Indiana grocery and convenience retailers are facing mounting pressure from state tax policies, Supplemental Nutrition Assistance Program restrictions and transportation regulations, according to Joe Lackey, president of the Indiana Grocery & Convenience Store Association.
Lackey said while the state is financially stronger this year – “they’re suddenly finding money all kinds of places” – legislators did not cut taxes but instead raised them in several areas.
The failure to reverse a previous 200 percent tax increase on cigarettes has basically “put the stores out of business on cigarettes,” he said.
“In Indiana, we’re the smallest state west of the Alleghenies, so we’ve just transferred all that business out of state,” Lackey said. “And the same is true now with [SNAP], with the soft drinks and candy. They’re just transferring all that business out of state as well.”
Lackey said many Indiana residents live within about an hour of a neighboring state border, making it easier for consumers to purchase cigarettes elsewhere or buy, as he described it, “from the black-market guys who have regular routes like milk routes coming into Indiana now.”
Indiana has implemented federally approved SNAP restrictions on soft drinks and candy, which Lackey said also is leading consumers to shop across state lines.
“None of the states around us have restrictions,” he said. “They can take Indiana cards, and people can buy soft drinks and candy … It’s only negatively impacted the stores. The stores have lost a lot of sales as a result of it.”
Lackey added he has heard that some convenience stores are considering dropping SNAP because of state restrictions and more extensive USDA requirements for product inventory to maintain SNAP authorization.
If that happens, it will only compound the problem of food access as the number of supermarkets continues to decline in the state, Lackey said.
“You’ve only got the big box stores, and they aren’t exactly in a growth situation themselves,” he said. “You’ve got a lot of areas that are food deserts. You don’t have anybody there, and that’s becoming more and more of a problem.”
Independent grocers in crisis
Beyond taxes and SNAP restrictions, Lackey said broader structural challenges continue to threaten independent grocers in Indiana.
Last year, Lackey told The Shelby Report that regional chains like Hy-Vee and Houchens were acquiring independents without succession plans.
He said succession remains a question for many independents.
“It’s becoming very iffy,” Lackey said, adding that one of his members told him that when he was ready to retire, he planned to close his store because he did not think conditions in the state were going to improve.
Lackey also pointed to the lack of grocery warehouses in Indiana as another challenge.
“The consensus seems to be, on the grocery side, if you don’t own or control your own warehouse, you’ve got a really tough row to hoe,” he said. “It’s awfully hard to be able to operate.”
On top of recent restrictions that have placed additional burdens on grocery and convenience retailers, Lackey noted that Indiana “remains the only state in the United States where grocers can sell beer but can’t sell it cold.”
“When you’ve got those kinds of restrictions put on at the state level, that doesn’t really encourage people to continue to open stores,” he said.
‘Silly’ road rules harm investment
Another issue facing retailers is what Lackey described as problems with the Indiana Department of Transportation’s traffic-access rules that prevent drivers from making left turns into or out of some properties along major roads.
“They’re making it almost impossible to open stores because of silly rules – right in, right out,” he said. “You can’t come out the front of the store and turn left. You have to go right, go down to make a U-turn someplace and come back.”
He called the rule “absurd” and said the legislature is not addressing the issue.
Lackey said he helped one member appeal a project all the way to the governor’s office, but nobody intervened. The member ultimately abandoned the project and invested elsewhere.
“The people in that town ended up with no store,” Lackey said.
He also shared an example he said illustrates the impact of the DOT rule.
“There was recently a police chase that went right through that town to another town,” Lackey said. “The mayor said [they] had to take the police cars to a local farmer to fill them up with gas. This was on a brand-new interstate. There’s no gas station between Indianapolis and Evansville to refuel police cars – and they’re telling us we can’t open a store there?
“Indiana used to be a state that was friendly to business. Several people have said that’s not the case anymore. I don’t know that it’s intentional. It just seems to work out that way.”
Ready to retire
When Lackey spoke with The Shelby Report last year, he mentioned retirement but said he did not want to “quit a loser.” Now, he says he will file his final lobbyist report in November.
“After that, I’m pretty well done.”
Lackey is 80.
“I’ve had enough,” he said. “But the industry has been very good to me, and there are some tremendous people here. That’s part of the reason I’ve stayed.”
The association itself may not continue in its current form. Lackey said it is under consideration whether to keep operating, combine with another organization or dissolve. A decision is likely still a few months away.
“We’re not unique,” he said. “This kind of decision is going on all across the country because the number of stores is declining.”
Concerns about compliance, education
Before wrapping up, Lackey also addressed what he sees as changing dynamics within the retail industry.
Lackey said some newer independent operators may be unfamiliar with U.S. regulatory requirements and trade association participation.
“We’ve got a lot of new Americans coming in, opening companies, and they are not necessarily attuned to working with trade associations from where they come from,” he said. “That’s a problem for enforcement. It’s a problem for boards of health, because there are a lot of cases where they just don’t know the rules.”
He urged manufacturers and suppliers to help with education and outreach.
“Anything we can do to encourage them, I think that would be very helpful,” he said.
As for Indiana’s grocery industry, Lackey said the market remains uncertain.
“We haven’t had any mass closings,” he said. “People are considering that. People are looking at it. But we haven’t had a lot of growth, either.”
Lackey thanked The Shelby Report for its coverage, saying the industry values seeing what others across the country are doing.
He added that he remains hopeful for the future of both the association and the state’s grocery industry. “I hope it works out well.”
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