Will Food Lion’s Rebranding Effort Pay Off?
In a series of announcements early last year, Food Lion announced it was closing some locations and beginning a brand repositioning in 268 stores in North Carolina, Virginia and West Virginia. The focus, as the rebranding effort has been expanded to 178 more stores in five states, has been on improving the customer experience.
Stores have increased training for associates, while floor plans have been reworked to provide clutter-free aisles. Bathrooms are to be kept clean, product handling has been improved in produce and meats, and stores have improved the amount of time it takes to move customers through the checkout.
Danny Scruggs, manager of the North East (MD) Food Lion, told the Cecil Daily that eight new people had been added to his store’s staff. He trained with them on improving the shopping environment for consumers. Mr. Scruggs mentioned that bathrooms in the store are cleaned seven times a day and the job of quality assurance associates "is to make sure the stores are clean."
A key emphasis of the rebranding effort has been in fresh departments. As other grocers have done, Food Lion is promoting local sourcing with the chain’s "Fresh From the Field" initiative. The company is backing its produce quality with a double-your-money-back guarantee.
As in other markets where Food Lion has rebranded, 6,000 items have had their prices reduced. Christy Phillips-Brown, a spokesperson for the chain, said the changes affected items in categories across the store. "Our goal is to be the recognized price leader in our market," she told the Cecil Daily.
While Food Lion remains higher priced than Walmart, Frederic van Daele, VP investor relations at Delhaize Group, said the gap had narrowed from a range of six to eight percent to five percent. Mr. van Daele offered this information in an exchange with an analyst during the company’s first quarter conference call.
With the addition of the newly remodeled locations, Food Lions said it has rebranded nearly 80 percent of its stores. The company reported a same-store sales increase of 1.9 percent in the first quarter this year compared to flat comps in the fourth quarter. Rebranded stores had comp store sales more than five percent higher than those not yet rebranded.
A March 2012 RetailWire poll found that 54 percent thought Food Lion was somewhat or very unlikely to succeed with its new branding strategy. Forty-six percent thought it was somewhat likely to succeed.
- Food Lion Announces Investments in 178 Stores in Five States; Hires 800 Associates – Food Lion
- Etablissements Delhaize Frères et Cie "Le Lion" (Groupe Delhaize) Société Anonyme Management Discusses Q1 2013 Results – Seeking Alpha
- Food Lion Launches New Brand Strategy in 268 Stores – Food Lion
- Delhaize America Announces Key Strategic Actions for U.S. Portfolio – Food Lion
- Food Lion Continues Branding Makeover – RetailWire
Discussion Questions
Considering the progress it has made over the past 14 months, are you more or less optimistic about Food Lion’s prospects going forward? What are the best elements of Food Lion’s makeover?
With all the changes made, a couple of things will have to happen to make this work.
1** Outstanding customer service
2** Prices that are competitive to the big-box stores
3** Great deli, meat, bakery, and produce departments.
4** Strong marketing, and promotions programs
5** Keeping the stores clean and fun to shop
If Food Lion’s management makes sure to continue to work with local communities in order to keep the public engaged, maybe they can turn it around.
All of these changes are lateral moves that will probably have no meaningful effect. If every one of them works it will elevate Food Lion to “below average” at best. Food Lion has woefully underperformed in sales per square foot versus its competitors for the past few decades. If stores are not getting at least a 3% same store sales increase they are losing market share because you need at least 3% to keep up with inflation and population growth.
Food Lion and Delhaize have been closing stores by the bushel, playing musical chairs with formats, and they even admit they can’t compete on price. I expect more “look at me” press releases with of of “we are encouraged” commentary. Publix is the master at punishing competitors that try to regroup before Publix enters their market. Delhaize tried to compete with Publix in Florida but was hopelessly beaten. I expect more of the same as Publix moves through North Carolina with a high level of confidence.
A higher cost, recuperating Food Lion offers less than is required to compete against an expanding Publix, even though the re-branded stores are doing better than the unbranded ones. Improvement over average doesn’t capture market share.
The best element of Food Lion’s makeover is the recognition that they had to re-brand.
If Food Lion is really making changes that are meaningful to consumers in their markets, they may have a chance. However, changing perceptions is difficult and if consumers have already made a change to another retailer, getting them back is even more difficult.
Branding is based, inter alia, on differentiation. Getting the basic supermarket “hygiene” features (well-thought planogram/aisles, product quality promise, attentive and knowledgeable associates and, okay, clean bathrooms) under control is certainly relevant to shoppers. But a brand positioning that is relevant without being differentiated is marketing underthink. “We’re doing a better job on the basics than we used to” does not feel like a differentiable (let alone defensible) proposition. “Food Lion, a nicer place to shop than we used to be.” Does that sound like a behavior-changing value proposition, especially if shoppers are fundamentally content with their choices of Harris Teeter, Walmart, etc.? Is there more to the story?
They really seem to be trying to improve. Good for them! I have been in some Food Lion stores that were pretty good and others that there was simply no excuse for. They really do need to remember to concentrate on the basics and that will help a lot. Improve customer service, attentive detail to the deli, meat, and produce departments, and make them as bright and clean as possible.
They have really stiff competition with price-leader Walmart and with Publix in a large portion of there market area. A lot of the mid-Atlantic GIANT stores are pretty nice also, providing more and different competition.
The very best element of Food Lion’s makeover is the EDLP on dairy products. They are the lowest in their market. But when they discontinued Angus beef, a mainstay of the Bloom banner, they downgraded their meat department.