Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.
Annual sales at dollar stores are approaching $55 billion, with compound annual growth rates averaging 6.5 percent since 2000 — well above the four percent recorded by conventional grocery.
Kantar Retail expects the dollar store channel to expand 6.6 percent annually through 2020, making it the fastest growing brick & mortar channel.
Mike Paglia, director of retail insights for Kantar Retail, adds that, from a dollar volume perspective, that's a $14 billion growth opportunity for edible groceries.
While mainstream supermarkets continue to increase their focus on better-for-you, dollar stores still move a lot of belly filler — the lower-priced processed foods more affluent shoppers are trying to avoid but lower-income consumers can afford.
Having hit their limit in traditional grocery, however, many legacy brands are making adjustments to product or packaging to hit certain price points to grow in dollar. Said Mr. Paglia, "We're talking about 25,000 stores with growth versus the same number of grocery stores with no growth."
Photo: Dollar General
Helping fuel the food growth is a focus by both leaders — Dollar Tree and Dollar General — on adding a significant amount of coolers. Frozen and refrigerated products are generally lower-margin but faster-turning. Bob Sasser, CEO of Dollar Tree, said recently on his company's third-quarter conference call, "The increase in shopping frequency provides Dollar Tree the opportunity to drive incremental sales across all categories, including our higher-margin discretionary products."
Indeed, one report indicates that, at Dollar General, baskets with a perishable item are 50 percent larger than the chain's average. Moreover, by offering a wider variety of foods, dollar stores can make the jump from fill-in to secondary or even primary retail destination.
Dollar General's new Market format — more than double the size of its average store with expanded frozen and fresh offerings, including produce — is even well positioned to compete against hard discounters like Aldi and newcomer Lidl.
Mr. Paglia said the additional competition at the value end of the retail spectrum will put pressure on traditional outlets seeking to attract that low-income shopper. "They'll either have to differentiate to attract that consumer or shift their efforts to more affluent shoppers."