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Why Whole Foods is moving into one of the poorest neighborhoods in Chicago

The company parodied as 'Whole Paycheck' tests its own business model.

This long-abandoned lot in the Englewood neighborhood of Chicago was once home to a bustling business district. Now Whole Foods is planning to build a store here. (Photo by Warren Skalski for the Washington Post)

CHICAGO—The center of Englewood has been vacant for so long that many people in the neighborhood can’t quite recall when it became that way. Thirty years ago? Forty? It was after blockbusting began on the South Side, after white flight was well underway, after the big Sears Roebuck, with the Hillman’s Pure Foods in the basement, closed in the 1970s.

Sometime around then, the small businesses at 63rd and Halsted closed, too, and the buildings that housed them were razed. And so one of the busiest shopping corridors in Chicago was reduced to a desolate stretch of city: 13 acres of crabgrass and concrete with aging streetlights.

Glen Fulton opens a window on the fourth floor of the bank building on 63rd to look out at all this blank space. “What I experienced as a child,” he says, “I want to experience again.” He imagines a shopping hub that would bring back jobs and retail dollars and basic goods that are now hard to find here. Maybe a Corner Bakery, a Gap, a Famous Dave’s barbecue chain. And in the middle of it, an anchor that would serve the function Sears once did: an 18,000-square-foot Whole Foods.

The grocer, which has built its fortunes and reputation anchoring condo developments in wealthy enclaves, has never gone into a neighborhood like this. But last year, to the disbelief of many, the company announced plans to open a store in 2016 here, in one of Chicago’s most economically depressed neighborhoods.

When the city held a ceremonial groundbreaking a few months ago, Walter Robb, Whole Foods’ co-chief executive, showed up in Englewood and vowed that it would be “one of the most meaningful things we’ve done as a company.”

This store, though, is no act of philanthropy. Nor is it a bet, by Whole Foods, on neighborhood change. The arrival of its gleaming stores in a neighborhood often signals the influx of wealthier residents. But that is not likely to happen in Englewood, at least not any time soon. Whole Foods is planning to sell olive oil and snap peas to the people who live here now. It is also planning, in the process, to make money.

That proposition entails unusually high stakes for a supermarket. Whole Foods is gambling that it can tailor its high-priced brand to a low-income market. It’s gambling that it can create customers out of people who out of necessity have long shopped at corner stores and Save-A-Lot. It’s gambling that it may even change what some of them eat.

Residents like Fulton, who grew up in Englewood and now heads its community development corporation, are hoping that more food options will mean healthier residents. And they’re hoping that Whole Foods will attract other retailers in a way that a Giant or a Jewel might not, spurring a business revival here.

What the area could be

“You see that big house?” Fulton says, driving past a boarded-up single-family home a few blocks from the Whole Foods site. “A family should be in that house.”

Then he passes another building, a once-handsome but now-hollowed-out brick apartment where the sky is visible through the windows. A sign with an X has been hammered over the door, a cue from the fire department that the building is no longer safe to enter.

“That could be senior housing,” Fulton says.

His family moved here in the late 1950s, buying a beautiful 1882 Victorian home that still has its original stained glass, and Fulton, 55, still lives here. Around that time, real estate speculators were prodding white families on the South Side to move out quickly and for little money. They then inflated housing prices for incoming black families, a historic practice that shaped patterns of segregation in the city that still linger.

Fulton has old black-and-white photos he likes to show of the neighborhood before the city put in an expressway that sheared off one side of Englewood, before this cycle of flight and disinvestment. One shows that corner of 63rd and Halsted. The Sears Roebuck towers over a bustling street. The sidewalks are lined with small business storefronts: Grossman’s Shoes, Whelan Drugs, Wormser Hats.

At the time, in the 1930s, Englewood was 99 percent white. Today, it is 99 percent black. Once, 160,000 people lived here; now, 60,000 do. A third of the households live below the poverty line, and a quarter of adults are unemployed. Crime rates are among the highest in the city.

