The West Des Moines, Iowa-based grocer stands out from the rest
Chloe Riley | Sep 15, 2023
In its 93 years as a midwest retailer, Hy-Vee has only had five CEOs.
Yes, count ’em: just five.
“I think if you look at the culture of Hy-Vee, the culture of Hy-Vee has really always been about the family of Hy-Vee,” said Randy Edeker, one of those former CEOs who now sits on Hy-Vee’s board of directors. “It’s a focus on autonomy, hard work, resourcefulness, ingenuity, all of those things.”
“Being ‘bold’ is another thing I talk about all the time,” Edeker added. “Make bold decisions, and fail fast, and keep moving to stay ahead of our customers.”
“Bold” is certainly the word to describe the strategy of the West Des Moines, Iowa-based retailer over just the past five years. In that amount of time, Hy-Vee has continued to ramp up its growing expansion in pharmacy and health care; rebranded its Hy-Vee Gas convenience concept to Hy-Vee Fast & Fresh; and continued to lead the market with its foodservice and prepared foods strategies.
“I think if you look at the culture of Hy-Vee, the culture of Hy-Vee has really always been about the family of Hy-Vee,” said Randy Edeker, one of those former CEOs who now sits on Hy-Vee’s board of directors.
Started in 1930 by Charles Hyde and David Vredenburg, the first Hy-Vee was a small store in Beaconsfield, Iowa. A shortened version of both Hyde’s and Vredenburg’s names eventually became “Hy-Vee.”
Since then, the employee-owned Hy-Vee’s growth has skyrocketed, with the company to date operating over 285 food and drug stores under a range of formats in Iowa, Illinois, Kansas, Minnesota, Missouri, Nebraska, South Dakota, and Wisconsin. The retailer now generates annual sales of over $13 billion.
Health care plays a massive, massive role in Hy-Vee
Hy-Vee’s foray into health care and pharmacy over the past decade (and even just the past five years) has been extensive. In 2014, the retailer acquired Amber Pharmacy, one of the largest privately owned specialty pharmacies in the country and a driving force behind Hy-Vee’s national health care strategy. That acquisition allowed Hy-Vee to move forward with providing specialty pharmacy services in all 50 U.S. states and Puerto Rico.
Amber Specialty Pharmacy has also allowed Hy-Vee to launch and operate several new national health care ventures like RedBox Rx, the retailer’s online telehealth and online pharmacy provider, and its newly formed pharmacy benefit manager Vivid Clear Rx. The acquisition has also helped the retailer grow its retail pharmacy footprint.
“We’re viewed as a food company, but our largest department is pharmacy,” said Jeremy Gosch, Hy-Vee CEO since 2022. “So health care plays a massive, massive role in Hy-Vee, and I think we’re just scratching the surface of what we’re going to be doing with health care moving forward.”
Perhaps the retailer’s most ambitious step into health care would be the launch of the first Hy-Vee Health infusion clinic, opened in April in West Des Moines. (A second opened in Chicago in August). The clinics service those who receive IV infusions on a regular basis (patients with MS and inflammatory conditions like Crohn’s and Colitis), and bridge the gap between hospital care and home care, according to Hy-Vee President Aaron Wiese, who added that Hy-Vee saw an opportunity and moved on it.
“We saw a need in a lot of different markets where we could provide something that was different with a really comfortable, accessible site for patients to come in and receive infused medications,” said Wiese.
“It’s a very exciting area of growth for us,” added Wiese. “And we have plans for a really robust rollout for the infusion clinics across the United States. We’re excited about that extended reach for Hy-Vee.”
The biggest challenges in this space, according to Wiese? Staffing, including the need for technicians and pharmacists. And then additionally, playing in a market with well-established players like CVS and Walgreens, in addition to retail players like H-E-B and Publix, both of which have retail pharmacy components, as well as some retail dietitian presence.
The biggest opportunities? Strong growth for Hy-Vee’s prescription business, as well as increased sales in that department.
Automation efforts to free up pharmacists. And closing the gap on health screenings, which Wiese said he sees as a major opportunity for the company.
Leading the way in foodservice
Hy-Vee employs over 6,600 workers in its foodservice division alone. In more metropolitan areas, Hy-Vee stores have full-blown food halls, featuring restaurants which include: HyChi, The Hibachi, Nori Sushi, Market Grille, Wahlburgers at Hy-Vee, Long Island Deli, and Mia Italian.
