MPG…On the Pulse
The Dollar Store Push Into Grocery: What it could mean for your business
As consumers continue to grapple with rising food costs, discount dollar stores are unlocking opportunities. Dollar stores have become the fastest-growing food retailers in the United States. They’ve doubled their share in rural regions and more than one in five consumers already buy groceries at dollar stores. Last year, Dollar Tree introduced three cooler doors, one at each price point, for $3-$5 frozen and refrigerated products in 3,500 stores. The company noted that the basket size more than doubles when the customer purchases at least one of these items, further validating that a grocery platform is a future growth opportunity for this channel. This year, both Dollar Tree and Dollar General continue to add stores and expanded grocery options, including fresh produce. In fact, on its recent fourth-quarter earnings call, Dollar Tree said it plans to add 16,000 cooler doors, and it’s adding “hundreds of national brand equivalents” to its consumable private label portfolio in the second half of 2023.
With continued, major investments in grocery, dollar stores have put a stake in the ground. As a grocery goods supplier, this channel should be considered in the competitive mix along with traditional grocery stores, mass and big box retailers. Here are some implications and considerations for you, our clients:
Do you have OPP or value-based product offerings within your portfolio that could be leveraged within this channel?
Can your current base and promotional pricing strategy accommodate distribution in the value channel without disrupting the marketplace including major EDLP retailers like Walmart? If not, what needs to change?
Dollar stores may draw new customers and trips away from competitive higher-priced retailers; how would this shift in sales impact your company’s P&L? What would need to happen for this channel to be margin accretive to your business? (i.e. Can you decrease trade fund investment, streamline product costs, ship more efficiently, change case packs, and/or adjust the product offering?)
As you plan future innovation or line extensions, be mindful of packaging size and counts that would gain distribution in the large and growing value channel.
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