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Grocery store financing program to be announced

The $200-million California FreshWorks Fund is designed to encourage grocers to expand into underserved communities to improve access to healthful, affordable food.

July 20, 2011|By P.J. Huffstutter, Los Angeles Times
  • First Lady Michelle Obama, seen above last month in Washington, is expected Wednesday to announce California FreshWorks Fund, a financing initiative to encourage grocers to set up shop in underserved communities such as South Los Angeles. The financing should be enough to create or retain around 6,000 jobs in California, according to fund officials.
First Lady Michelle Obama, seen above last month in Washington, is expected… (Jim Watson, AFP/Getty Images )

In a bid to fight childhood obesity and change eating habits on the local level, First Lady Michelle Obama is expected to announce a healthful food financing initiative Wednesday that aims to draw grocery stores into so-called food desert areas in California.

The $200-million program, dubbed the California FreshWorks Fund, is a joint effort by the California Endowment and a team of grocery industry groups, healthcare organizations and leading Wall Street banks.

Modeled after similar funds launched in New York City and Pennsylvania, the idea for the California fund was hatched about 18 months ago by the California Endowment, a private, statewide health foundation. Starting with a $3-million grant and $30 million in seed capital, the organization recruited partners to grow the loan pool, including JPMorgan Chase & Co., Kaiser Permanente, savings bank NCB, the Unified Grocers wholesale cooperative and the California Grocers Assn.

The goal, said organizers, is to provide financing at or below market rates to encourage grocers to set up shop in underserved communities such as South Los Angeles to increase consumers' access to healthful, affordable food.

"It's key to getting developers to realize they can operate in these areas profitably, to get past some of the myths of operating in these communities," said Dudley Benoit, senior vice president of JPMorgan Chase's community development banking.

Fund organizers said they also hope the fund will spur economic development in these areas at a time when bank lending remains tight. The financing should be enough, said fund officials, to create or retain about 6,000 jobs in California.

The loans will be available to food retailers big and small. Fund organizers expect that a portion of the lending will help mom-and-pop grocers and small, independently owned chains expand existing retail space and install new equipment such as refrigerated displays for fresh produce, eggs and meat, or build new stores in underserved communities.

The money could also be used by grocers to develop new distribution models, such as mobile produce trucks, to bring healthful foods into these neighborhoods. Or it could be used to finance collaborative, wholesale purchasing to help small retailers lower their costs. Details are still being worked out, but organizers are planning outreach efforts to advertise the loan program.

"When we started down this road, we were trying to figure this out for South L.A.," said Tina Castro, director of mission-related investments for the California Endowment. "Then, we realized that if we were going to put together the pieces of the puzzle for one area, why couldn't we expand and look statewide."

The fund comes at a time when the grocery store landscape has become increasingly competitive, particularly in Southern California. The region's three largest unionized supermarket chains — Vons, Ralphs and Albertsons — are embroiled in tense labor contract negotiations with area United Food and Commercial Workers locals. At the same time, big-box competitors are ramping up efforts to sell fresh foods to consumers.

Still, there are nearly 4.4 million people in California who live in areas with limited or no access to healthful food options, according to an analysis of grocery availability in California conducted by Social Compact, a nonprofit organization that works to draw financial investment into inner-city communities.

Access to healthful groceries has long been a struggle in low-income areas. After the 1992 Los Angeles riots, four major grocery chains promised to build at least 30 supermarkets in affected neighborhoods. But nearly three decades later, these neighborhoods still lack many full-service supermarkets.

The problem is also seen in some rural areas across the state and nation. The U.S. Department of Agriculture recently released an online map highlighting thousands of areas where families have little or no access to fresh food. According to the agency, up to 10% of the country is considered a food desert.

Although access to supermarkets has become a public policy issue and part of Obama's campaign to battle childhood obesity, a recent study found that grocery store availability doesn't necessarily mean consumers make more healthful choices.

The study, by the University of North Carolina-Chapel Hill's Nutrition Transition Program, tracked the diets of more than 5,000 people in low-income communities in four U.S. cities with high obesity rates for a 15-year period.

Published by the Archives of Internal Medicine, the study found that income and close proximity to fast-food restaurants were leading factors in food choice. It also found that building a supermarket wasn't enough to get people to eat more healthfully. Other factors included food costs and cooking skills, the study said.

p.j.huffstutter@latimes.com

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