Editor’s Note: Nearly 24 million Americans live in food deserts, low-income neighborhoods with no access to affordable, fresh, healthy food. As a result, people who live in these areas often have poor diets that can lead to higher levels of obesity and other diet-related diseases.
Fourth generation grocer Jeff Brown wants to change that. He’s opened seven ShopRite supermarkets in food deserts around Philadelphia. Paul Solman recently profiled Brown’s operation in the latest Making Sen$e Thursday on the NewsHour. Watch the full report below. For a closer look at what makes Brown’s stores successful, read Paul’s extended conversation with the entrepreneur, edited and condensed for clarity below.
— Diane Lincoln, Making Sen$e Producer
Paul Solman: Your family business is groceries?
Jeff Brown: Yes. My great-grandfather and grandfather started their own corner grocery store. They probably just wanted a job, but no one would give them a job as immigrants.
Paul Solman: How did you start in the business?
Jeff Brown: I worked for my dad after college, and he sold his company. I wanted to stay in the grocery business, and so I went to ShopRite and asked them if they would take me in — said that I would like to bring ShopRites to Philadelphia.
Paul Solman: What is ShopRite?
Jeff Brown: ShopRite’s a cooperative. And there are 48 other entrepreneurs like myself, and they operate stores from Virginia to Massachusetts. Each operator tends to be in a local area, where they know the local area, they’re from the local area, and we benefit from that knowledge, and each store sort of runs customized to the areas they serve.
Paul Solman: Was there a philosophy behind your going to ShopRite as opposed to some other grocery business?
Jeff Brown: Yes. The idea that it’s privately owned and business people, grocers, decide how we do things, based on what their customers told them, is a superior model.
Paul Solman: Superior to?
Jeff Brown: Superior to a large, national firm or a wholesaler that’s supplying you at a profit. They have their own objectives. At ShopRite, our objective is to serve our customers.
Paul Solman: Well, isn’t a national firm’s objective to serve its customers?
Jeff Brown: Yes, but in ShopRite, the owners who live in their stores, they make the decisions. And so the ability to adjust to serve our customers is, I think, better.
Paul Solman: And what would an example be?
Jeff Brown: In the Fox Street ShopRite in North Philadelphia, we use all induction and LED lighting. It costs more, but I don’t want to damage the environment. So as an entrepreneur who has that ability, I decide that’s what I want to do.
Paul Solman: And the national chain would be less likely to do it?
Jeff Brown: They’re going to look at the return on investment and that’s going to be the major guiding principle. And I’m interested in that as well, but I’m also interested in how I can not do harm or how I can help people.
Paul Solman: So you join ShopRite, and then what happens?
Jeff Brown: I started out as a one-store operator in Philadelphia. There weren’t very many ShopRites in Philadelphia at that time. I believe I was the second store, and over the 27 years, I grew.
Paul Solman: And you grew how?
Jeff Brown: A lot of times I grew, because one of my chain competitors would fail in the store, they’d close it, and I would buy the failed store and reopen it.
Paul Solman: So what do you do to make an insolvent location into a solvent store?
Jeff Brown: Well, with us, the process starts out with listening to our customers. We would spend time with them, go to community meetings, listen to what they were saying. We’d make observations about their religion, their race, their heritage. And that’s building up in our mind — how are we going to serve people in a really good way here?
Paul Solman: But how do the economics work? How do you make it profitable?
Jeff Brown: These stores don’t tend to be profitable on their own. And one of the innovations that makes this work possible is a public-private partnership in which we figure out a way to finance it to bring down the operating costs and mitigate some of the financial gap that would otherwise exist.
Paul Solman: And you do that in partnership with whom?
Jeff Brown: It started out with the Fresh Food Financing Initiative, which was a collaboration between the state of Pennsylvania, the reinvestment fund, which is a community development financial institution, or a nonprofit lender and some nonprofits. They organized the fund to finance grocery stores and help mitigate some of the financial gap.
Paul Solman: And is that because of the famous problem in the inner city, which is to say, the food desert?
Jeff Brown: Food deserts, right. That’s the problem we aim to solve. And it creates two big problems for society. One is it apparently leads to much accelerated obesity, and as you know, leads to all kinds of ailments — hypertension and diabetes.
And it also takes away the jobs that exist in society to service people. So not only do you lose the service, the community also loses the jobs of the service. And all those are building blocks to prevent poverty. So when you take it away, it accelerates poverty.
Paul Solman: So the food desert is the problem, and then the solution is a bunch of foundations and government agencies working with a grocery entrepreneur?
Jeff Brown: Well, yes! The truth of the matter is these public-private partnerships are a little different in each place you go, in each job you do, but the idea is that society will benefit from this business being here in a very big way. And the reason it’s not here is small, financially, compared to the benefit to society. And the idea would be that we’d organize interested parties — it could be one, two or three levels of government. It could be private foundations. It could be banks that want to finance something in an impoverished area.
Paul Solman: So a skeptic would say, “Wait a second. If this were viable economically, then someone would already have tried it. So this is really only government subsidizing your efforts.”
Jeff Brown: The free enterprise system did come up with a way to get food here. Whether it’s fast food restaurants or dollar stores, it’s not like the area had no food. The free enterprise system created food that was really making people obese. A diet of all processed food accelerates obesity, and those people end up in emergency rooms sick at a great cost to society.
Paul Solman: Or Medicare and Medicaid.
Jeff Brown: That’s right. All the government-funded programs. And so the government’s money is going to be at play here. This is a way to hopefully spend less by preventing people from being sick. I’ve come across all kinds of different elected officials that have different philosophies, and what makes this appealing to almost everyone is that it’s a free enterprise solution to a public problem. It’s the public investing a very small amount to solve a very big problem.
Paul Solman: Is there one key competitive advantage that you have over other people so that you can actually pull this off? Or is it a whole variety of skills?
Jeff Brown: I think everything that we do breaks down into two things. One, the deal has to work up front. The math. We still have bills, and we still have to pay our bills, and we have to be smart enough to understand what our costs are going to be and make sure we have a viable deal. And that gets into the public-private partnerships, because we don’t want to do this and have it go out of business.
The second avenue is the national food system was not designed for new immigrants, people of different religions, different heritages and ethnic backgrounds that have migrated from different parts of the country or world. And so it requires a far more flexible operation to listen and come up with what people want in this neighborhood.
Paul Solman: And so that’s a culture of inclusiveness, outreach and sort of local attentiveness that a national chain, who might be your competitor, wouldn’t have?
Jeff Brown: I think that’s exactly right. We’re very, very interested in people. We care about them, we want to serve them, and we also know from a business standpoint, serving them means revenues because if you sell something that you didn’t sell before, it’s more revenues. And a lot of times the things that we’ve innovated are more revenues than what is normally the case, because we finally have what the people want.