Dollar General strives to be an oasis in food desert - The Packer

Dollar General strives to be an oasis in food desert

12/06/2011 11:53:00 AM
Tom Karst

Oasis is to sandy desert as Dollar General is to food desert. At least, that is the way some coverage of the company is viewing the retailer's ambition to add a broader mix of food to its stores and expand its "Market" store concept.

Check out coverage from The Tennessean  

From the story: As Dollar General posted yet another strong quarterly profit on Monday, the discount retailer said it soon will turn its attention to targeting food deserts — areas not served by supermarkets or nearby grocers — in a bid to fill voids in many communities.

  Here is the link to the Dollar General report for the quarter ending Oct. 28. From the report: 

We are the largest discount retailer in the United States by number of stores, with 9,813 stores in 38 states as of October 28, 2011, primarily in the southern, southwestern, midwestern and eastern United States.  482 new stores were opened and 544 of our existing stores were remodeled or relocated in the 39-week period ended October 28, 2011.

 In the 2011 third quarter, we opened our first stores in Connecticut, Nevada, and New Hampshire, and in early 2012, we plan to open our first stores in California. Square footage expansion, including new store growth and store relocations, is an integral part of our long-term strategy. We expect total square footage growth of approximately seven percent in each of fiscal 2011 and fiscal 2012. To support this growth, we are currently expanding our merchandise distribution network by adding two new distribution centers, including one we are constructing in Alabama and a second that we plan to lease in California, both of which we expect to begin shipping in the first half of 2012.
 
Most of our success in driving sales growth in 2011 has been from expansion of our consumables offerings. Consumers are spending less on discretionary non-consumable items as they continue to face high rates of unemployment, fluctuating food, gasoline and energy costs, rising medical costs, weakness in the housing and credit markets, and uncertainties regarding the outlook for the future. We are intensely focused on helping our value-conscious customers make the most of their spending dollars. We provide a broad selection of merchandise at everyday low prices, including consumable products such as food, paper and cleaning products; health and beauty products and pet supplies; and non-consumable products such as seasonal merchandise, home decor and domestics, and apparel.

Total sales increased 11.5% to $3.60 billion. Sales in same-stores increased 6.3% driven by increases in customer traffic and average transaction amount. Average sales per square foot for all stores over the 52-week period ended October 28, 2011 were approximately $207, up from $200 for the comparable prior 52-week period.

Due to ongoing economic uncertainty faced by consumers and the impact of such uncertainty on the discretionary spending of our customers, we believe that the increase in sales of consumables will continue to outpace the growth in sale of higher margin non-consumables.

Here is an insightful perspective from The Packer's Chuck Robinson on Feb. 11 this year:

 
    Dollar General has 9,000 discount merchandise stores in 35 states. In addition, the Goodlettsville, Tenn.-based chain has 57 Dollar General Market stores, which are larger than the traditional Dollar General and offer a range of perishable items, including produce.
    These stores dot the area surrounding the chain's corporate headquarters.
    I offer many thanks to Joseph Fecke, senior buyer for Dollar General Markets, who in January took me to task for my dubiousness of Dollar General's ability to create a store concept that offered perishables, including produce items.
    He was a gentleman, and he acknowledged a perception problem that Dollar General must face.
    "You are correct about overcoming the ‘dollar store' image, which is not positive in the minds of most folks, including yours. This is not just a DG thing -- but the whole dollar store sector," Fecke said.
    It is particularly a challenge with the meat department, where people assume food is a close-out item and are suspicious of even name brands. These aren't close-out items at all, he said.
    "We do better with produce, which can be touched and felt," he said.
    With fresh produce, consumers can feel confident about the quality by how fresh it looks.
    Of course, Fecke said, Dollar General Markets relies upon some excellent suppliers for its produce, including Caito Foods, Indianapolis, and Salinas, Calif.-based River Ranch Fresh Foods, exclusive supplier of salad items for Dollar General Markets.
    The key for Dollar General Markets is to not get too fancy in its produce selection, he said.
    "Since the 60 (stock-keeping units) we carry are what 80% of what folks want to buy, we minimize much of the labor costs and shrink," Fecke said. "We don't carry artichokes or eggplants, for example."
    It will be up to others to expand the core number of produce items consumers eat.
    On some level all consumers want to put food on the table, and we prefer it to be cheap.
    If the stores are as clean as Fecke suggests, I would be glad to shop Dollar General Markets, if they ever come to my region, despite my noted perception against dollar store perishables.
    To get the basics down is a great achievement and takes a lot of work. My hat's off to those that can do it.
    Still, this basics-only approach won't bring produce to the forefront, where it should be. We have cheap fruits and vegetables, and still produce loses out to less-healthful food.
    We need to add some adventure and zing to our marketing.
    E-mail crobinson@thepacker.com

TK: The produce industry should hear more from Dollar General in the months and years ahead, zing or no zing.


The Census Bureau has another holiday special.  Here are all the facts CB gathered on Christmas.

Christmas tree tax reprise

All Christmas radio

Fresh garlic China ITC

Washington labor shortage threatens ag

Heritage: Christmas tree tax

Child labor report

Global Horizons case

How the food industry gets your kids sick

Red pomegranate in California

Reusable plastic container standard

Rise in minimum wage

FDA funding

PACA action : Grand Mart

Prune crop insurance

Krispy Kreme results

Join the LinkedIn Fresh Produce Industry Discussion Group.Check out the stats from LinkedIn on the growth of the group. Facebook link here.

Bookmark the Fresh Talk home page.

Follow me on twitter @tckarst.

E-mail me at tkarst@thepacker.com




Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left

Feedback Form
Leads to Insight