At test Target cafes, hot dogs out, salads in
Hadley Malcolm, USA TODAY 
A rendering of Freshii at Target. The fast-casual chain will open in nine
Target stores this fall as part of a test Target is doing to offer healthier,
fresher foods in stores.(Photo: Freshii)
For Target customers in 14 test stores, there'll be no more munching on big-box staples like hot dogs and gooey nachos while they shop this fall.
Instead, they'll be able to choose from a wider array items, including "artisan style" pizza, fresh salads with ingredients such as kale and edamame, and pressed juices with beet and carrot.
Starting in October the company will roll out a new cafe concept — fast-casual chain Freshii will go into nine stores, while Pizza Hut will open restaurants in three stores featuring a limited menu of "artisan" pies, such as margherita and barbecue chicken. Two Minneapolis stores will get outposts of D'Amico & Sons, a local Italian restaurant whose founders have been semifinalists for a James Beard award multiple times and whose menu includes toppings like organic goat cheese and arugula.
About 1,700 out of Target's nearly 1,800 stores have cafes. In the test markets, the cafes will be replaced with either a Freshii, a D'Amico & Sons, or Pizza Hut.
The test is the first major change to Target's food strategy since hiring new head of grocery, former Safeway executive Anne Dament, in April, but the idea has been underway since shortly after CEO Brian Cornell took the helm last August, says Tina Tyler, Target's chief stores officer. Cornell has made food a bigger priority for Target, with plans to increase its offering of natural and organic food products and local brands.
Target decided to go in a new direction with its cafes after hearing from customers who wanted higher-quality food and more of a fast-casual atmosphere, Tyler says. Currently, about 40% of Target customers visit the cafe while shopping. But the test is less about boosting that figure and more about showing customers that the brand is serious about health and wellness, Tyler says.
Right now, most stores feature a Target-branded cafe with a menu of decadent junk food including popcorn, pizza, hot dogs, nachos and Icees. The test markets will get rid of those options.
"We think this takes us a giant step in the direction of making a much better first impression," Tyler says.
Target has yet to make any significant announcements about how its grocery strategy will change in the coming months, but wellness is a core focus and one where the brand has seen significant success in the past year. Style, baby, kids and wellness — areas where Target has been investing in new products and improved store presentation — saw same-store sales grow three times as fast as the company average in the second quarter ended Aug. 1, the company reported this week.
Competition for customers who want fresh and local food is fierce, and mainstream retailers aren't immune to the heat food companies are feeling to use more wholesome ingredients. Even drugstores like CVS are stocking food aisles with more organic products and options that boast being gluten free or having no artificial ingredients.
Food may be a low-margin business, but it's also a traffic driver — it accounts for more than 20% of Target's business — and one that could help boost sales if customers choose to both eat and shop, says Efraim Levy, an equity analyst who follows Target for S&P Capital IQ.
"If they can enhance frequency of visits to the stores, that’s an opportunity to accelerate revenue growth," he says.
Though Brian Yarbrough, a consumer research analyst with Edward Jones, doubts the new cafes will be responsible for driving significant store traffic, they will likely appeal to Target's customer base,
which is more affluent than a typical big-box shopper. "Their core customer ... is a little bit of a higher-end customer than Walmart," he says, "and that's what they want: organic, specialty items, more exclusives."