In more metropolitan areas, Hy-Vee stores have full-blown food halls, featuring restaurants which include: HyChi, The Hibachi, Nori Sushi, Market Grille, Wahlburgers at Hy-Vee, Long Island Deli, and Mia Italian.
According to Gosch, the company plans to expand its Mia Italian concept — Neapolitan pizza done in four minutes, cooked in a 700-degree oven. Hy-Chi, the company’s Chinese food concept, also just continues to dominate, Gosch said.
“It’s all about being customizable now — customers really want what they want. We’re selling our fried chicken, we’re selling our chicken strips that are made fresh and breaded in-store every single day. So everything we do in our food hall really begins with quality.”
Labor and retention has been a challenge in hospitality and retail, especially over the last three years since the start of the pandemic. So what’s it like running multiple restaurant concepts within a supermarket chain?
“It’s a real challenge, we’re no different than anyone,” said Edeker. “We face the challenges, just like everyone else does.
“[Foodservice] is not always easy. It’s not always the most desirable job. But it really falls on us to make it a really good job and a real job in our company that has a path where you can improve yourself, do better for yourself and your family, and make a life for yourself.”
“It’s all about being customizable now — customers really want what they want,” said Jeremy Gosch, Hy-Vee CEO since 2022.
Automation has also been a big help in terms of streamlining labor within the company’s foodservice operations, Edeker said.
“It’s about taking the busy work out of those perishable departments…[our employees] are not chopping onions,” he said.
Fast & Fresh
In 2019, Hy-Vee announced that it would be rebranding its Hy-Vee Gas convenience concept to Hy-Vee Fast & Fresh. The rebrand was largely about tapping into consumer demand for prepared foods. To date, there are close to 190 Fast & Fresh stores, and Hy-Vee plans to expand the concept, opening three more stores between now and spring 2024.
Each Fast & Fresh has a Market Grille Express, a food concept with a smaller selection of items to Hy-Vee’s traditional in-store Market Grille restaurant concept.
To date, Hy-Vee has opened 89 Market Grille Expresses within its Fast & Fresh concept, with plans to add several dozen more over time.
To date, Hy-Vee has opened 89 Market Grille Expresses within its Fast & Fresh concept, with plans to add several dozen more over time.
“We think the key is really fresh food made to order,” Gosch said.
The company is also in the process of transitioning its original Market Grille concept to Wahlburgers at Hy-Vee, with a plan to convert more than 20 Market Grilles before the end of 2024.
Hy-Vee first partnered with Wahlburgers, the burger chain from brothers Mark, Donnie, and Paul Wahlberg, in 2018, and now operates 69 Wahlburgers at Hy-Vee locations. The company announced earlier this year that it would move away from partnering on freestanding Wahlburgers; moving forward it will only open in-store versions of the burger concept.
The in-store Wahlburgers locations also offer full-service breakfast. In 2022, Hy-Vee said it saw a 15% increase in breakfast sales as a result from the launch of its new breakfast menu, first offered in 2021.
We said we were going to have the best breakfast in America, and that’s what we’ve done,” said Gosch. “We traveled all over to what we consider some of the top restaurant chains in America that do breakfast, and that’s how we developed our breakfast menu.”
Hy-Vee currently produces over 250 items at its fresh commissary, a centralized kitchen which opened in Ankeny, Iowa, in 2018.
Popular sellers include pizza, chicken Alfredo, lasagna, fresh salad kits, HyChi items, and white cheddar macaroni and cheese.
Next year, the retailer plans to add new pizza flavors to its Tonucci frozen pizza line and develop new salad kits.
“The commissary…has been a fantastic growth area for us,” said Gosch. “And we continue to add space. Customers are looking for not only easy quick meals, but nutritious meals, which we’re able to do with a variety of food and product lines that are made fresh and sent to the stores. So, it’s been fantastic and it’s been a good avenue for us. I see the growth [continuing] there.”
