Dollar General 'Food First' Strategy Threatens Legacy Food Retailers

 

Inflation, inflation, inflation is top of mind with consumers and Dollar General is targeting all food retailers with legacy stuck in the middle pricing. That’s right according to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions® legacy grocery stores and C-stores that have not elevated their food retail positioning and are still clinging profits form slotting fees and middle of the road pricing are soon going to be in for a big surprise.

In case you have not heard, Dollar General is putting “Food First” by investing heavily in store brands. The discount retailer has expanded its private label Clover Valley to include national-brand alternatives, debuting more than 100 new items for 2023. This includes a wider selection of sauces, condiments, entrees, sides, snacks and more at what the company described as affordable price points, with many also featuring stylish new packaging designs.

Jackie Li, SVP of private brands and global sourcing for Dollar General, stated, “When Dollar General pioneered the ‘dollar store’ format in 1955, few food products were offered. With continual growth and changes to the company’s business model, our product selection has evolved,” ... “Customers shared that they believe in the quality and equity of Clover Valley and were receptive to more innovative products. We have put ‘Food First’ this year because we see a need and to fulfill the desire for even more options.”

So, Dollar General’s Food First initiative is a broader strategy to provide customers with healthier options, including more food products and fresh food. While the company isn’t a grocer, approximately 80% of Dollar General stores serve communities of 20,000 or fewer people, with many Americans, especially in rural areas, relying on the retailer for their basic, everyday and household essentials.

Did you realize that consumables recently accounted for approximately 80% of total sales at Dollar General and the company’s research indicates that Dollar General offers a price advantage over most food and drug retailers, offering prices that are competitive with even the largest discount retailers. ChaseDesign’s 2023 Dollar Store Channel Survey also found that grocery is now the top category shopped in the overall dollar store sector.

Therefore, it’s no surprise that 80% of new Dollar General stores and nearly all of its store relocations for FY23 will be in one of the retailer’s larger store formats, providing the opportunity for a significant increase in cooler count, as well as the ability to add fresh produce in many stores.

Now according to Dollar General, as of the first quarter of 2023, it offers fruits and vegetables in nearly 3,900 stores, with plans to have produce in 5,000 locations by January 2024, giving the company more individual points of produce distribution than any other U.S. mass retailer or grocer.

Why c-stores and grocery stores should worry, Dollar General’s Clover Valley private brand, which was introduced in 2009, has expanded to include approximately 600 items. Examples of the latest on-trend additions include Lobster Bites; Crab Cakes; Chicken Dipping Sauce; Siracha Chili Sauce; Parmesan Garlic, Mild Buffalo and Medium Wing Sauces; Cookies ‘n Crème and Turtle Sundae Trail Mixes; BBQ, Dill Pickle or Ranch Sunflower Seeds; Spicy Nacho Cheese or Chili & Lime Rolled Corn Tortilla Chips; Mandarin Orange or General Tso’s Chicken Bites with Rice; Black Bean & Corn Salsa; Berry Blast or Tropical Fruit Flavor Snacks; Peanut Butter & Jelly Wafer Sticks & Dip; Peanut Butter Spread with Honey; and 100% Whole Wheat Sandwich Bread. Additionally, all Clover Valley products come with a 100% satisfaction guarantee.

Emily Taylor, EVP and chief merchandising officer at Dollar General, stated, “We have made significant enhancements to our private brands in 2023, and we know how important these value offerings are for our customers,” ... “We believe these products will further differentiate Dollar General in the marketplace as we look to provide our customers with tremendous value on quality products.”

Research confirms the popularity of store brands, with dollar share reaching record levels this year. The Private Label Manufacturers Association (PLMA) shared data from Circana showing that dollar sales of store brands outpaced national brands during the six-month period ending June 18. Moreover, store brands’ dollar sales increased to a record level (18.8%) for the first part of 2023. Private label sales grew 8.2% on a year-over-year (YoY) basis during that time, while national-brand sales rose just 5.1%. Beverages led the charge, climbing 19% on a YoY basis, with notable gains also coming from general food (up 16%) and refrigerated products (up 16%).

As of May 5, Goodlettsville, Tenn.-based Dollar General operated 19,294 Dollar General, DG Market, DGX and pOpshelf stores across the United States, and Mi Súper Dollar General stores in Mexico. The company is No. 16 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America.

Foodservice Solutions® team is here to help you drive top line sales and bottom-line profits. Are you looking a customer ahead? Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may the clue you need to propel your continued success.