The neighborhood, though, has well-kept homes — like Fulton’s — that could be considered mansions. They’re tucked among vacant lots and empty buildings, many of them victims of the foreclosure crisis and bearing those Xs. One-third of the lots and homes here are vacant.

When Whole Foods selected the site, with the city’s help, it chose an unlikely neighborhood but a strategic location. It’s across the street from a community college culinary school, which opened here in 2007. There’s an elevated train stop at the corner, too, and a straight shot down 63rd onto the expressway that could bring other South Side shoppers to the store. The lot, where the city is spending $10 million to prepare all 13 acres for development, is large enough for several retailers and maybe some apartments or a park.

The neighborhood was targeted by the city as a “food desert,” although corner stores are common and discount-grocer Aldi’s is just down the street. Supporters of the project look at those alternatives and say Englewood doesn’t have the options most neighborhoods do — and that the options it does have box people into unhealthy eating. Skeptics look at the stores here and question whether Whole Foods can survive alongside them.

“The fact is that Whole Foods sells eggs at $2.99 a dozen, and they can go a block away to Aldi’s and buy them at 89 cents. That’s going to be an issue,” says Toni Foulkes, an alderman who worked for many years for the grocery chain Jewel and who questions whether Whole Foods will really be accessible to residents. “Can they afford to spend $5 for a loaf of bread? Or can they afford to get four loaves for $5 when you have five kids at home?”

After the groundbreaking over the summer, the Chicago Tribune called the Whole Foods a “socioeconomic experiment,” a phrase that made Mayor Rahm Emanuel and another local alderman, JoAnn Thompson, bristle.

“This is not an experiment. African American people are not an experiment,” Thompson says. “People need to stop thinking like that, that we cannot afford the things that people in other communities have.”

Looking beyond numbers

In summer 2013, Whole Foods opened a store in Detroit that also raised eyebrows. The Midtown location, though, had more customers at the ready: Pricey new condos are rising around it. Wayne State University and its medical center are nearby. The Detroit Symphony Orchestra is a block away.

As an inner-city outlier for the company, even the Detroit store does not quite approximate Englewood. But it was the first test of a larger plan for the company, within which Englewood represents the next move. Whole Foods has 402 stores. But it’s aiming for 1,200, an impossible number if the company targets only the high-income markets it’s already entered. Whole Foods also can’t get to 1,200 stores by only talking about the quality of food without addressing the price of it.

“Five or six years ago, we were starting to think internally about how we get to places like Detroit,” says Michael Bashaw, Whole Foods’ regional president for the Midwest. Its first store there, as with the one in Englewood, was an act of business faith, one where the company’s own market research looked grim. “Analyzing those numbers,” Bashaw says, “Detroit doesn’t make any sense, and should never have been approved.”

That doesn’t mean that Midtown Detroit couldn’t work — or that Englewood can’t. It means that none of what Whole Foods had learned about where it had been successful could predict if it would work in these places, too.

The company didn’t exactly receive a hero’s welcome in Detroit. Bashaw describes the first community meetings there as “difficult.”

“The common assumption is that Whole Foods is a store for rich, white people,” he says. “I think the community had a feeling that what retailers brought to Detroit was not their A game, but their D game, that the stores were not as nice, not as clean, not as well staffed, that the customer service was poor — that this was a disrespect to the community by giving them the leftovers.”

In those initial meetings, Whole Foods suggested that it emphasize its more affordable in-house 365 brand. Community members balked. If they were going to get Whole Foods, they didn’t want Whole Foods Lite. When the store opened, it didn’t carry porterhouse steaks. Then customers kept asking for them, and Whole Foods realized that it needed to rethink its butcher shop strategy. The store has had to adjust its expectations of its new consumers as much as skeptical shoppers may be adjusting what they thought of Whole Foods.

