As Living Cities explored opportunities to support innovations in the food system through our Green Economy Working Group, we were drawn to the substantial economic impact of the food system on low-income communities.
In particular, we quickly learned of the prevalence of poor quality jobs throughout the U.S. food systemand recognized the potential of small- and mid-sized food businesses to create quality jobs for low-income people. So we actively sought leaders at the forefront of operating food businesses that provide quality jobs and career pathways for low-income community members.
Out of this effort came a partnership with UpLift Solutions – a national non-profit working between food businesses, governments, and nonprofits to support the creation of full-service, community-oriented supermarkets in underprivileged neighborhoods. The UpLift model comes from founder Jeff Brown’s experience as CEO of the 11-store ShopRite chain in Greater Philadelphia. His ShopRite stores have received national recognition for addressing the lack of access to food that many underserved communities experience while offering employment opportunities to those that need it most – including ex-offenders.
Living Cities is engaging with Jeff and UpLift Solutions to learn more about the mechanics of his business model and the value in creating career pathways for local low-income residents. We conducted a series of interviews with Jeff to kick off this work. In this first installment, Jeff and I discuss the specifics of the UpLift supermarket business model, including the impetus for its creation and lessons from its successes and challenges.
What made you decide to experiment with a new supermarket business model?
Jeff: Well, I’m a fourth generation grocer. Almost all of my family in the business has experience in serving underprivileged communities - so it’s kind of in our DNA. But what really sparked my interest was a convening by The Food Trust to discuss new evidence about food deserts causing a horrible harm to our society and health care system, and exacerbating the circumstances of poverty.
On one side, I was incredibly struck by the potential that solving this problem could have for our society. On the other side, I was fascinated by how the American free enterprise system wasn’t working. There is great potential to open and operate strong businesses in emerging areas, yet others fail to see the opportunity.
What is the role of a grocery operator in low-income neighborhoods?
Jeff: Operating a supermarket in distressed areas isn’t for every grocer – and there are structural reasons for that. People have different missions. But the problem is created by more than what’s in control of the grocer. So it occurred to me that food deserts could be solved if all sectors work together.
Ultimately, a grocer needs to be willing to have a different kind of business model and to work with stakeholders typically uninvolved– the public and philanthropic sectors. This problem is solvable if we work together.
How did you decide that both the public and philanthropic sectors should be involved?
Jeff: If entrepreneurs pursue opportunity, why aren’t there more supermarkets in low-income neighborhoods that lack services? This doesn’t work because these stores lose money in almost every case. A lack of affluent customers, a different mix of goods purchased, and the side effects of poverty - like an untrained workforce - cause a financial gap in grocery stores.
Yet the grocer doesn’t control these circumstances. Instead, the people that spend their lives trying to figure this problem out are the public and philanthropic sectors. Governments have been trying to fix these problems ever since governments have existed. So there had to be another way. To me, it made sense that the solution would include partnering with other sectors.
What steps did you need to take to address this problem?
Jeff: We first had to fill the grocer’s financial gap. So we built supportive infrastructure with Pennsylvania’s Fresh Food Financing Initiative (FFFI) to fill the financing gap of grocery store projects. This was step one: to mitigate the financial barrier through a public, private partnership. In FFFI, The Reinvestment Fund, the community development financial institution (CDFI) that managed the initiative’s lending, combined private and public funds to support the development of new supermarkets.
I did the very first project in Southwest Philadelphia. We looked at the pro forma of the project – which had a big gap – and saw the store wouldn’t stand on its own. So we used the combination of FFFI grant dollars, loan dollars and new market tax credits. With these resources, we were able to turn the pro forma into one that could pay back its loans.
The second step was to address that a suburban store’s market dynamics do not match those of a low-income community. So we met with community leaders to understand their past experiences and identify opportunities to do a better job for them while also doing better financially. We quickly realized that one key to success was in pricing. You can’t fill the gap by charging consumers more. Another key is that the quality had to be the same. Our goal was to meet a top notch suburban standard in a different environment with no inferior quality or conditions.
The third step we took was to become intertwined with the community, so that our initial efforts wouldn’t be a single occurrence. So we added a community room and hired a community coordinator to keep the dialogue between local leaders and the store alive.
What players or stakeholders need to be collaborating on this work?
Jeff: Two levels of collaboration are critical. First, establishing a public-private partnership with flexible dollars from public and private sources requires participation from all levels of government. It also needs representation from the food industry and from nonprofits in this field. Foundations may also need to be involved where governments are too strapped to do this on their own.
Some problems can even be addressed through collaboration without additional investment. For example, in many states, SNAP (the Supplemental Nutrition Assistance Program) is distributed once a month. That’s a huge problem. If the goal is access to healthy food, SNAP recipients can’t buy fresh food that lasts a whole month. Similarly, businesses can’t maintain a reasonable cost structure if they do most of their business on 3 days with little business the rest of the month. This needs to be changed.
Secondly, the store and the community should become more integrated. Supermarkets without close bonds to the community have more difficulty being successful. Having the right merchandise and recognizing the unique issues of the community are both important. When the community is with you, material measures of success start to improve. For example, once we engage a community properly, theft will decline, making the store more viable in the long run.
What do you see as the value in hiring locally?
Jeff: Historically, businesses have done the opposite. A store might be in an African-American neighborhood, yet all the managers and senior staff would be Caucasian from outside the community. That causes bitterness and damages a store’s relationship with area residents. Instead, hiring locally helps bring a community and store together.
Furthermore, a supermarket often has 250 or 300 jobs. With every job you don’t give to local residents, there is a ripple effect on your business- the community can’t earn income and the additional business that can result from that income never makes it back to the store. It’s self-defeating.
How did you begin to implement local hiring practices into your supermarkets?
Jeff: At first, we started building a network of nonprofits to help us select and train our workforce. Our goal was to hire locally as much as possible and to prepare people to work so they could be successful. Ultimately, we incubated a nonprofit - ABO Haven – that became our lead workforce partner. They built a mock supermarket in Center City and drew from the ex-offender community and from welfare rolls to get new workers in the grocery industry. We committed to hiring every trainee. After we staffed up completely, the program expanded to other employers. By the end, it created a training operation for the industry itself.
What are the differential benefits and related costs of the added workforce services in your stores?
Jeff: There are two ways to look at this. Let’s start with the public sector point of view. If you look at workforce efforts, they don’t often help the worst off because their requirements cause employers to be interested in people who have more education or are not ex-offenders. They are often creaming from the workforce.
In our effort, we are not creaming. We are not trying to pick the least challenging situation. We are dedicated to hiring as many local workers as possible and to giving them what they need to succeed. This is a chance to take people who have been financial burdens on society and support them to become contributing members. We have the chance to fix this for both existing and future generations. If you look at the financial benefit to society mathematically, it’s very substantial.
From the supermarket side, our training cost is still four times more than my suburban stores, even though we used non-profits and public incentives. Naturally, it’s a challenge to fund. Yet workforce development is necessary. If you want to run a first-class inner city grocery store in an underprivileged area, you need to partner with others to get the job done at a lower cost.
What can be done to reduce the barriers of replicating this model?
Jeff: We need to document the best ways to operate inner city groceries. The more obstacles we can remove for interested grocers, developers, public officials, non-profits, and foundations, the easier the work becomes.
In many ways, this is the bigger goal of UpLift Solutions and what we hope to accomplish through partnering with Living Cities – to share the creative business strategies we used and make it easier for others to develop similar approaches for their own context.