Hy-Vee Doubles Down on Fresh, Pharmacy and E-Commerce After Divestitures

Hy-Vee's Post-Divestiture Push Into Fresh, Health and Convenience

After exiting its Wahlburgers partnership and convenience-store operations, Hy-Vee is concentrating investment on prepared foods, perishables, health and pharmacy, CEO Jeremy Gosch said in an interview with the Des Moines Business Record.

The retailer has begun an extensive remodeling program in West Des Moines, including relocated pharmacy and floral departments, a branded Candy Shoppe, an upgraded Market Grille restaurant with expanded prepared foods and deli options, and a Starbucks cafe moved into the dining area. A Waukee store shows the e-commerce direction: online grocery pickup is being moved from the parking lot to an attached area, paired with a dedicated pharmacy pickup lane.

Hy-Vee is also testing a drive-through pharmacy service in Waukee, Grimes and Ankeny, Iowa, allowing customers to notify the store and pay before arriving. The company is expanding vitamins, supplements and other products in its HealthMarket departments and has completed a brand evaluation in meat and produce, ending some supplier partnerships while strengthening others, including Driscoll.

The chain is converting its low-price Dollar Fresh Market banner in small towns to the traditional Hy-Vee format with a service meat department and in-store bakery, with plans to take that smaller format to more Midwestern small towns. Hy-Vee remains focused on new stores in existing metros such as Des Moines, Kansas City, Omaha and Springfield, and is open to more acquisitions that fit its values.

What the Strategy Signals for Hy-Vee's Competitive Position

Refocusing From Diversification to Core Grocery

The shift is a portfolio simplification. By exiting Wahlburgers and convenience stores, Hy-Vee is concentrating capital and management attention on departments where grocery retailers can differentiate service and freshness rather than compete only on price. The West Des Moines remodel operationalizes that thesis: more prepared foods, fresh bakery items, and an in-store restaurant designed to keep shoppers in the store longer.

The Pharmacy and Pickup Redesign Is an Operations Bet

Moving e-commerce pickup from the parking lot to an attached store area and adding a pharmacy pickup lane is intended to speed fulfillment and improve traffic flow. The planned drive-through pharmacy service in Waukee, Grimes and Ankeny adds a convenience layer: customers can notify the store they are on their way and pay in advance. That reduces wait time, but the test is limited to three Iowa locations, so Hy-Vee has not yet proven it can scale the model profitably.

Dollar Fresh Conversion Creates a Small-Town Identity Question

Converting Dollar Fresh from a low-price concept to a traditional Hy-Vee format with a service meat department and in-store bakery changes the value proposition. It may lift basket size by adding service departments, but it also risks weakening the banner's price-oriented appeal in small Midwestern towns. The company is betting that a smaller, service-led Hy-Vee format can attract communities where discount positioning alone is not enough.

Acquisitions Remain a Tool After Strack & Van Til

Hy-Vee's openness to further acquisitions, following its 2024 purchase of Strack & Van Til, suggests the chain still sees regional consolidation as a growth path. Gosch's condition that a target's mission and values must closely match Hy-Vee's indicates a preference for culturally compatible, bolt-on deals rather than aggressive geographic leaps.

Near-Term Implications for Hy-Vee's Suppliers and Retail Teams

What retail teams and suppliers should watch from Hy-Vee's roadmap:

• Store operations: The West Des Moines remodel relocates pharmacy and floral and adds a Candy Shoppe and prepared-foods changes; similar remodels will likely require re-staffing and changed traffic flow.
• E-commerce and pharmacy partners: The Waukee model attaches online grocery pickup to the store and adds a pharmacy lane, while the drive-through ordering test in Waukee, Grimes and Ankeny requires prepayment and arrival-notification integration.
• Fresh suppliers: Hy-Vee says it ended some partnerships and strengthened Driscoll after its meat and produce brand evaluation; suppliers should determine whether their partnership survived the review.
• Small-town competitors and vendors: Dollar Fresh conversions to a traditional Hy-Vee format with service meat and bakery signal a more service-led assortment, which may shift local price expectations.
• Dealmakers: After the 2024 Strack & Van Til purchase, Hy-Vee says it remains open to acquisitions with closely matched mission and values, focused on existing Midwestern metro and small-town markets.