Innovation in fresh can help head off a concerted push into food and beverages from dollar stores like Goodlettsville, Tennessee-based Dollar General, which reported in July that consumables had accounted for approximately 80% of recent sales. The company’s “Food First” initiative for 2023 saw the expansion of the private-label Clover Valley line to more than 600 products (including sauces, salsa, chips and sandwich bread), and DG said it expects to have produce in 5,000 locations by the start of 2024.
Still, a month later, Dollar General reported that same-store sales had ticked down 0.1% in the recently ended quarter, and both operating profit and diluted EPS slid more than 20%.
“Everyone is going after that food dollar, and it seems that everyone is realizing that fresh drives the trips,” Roerink says. How fresh is presented to shoppers and what kinds of value are offered, however—not only absolutely lower prices but also convenience and meal solutions for tonight as well as this weekend—can play a big role in the long-term success of the play for shoppers’ food dollar.
Look to the investments that warehouse clubs and mass merchandisers have made in fresh over the past decade and how these have paid off, Roerink says. “Those formats have invested heavily in fresh, and the experience is not at all what it was maybe 10 or 15 years ago,” she says. As consumers have picked up a few fresh fruits and vegetables here, a pork tenderloin or a mini charcuterie board there while at the store for paper towels and laundry detergent, they’ve been “starting to realize that the quality is there (in fresh),” Roerink adds.
And as U.S. consumers continue their pullback on spending on discretionary items like clothing and home décor—but they still seek value, assortment and preferred pack sizes for household essentials such as toilet paper and dish soap—grocery has gotten a boost and, indeed, continued to propel sales growth for the likes of Walmart and Sam’s Club. Walmart Inc. noted in August that food and consumables had led Sam’s Club’s comp sales growth in the fiscal second quarter.
“In today’s marketplace, the ultimate value is the combination of price with elements such as convenience, health, taste and experience,” Circana’s Jonna Parker stated in Circana and IDDBA’s report on August grocery sales. And innovation in fresh—which, more than any other department, can deliver on all of those elements—can fortify food retailers’ positioning in their markets in the year ahead. Showcasing not just price but also possibilities can help retailers maintain or strengthen their relationship with shoppers for whom balance is a moving target.