Heirloom Tomatoes, Coffee Help Attract Foodies to U.S. Malls

Malls angling to reel in American shoppers are using groceries as bait.

In some locations, they’re bringing in supermarket chains to do the job. In May, Westfield Group (WDC) is opening an Aldi grocery in a Chicago-area shopping center. In other malls, the owners are aiming upscale and establishing farmers-market-style food courts with a cornucopia of artisanal products.

“They are things a foodie would be attracted to,” said Arthur Coppola, chief executive officer of Macerich Co. (MAC), which in May plans to open The Market at its Santa Monica Place mall.

More U.S. retailers are selling groceries these days. Walgreen Co. (WAG) and CVS Caremark Corp. (CVS) are putting fresh veggies and sushi up front with the cough syrup. Wal-Mart Stores Inc. (WMT) is offering food in more urban neighborhoods, and Target Corp. has put comestibles in more than 460 locations.

Grocery stores pull in shoppers almost nine times a month, three times as often as malls do, according to trade groups.

The idea is that if people come to the mall to buy food they’ll buy other merchandise, as well, said Dan Fasulo, the managing director of Real Capital Analytics, a New York firm that provides real estate data.

Fresh food “definitely has the ability to drive more traffic and make a mall more profitable,” Fasulo said.

By 2020, stores selling groceries will account for as much as 5 percent of the square footage at U.S. enclosed malls and lifestyle centers, according to an estimate by Craig Johnson, president of Customer Growth Partners, a New Canaan, Connecticut-based retail consulting firm. Today, they represent less than 1 percent of square footage, he said.

Soufflé Bar

“The percentage is growing as more malls are redeveloped,” Johnson said.

When Coppola was looking to open The Market in Santa Monica, he took his cues from the city’s twice-weekly farmer’s market. Rockenwagner Bakery, which sells its wares there, will operate a soufflé bar at the mall. Other vendors will sell heirloom coffee, small-batch vinegars, artisanal meats and wine. The Market also will have a cooking school, where chefs will teach shoppers how to work such seasonal produce as artichokes into their meal menus.

The mall’s food offerings, which already include six celebrity chef restaurants and nine fast-food counters, are helping generate sales of more than $1,000 per square foot, Coppola says, compared with less than $400 before the shopping center was refurbished.

‘Next Frontier’

“Adding food choices in a shopping environment helps extend” how long shoppers stay, Coppola said. “You can generate traffic, traffic creates sales, sales create profits, and profits create the ability for tenants to pay the rent.”

Santa Monica-based Macerich, the third-largest U.S. mall operator, rose 37 cents to $47.98 at 4 p.m. in New York Stock Exchange composite trading. The shares have increased 24 percent over the past 12 months.

Mall owners are luring supermarket chains to a range of locations, from middle- to up-market. Macerich, which in December opened a Hispanic market at its Desert Sky Mall in Phoenix, has signed leases with Costco Wholesale Corp. (COST), SuperValu Inc.’s Albertsons and Trader Joe’s.

General Growth Properties Inc. (GGP), the second largest U.S. mall operator, sells fresh food at “many” of its 169 malls and is steadily adding more, said Executive Vice President Michael McNaughton, who declined to provide specific figures. One of the company’s San Francisco malls features a Trader Joe’s market.

“Grocery is the next frontier,” he said.

Chicago-based General Growth Properties rose 22 cents to $15.20. The shares have advanced 40 percent over the past 12 months.

Full Circle

Westfield Group this summer is replacing the traditional food court at a Skokie, Illinois mall with a marketplace offering gourmet prepared foods and groceries, said Katy Dickey, a Los Angeles-based spokeswoman. This will bring to eight the number of its 55 U.S. malls that sell groceries, Dickey said. Westfield shares rose 13 cents to A$9.79 in Sydney.

U.S. malls are coming full circle. Fifty years ago, supermarkets were tenants in many American shopping centers, said John Bemis, an executive vice president at Jones Lang LaSalle. By the 1960s and 1970s, they could no longer afford the rents and fled to cheaper precincts, he said. Now, in the wake of the real estate slump, they’re back.

Next Coppola may tackle Macerich malls in San Rafael, California and Scottsdale, Arizona.

“It’s a no-brainer,” he said.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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