often sells even brand-name organic items for a cheaper price than Whole Foods.

One of the reasons Target can afford to do that, he said, is that the retailer gets good margins on its home goods and apparel.

“It allows them to be competitive on traffic-driving categories like food,” he said. “It’s a nice advantage they have compared to others.”