“The reputation as ‘Whole Paycheck’ is just something we have to continue to battle,” says Larry Austin, who manages the Detroit store. “Sometimes, people will come in the store and see that we have a 60-year-old aged vinegar, or olive oil that may be a little more expensive, and people will say, ‘You’ve got a $30 olive oil!’ But then, we’ve got 365 olive oil, and it sells for $7.99 for a liter.”

Whole Foods does, however, charge less for some products at its Detroit store than it does at Whole Foods in suburban Michigan. If avocados sell two for $4 in the West Bloomfield store, they may be two for $3 in Detroit. A pound of strawberries, in season, may be a dollar cheaper. The company has tried to set its price points relative to other supermarkets in the city, not relative to its own stores outside of it.

With that model, Bashaw says the Detroit store reached its 10-year sales goal in its first 14 months. In that time, it also had the highest food stamp use of any store in the region.

Detroit illustrates a tenuous balance the company must manage. If it doesn’t adapt its stores in communities looking for more value, the result will appear tone-deaf: $35 triple-crème brie for single moms in Englewood? Whole Foods could equally take flak, though, for selling Wagyu in the suburbs and chicken wings in the city.

“We will seek to price things to be more accessible,” Bashaw says. “But we only sell cage-free eggs. We’re not going to have 99-cents-a-dozen eggs.”

Growing here, selling there

The strange economics of food in Englewood are apparent on Wood Street, at an urban farm about a mile and a half from the Whole Foods site. Here, a nonprofit group called Growing Home churns out more than 30,000 pounds of produce a year, much of it on a once-abandoned industrial lot it bought from the city for a dollar.

The farm is in the middle of the neighborhood, bordered by a stretch of defunct railroad tracks and disputed gang territory. In the beds and hoop houses here, Growing Home is raising beets, cucumbers, greens and thousands upon thousands of tomatoes, all of it organic.

“People always ask if people steal the vegetables,” says Shaniece Alexander, the farm’s employment training manager, standing in front of a row of tomato plants wide open for the plucking. “No one steals vegetables.”

Only a small fraction of the produce is even sold in the community, at a farm stand on the property that draws a handful of regulars on Wednesday afternoons. Growing Home drives most of these vegetables to farmers markets on the city’s wealthier North Side, where it sells a bushel of carrots for twice what they cost at the farm stand.

“We’ve found that if you price it too low,” Alexander says, “people are wary of it.”

Growing Home reinvests all of its profit from the produce sales into the job-training program it runs on the farm, working primarily with residents in the neighborhood who have come out of the prison system. They learn how to plant, harvest, package and sell the produce as well as how to apply and interview for jobs in the food industry.

Growing Home sells its vegetables on the North Side because there are few places to sell it near here, but also because selling produce in Englewood wouldn’t generate as much money to support the program that trains people here to have jobs.

This is part of the food paradox of Englewood today: People don’t have much access to fresh produce, even though it’s grown in the neighborhood. What they do have access to is chips and soda, which are cost-effective to stock on corner-store shelves, or higher-cost perishables like milk that benefit from none of the economies of scale of a large supermarket.

As a result, snacks are cheap and many staples are not. People with less money wind up paying more for their food.

Whole Foods could, in theory, bridge the disconnect between Growing Home and its own neighborhood. Since announcing plans to come to Englewood, Whole Foods has donated money to the farm — $100,000 for a new hoop house that extends the growing season to 10 months — and helped install a walk-in cooler that extends the life of the produce once it’s picked. Both of these could help Growing Home become a Whole Foods supplier, as the company and the farm hope.

Near the Whole Foods site, the other odd food incentives in Englewood are on display. Walgreens is two blocks away and has several grocery aisles. It sells cut fruit in plastic containers alongside salad greens and a few baskets of apples and oranges. A display shelf for “smart buys,” though, features an 81/2-ounce bag of Uncle Ray’s sour cream-and-onion chips for a dollar. Walgreens sells just-add-water and microwaveable pasta sides, but no boxes of plain pasta. The food section has a sign to Walgreens’ valued customers that “this location accepts SNAP benefits.” It’s mounted in the chip aisle.

