Walmart opens 48,585-square-foot Neighborhood Market in Crestview, Florida

Walmart opened another small-format grocery store this week, a 48,585-square-foot Neighborhood Market on the north side of Crestview, Florida. The format runs on fresh grocery and fast fill-in trips. C-store operators have been chasing that same business with bigger kitchens and expanded foodservice, and Walmart can beat them on price.

Walmart's small format

A Neighborhood Market is not a full supercenter and it is not trying to be. It is a grocery store sized to drop onto a busy corner, which is exactly the corner a convenience store wants. One of these within a couple of miles pulls the center-store and snack trip, the trips that carry margin when fuel does not.

Crestview is one store. Walmart has leaned on this format when it wants grocery share without the cost and permitting of a supercenter, and each opening narrows the price gap a c-store can hold on packaged goods and drinks.

The Farmington beer permit

A Valero station in Farmington, Connecticut lost its bid to sell beer this week. The owner wanted to add packaged beer, arguing the convenience side of the business could qualify as a grocery store under the state's rules. That designation is the lever a lot of operators reach for when they want packaged beer without a full liquor license.

It never reached the state liquor board. Because the store sits close to an existing package store, Farmington required a town certificate of zoning compliance first, and the zoning board voted no in a split decision. Members cited too many alcohol retailers near a playground and a heavily used rail trail.

Beer is one of the stronger margin lines on a c-store shelf, and it pulls the basket trip that goes with it. The grocery-store workaround is how operators try to add it where the local rules were not written with a gas station in mind. Farmington shows how fast a local board can close that door on proximity grounds alone, before the state ever weighs in.

What to watch

Whether Walmart keeps adding Neighborhood Markets at this clip, and where. The openings near fuel-and-food c-stores are the ones that hurt packaged-goods sales. On beer, watch how other towns treat the grocery-store designation when the applicant is a gas station. If zoning boards keep leaning on the playground-and-package-store distance rule, the paper path to a beer cooler gets harder, and operators may have to buy an existing permit instead of arguing for a new one.