Video and retail media
Hy-Vee first launched its video platform, HSTV (Helpful Smiles TV), in 2018 and has since seen over 45 million views on its video content. In 2021, the retailer added shoppable content technology to the platform. Series that have seen the most success to date include “Beard Behind the Bar,” hosted by a mixologist. One season featured celebrities like Mark Wahlberg and 50 Cent. Other series that have performed well include a holiday how-to series, as well as “Cin Cin to Italian,” hosted by celebrity chef Fabio Viviani, which specifically promotes Hy-Vee’s Italian private label brand.
Despite these successes, Hy-Vee will be moving away from the HSTV name and rebranding all of its video content to “Seasons,” a nod to Hy-Vee’s Seasons magazine, a bi-monthly print magazine launched in 2006 that “has been one of our strongest and most consistent brand tools to date,” according to Hy-Vee President Donna Tweeten.
“While we’ve seen great engagement with our content, we have learned throughout the past five years that there is a brand awareness gap for HSTV,” Tweeten said. “By leaning into the brand recognition of ‘Seasons,’ SeasonsTV will be part of a larger, all-encompassing content hub for Hy-Vee shoppers.”
Red Media, Hy-Vee’s retail media network, launched in 2022. According to Tweeten, opportunities for Hy-Vee are omnichannel and personalization, which the retailer plans to lean into heavily.
“More and more, consumers are cutting traditional cords and finding information and entertainment in non-traditional ways,” Tweeten said. “That, coupled with a growing distrust for traditional advertising and big brand ads, is creating new opportunities to reach customers…personalization, driven by our data, will be the engine that allows us to be everything to everyone.”
By 2025, Hy-Vee plans to expand into four new states and build a distribution center in Nashville, Tenn., opening more than 20 new stores. In 2024, the retailer will break ground in the southeast, in addition to locations announced in Indianapolis and Nashville.
A focus on “fresh” has become critical across Hy-Vee’s branding.
In terms of health care, Hy-Vee continues to expand Vivid Clear Rx, the company’s PBM (pharmacy benefits manager). First launched in 2020, Hy-Vee did an initial test run of the program by creating a health care plan for its own 80,000-plus employees. Now, Hy-Vee has had “a lot of great success” selling those services to small or midsize employers across the U.S., according to Wiese.
Wiese said Hy-Vee’s differentiating factors in the space include not holding rebates (they get passed through to employers with a per-member per-life cost), and there’s also no spread pricing, which means no cost difference between what Hy-Vee charges the employer group and what the company reimburses to the retail pharmacy.
“Our strategy around health care is really focused on the customer and really being the destination for the customer for their whole health and well-being,” according to Gosch.
The company also positions itself holistically when it comes to health. The HealthMarket concept, first launched in 2001, is Hy-Vee’s answer to the wellness aisle in Whole Foods — shoppers can find supplements, organic items, and specialty items that target diets like keto, paleo, gluten-free, and dairy-free.
There are currently over 190 HealthMarket departments across the company, and additionally, in 2022, Hy-Vee launched the ecommerce site WholeLotta Good (www.wholelotta.com), which ships dietitian-approved products to consumers across the U.S.
In May, the company also launched Healthy You, a $99 monthly subscription service that gives members access to dietitians and wellness services.
Wiese wouldn’t give specific numbers, but said so far Hy-Vee is “very, very pleased” with the initial growth of the subscription service, adding that the company plans to eventually roll out variously priced tiers of the dietitian service.
Hy-Vee Plus Premium, the retailer’s $99 annual loyalty program which rolled out in 2020, also has plans to keep growing. Gosch said he sees it as a “viable growth engine” where the company will continue to add perks and advantages as it makes a play for shopper loyalty.
Hy-Vee is also planning on “a big play” in the expansion of its Wall to Wall Wine and Spirits liquor store concept, first launched in 2021, according to Gosch. The company currently has four locations: one in West Des Moines, two in Omaha, Neb., and one in Lincoln, Neb., with further expansion plans for several new locations.
At the end of the day, both Gosch and Edeker would tell you — it’s the people at Hy-Vee who matter most. All five of the company’s CEOs started off as in-store baggers or cashiers. And of the many employees Supermarket News spoke with — be they store managers or VPs — all told us about their decades-long careers with the retailer. How they had been given opportunities to grow in their careers; how their fellow employees at Hy-Vee really did feel like family.
“Our strength is our people,” said Edeker. “It’s our people that stay in tune, study, think, have an opinion, voice the opinion, and then move with real focus. That keeps us fresh. That keeps us strong.”