A block farther is the Aldi’s. Plastic-wrapped stacks of flour and boxed gallons of juice line the dimly lit aisles the same way they might in the behind-the-scenes storage of a more mainstream supermarket.

The milk is cheap — $2.09 for a gallon (it’s $3.69 at Walgreens). Customers are limited to four gallons, because the corner stores shop here, too. They, in turn, charge customers twice as much for that gallon.

“Those type of experiences,” says Kristopher Murray, executive director of the Washburne Culinary and Hospitality Institute at Chicago’s Kennedy-King College, “they only exist in areas like this.”

Needing a catalyst

The culinary school has a restaurant, Sikia, that looks out on what will be the Whole Foods. Three days a week, it serves lunch, a three-course prix-fixe menu prepared by the students that’s a steal at seven bucks. Their restaurant, with 80 seats, white tablecloths and aproned servers, is the only such full­-service, sit-down spot around.

When students first come to Washburne, mostly from the South Side, many have gotten their primary exposure to restaurant cooking on TV. They then take classes in pastry making and international cuisine, where they cook with products many haven’t seen: nori paper, almond milk, bread flour.

“It’s unlikely that’ll be at Aldi’s,” Murray says. Which also means his students probably can’t reproduce at home what they learn here.

Murray recognizes the mistrust that accompanies development in a community like this.

“‘When something new comes, automatically you’re not trusting it. Who does that benefit?” Murray says over a steak at Sikia that was not quite cut to his satisfaction. “Whole Foods, Starbucks, Chipotle — everything would be questioned. But as a resident, you’re at a point where something has to change. This place has to evolve. It needs a catalyst, and a catalyst means somebody with funds who can monetize the development has to be at the table.”

Murray is hoping that Whole Foods will employ some of his students. Likewise, Whole Foods is planning to use Washburne and its vast classroom kitchens to hold classes — in cooking, nutrition and shopping on a budget — it plans to start a year out from the store’s opening.

This, too, will be a delicate exercise (Whole Foods teaches people how to shop at Whole Foods!). But it’s quite likely the store won’t succeed if all it does is open its doors with no outreach. Education without access won’t do anyone any good — if you learn how to cook an eggplant but can’t buy one. The inverse is true, too.

Part of what Whole Foods sells is also its imprimatur, the assurance that it has traced the quality of its products so you don’t have to. Whole Foods has put its suppliers through a 131-step certification to ensure that your chicken was humanely raised. And while most customers don’t know that, they know that they’re paying to have that trust, whether they care about animal welfare or high-fructose corn syrup or hormones. Part of the question Whole Foods raises as it enters these new markets is whether it can also teach people to value that thing that sometimes makes food more expensive, that often feels like a luxury.

“Good food ain’t cheap, and cheap food ain’t good. And I appreciate that,” says Ed Peecher, the bishop at a church in Englewood. He and Thompson, the alderman, took a trip together to visit the Detroit store. He is prepared to preach now on its behalf for what he considers the health of the neighborhood.

“Price point was the Number One, the earliest, the strongest and the longest-lasting argument,” he says of wary residents. “And when you started contextualizing what price point meant in comparison to a $450 hair weave, or $120 sneakers, or $60 for a fifth of alcohol, then price point is not as strong of an argument as it initially was.”

If that sounds paternalistic, Peecher acknowledges that other people cannot say that. “I can say that,” he says. “I have credentials. I graduated from Englewood High School. I moved here in 1959.”

Bashaw’s pitch goes a little different. Whole Foods has never closed one of its stores, and he doesn’t intend for Englewood to be the first. If anyone is motivated to make this store viable, it’s Whole Foods, precisely because it’s coming into the neighborhood to run a business, not a charity. And it has signed a long-term lease.