The future of supermarkets as seen by Hy-Vee Inc. includes everything from a full baby department with its own gift registry to a hands-on kitchen and classroom groups might use for cooking lessons and to learn about wine.

The 75-year-old West Des Moines-based supermarket chain is testing some new concepts at one of its newest and largest stores in northern Sioux City, which opened in May. While picking up groceries, shoppers there can check out cribs and strollers, order a baby-themed gift basket for new mothers, or have their children’s pictures taken at its portrait studio. There’s also a full Hy-Vee HealthMart, a Starbucks Coffee outlet, a drive-up pharmacy and more.

This Sioux City is housed in a converted sporting goods store, that’s about 8,000 square feet larger than a typical new Hy-Vee supermarket. The company decided to use the additional space to test new ideas it is considering using in metropolitan stores, according to Ruth Comer, Hy-Vee’s assistant vice president of communications.

“We’re pretty proud of the fact that we’ve been a leader in fashioning our supermarkets to reflect today’s lifestyles,” Comer said. “I think that’s been one legacy that Ron Pearson (Hy-Vee’s chairman of the board) has given the company – a real laser-like focus on of bringing services that customers want, services for two-income families that have a limited amount of time and need to accomplish a lot in one trip.”

Hy-Vee Chairman Ron Pearson said one of his company’s strengths in recent years has been staying at the forefront of lifestyle trends.

“We’ve always prided ourselves in finding ways to fill customers’ lifestyle needs,” Pearson said. “We’ve never looked back on what anyone else was doing. We’ve always led.”

Pearson’s forward-looking attitude has led Hy-Vee through a period of strong growth. While the grocery industry has grown at a pace of about 1 percent each year for the past several years, Hy-Vee’s growth margin has consistently been higher, with sales in excess of $4.6 billion last year.

“Our sales have grown every year for a number of years – three to four to five times stronger than the industry average,” Pearson said. “This year, we’re running about four times industry average. Last year was five times. It’s been compounding for years.”

Last August, Pearson was named to Supermarket News’list of “50 People Who Drive the Food Industry.” The trade publication recognized Pearson for leading Hy-Vee to outstanding sales results in the face of unprecedented competition from supercenters and other retail formats, as well as for encouraging autonomy and entrepreneurship across the company.

Pearson started working for Hy-Vee part time 45 years ago, as a student at Drake University. He worked his way up the corporate ladder and was appointed chairman in 1983.

“I wanted to build on the great strength of autonomy and employee ownership and the entrepreneurial mindset that flowed through the company,” Pearson said. “Probably the biggest challenge was to modernize the company. We had nice stores, but they were small and getting old and didn’t have some of the modern lifestyle things that we’ve needed for the 21st century.”

According to Comer, Hy-Vee has invested about $150 million to $200 million each year over the past five years on capital improvements, and prior to that, it spent about $100 million annually on improvements.

“When Ron Pearson became our CEO, a goal that he really identified at the time was modernizing and updating a lot of our store facilities. Throughout the 1990s and into the 21st century, we’ve really devoted a lot of resources into bringing our stores up to date.”

In addition to improving existing ones, Hy-Vee has been building new ones. The company now has 221 retail stores, 26 of which are stand-alone pharmacies, in seven Midwestern states. More than half of Hy-Vee’s stores are located in Iowa, but Comer said the company still sees opportunities for additional growth in its home state.

“You might think that we would have the state pretty well covered, but we are finding more areas as the population grows,” she said. “We have a store right now under construction at 50th Street in West Des Moines that will be our 15th store in the Des Moines metro area. And just in the past two years, we’ve added two more stores in Davenport.”

In addition, Hy-Vee is also getting ready to start construction on a new store in Cedar Rapids which will be its eighth in that market. The company has also increased its presence in cities outside of Iowa in recent years. Hy-Vee now has 22 stores in the Kansas City metro area and 10 in Omaha, Comer said, in addition to stores in new markets.

“We opened our first store a couple of months ago in the Lake of the Ozarks area, and that has been well received there, as a lot of people down there are familiar with our name,” Comer said.

Construction activity is also brisk in Hy-Vee’s gasoline division, which has taken off over the past few years. The company now operates more than 50 gas stations, with another 25 on the drawing board.

Pairing gasoline with groceries is a logical combination, Comer said, because both are purchased on a regular basis. Individual store managers are having success with gas sales as they offer special discounts for customers who buy groceries and fuel at the same place.

“It’s up to the stores how they want to market gasoline,” Comer said. “Stores have the flexibility to say, today’s Friday the 13th, so we’re going to give everyone 13 cents off, or, other stores have combined with suppliers to give discounts if you buy certain products.

“It seems unique, but really, in a way, we are using gasoline like any other product that we sell, as something that we can use to draw people in. Maybe this week we put eggs on sale or soda pop, and maybe next week it’s gasoline.”

Pharmacies are another area where Hy-Vee anticipates growth, which is why the company changed the name of its Drug Town chain of pharmacies to Hy-Vee Drugstores last month. When Hy-Vee opened its first retail drugstore in 1969 in Cedar Rapids, supermarkets and pharmacies were two separate businesses. As that has changed, it made sense to build on Hy-Vee’s reputation.

“We really have more Hy-Vee pharmacies now than Drug Towns, so in changing the name, we think it opens the door for more expansion of our pharmacies,” Comer said. “In entering towns we aren’t currently in, people are usually familiar with the name Hy-Vee. We see that long term as something that prepares the way for more expansion.”

Hy-Vee also plans to boost sales by offering more in-store education from health and food experts.

“We’re finding that our health food markets are really taking off when we offer informational demonstrations to help people understand topics like the benefits of soy in a diet and how to use flaxseed,” Comer said. “The same is true with our cooking demonstrations. We’ve sold seafood for years, but when we offered classes in the new Sioux City store on how to cook it, we had a great turnout.

“People have developed a level of trust with Hy-Vee through shopping with us, and they’re now calling on us to help them learn how to use these products in their everyday lives.”