Dollar General Focuses on Groceries

GOODLETTSVILLE, Tenn.—Food retailers have spent the past two years fretting over the combined power of Amazon and Whole Foods. But a new, possibly bigger threat looms on the horizon in the form of Dollar General, according to RetailLeader.com.

Tennessee-based Dollar General has emerged as a food retailing powerhouse with sales greater than the likes of Meijer, Hy-Vee and ALDI, and in the next few years will become a much larger player. This is why: 

• Dollar General’s massive footprint is getting bigger, and it continues to gain share in the food and consumables categories. Consumable represented 77.5% of total 2018 sales of $25.6 billion. The chain is scheduled to end 2019 with 975 new stores for a total of roughly 16,000 locations. While not always neatly merchandised and with no elaborate prepared food presentations, Dollar General appeals to convenience-minded shoppers.
• The chain began installing cooler doors to new and existing stores in 2013, and 40,000 additional cooler doors will be added this year. The company has shared that a traditional remodeled store with an average of 22 cooler doors delivers a 4% to 5% comp lift. A store format called Dollar General Traditional Plus, or DGTP, has an average of 34 higher capacity coolers that generate a comp lift of 10% to 15%.
• With more cooler doors, Dollar General has begun self-distribution of frozen and refrigerated goods, including dairy and deli. The initiative is called DG Fresh, and the first facility came online in Pottsville, Pennsylvania, in the first quarter to serve 800 Northeast locations. A second facility opens in North Carolina this month, followed by two more locations later this year servicing 5,000 stores. Self-distribution is expected to improve margins, on-time deliveries and in-stock levels and to be chainwide within three to four years.
• Fresh produce was added to 50 stores in the first quarter, giving Dollar General 480 locations with produce. With self-distribution capabilities growing and more coolers, produce could soon be in a lot more stores.
• The company is becoming more focused on trends. An initiative called Better For You launched in 2018 and saw an assortment of healthier products extended to 2,500 stores last year. It is expected to be in roughly 6,000 locations by year end, facilitated in large part by self-distribution. 

When the next recession comes, and one always eventually comes, history has shown value formats benefit. A period of economic weakness is likely to spur traffic to Dollar General stores as shoppers tend to trade down. Those who do will discover an expanded assortment of affordably priced food.