Dollar General Getting Into Beer and Wine Biz

Their demographics would drink this up big time. It would be serious competition to mom & pop retailers and regional chains in particular. Incremental sales would come from the availability factor just like many states enjoy with grocery stores. Expect a fight though--here in NY, grocers still can't sell wine.

Bob Phibbs, President/CEO, The Retail Doctor & Associates

Wow, certainly a major shift for DG since they were founded in a DRY county in Kentucky. DG has many stores in areas that alcohol sales are not allowed. But in the areas where they are allowed they will be a major threat. They will truly compete with the Walgreens, Rite Aid and other convenience stops for such items. Agree, the demographic will appreciate being able to purchase these items along with the other "quick stop" purchases.Don't think the entry into this business will grow it, just simply shift the business from elsewhere.

Susan Rider, President, Rider and Associates, LLC

Beer is a destination category for convenience retailing so the threat to that and to other beer/wine outlets is real. The size of the threat is yet to be determined. Much will depend on the positioning of the category by Dollar General.

Beer is a known value category - customers know what the price is at various retailers. Dollar General will likely utilize a low margin strategy with the category. The success of this may be mitigated in some states where retailers all currently price at state minimums currently.

One of the limiting factors may be Dollar General's cooler space. While some beer is purchased at room temperature, the majority of it is sold cold from reach in or more and more from walk in coolers called "beer caves". Will Dollar General be willing to invest in more cooler space? Will it be willing to reduce the space of other chilled categories enough to develop a significant beer presence? Will it try to use it to drive traffic or simply position it to be a convenience category for its current customers. All of these will determine the size of the threat.

Steve Montgomery, President, b2b Solutions, LLC

The temptation is too great - the thought of buying beer and wine at DG makes me long for my college days of Boone's Farm, Annie Greensprings, and MD 20-20. How good could the wine possibly be? How fresh can the beer possibly be? Good luck with the effort - I don't see even the most downscale of shoppers being that interested in beer that is months old.

Dr. Stephen Needel, Managing Partner, Advanced Simulations

I agree with Bob Phipps, the demographics will drink it up. Many of these stores are located in blighted areas where the local liquor store is the commercial focal point. The good news is there is a high demand among the consumers. The bad news is that it will increase security risks. I don't think Dollar General will be too big of a threat to local businesses. In blighted urban areas, local mom and pops often skirt the law and accept Food Stamps, WIC, and such for liquor where as Dollar General and other chains will never do that.

David Livingston, Principal, DJL Research

This idea brings back images of my teen years (many, many years ago). I don't think you're going to find discriminating pallets in the dollar stores. I don't know if the old standbys of Ripple and Schlitz are still around.

I am sure they have researched it, but there seems that in addition to the physical requirements there has to be concern over the legal ramifications of wine and beer. These include everything from age verification of the employee and the customer to the risks of serving an overly intoxicated consumer who has no insurance and gets involved in an accident. It might even translate into higher labor costs. All this will vary by jurisdiction.

Having said all that, wine and beer have become fairly common beverages that are used by many adults along with their home meals. As more "empty nester" households evolve, I imagine this trend will continue. So making it convenient for the consumer at a reasonable price seems like a good strategy.

Bill Bittner, Principal, BWH Consulting

Expanding their product offering into food pantry and alcohol items is an important step in building and retaining both their growth and market share going forward.

DG is the Aldi of the General Merchandise world and it has clearly everything to gain in this continued category expansion.

As to the question of whether this results in an expanding market or a reduction in competitors' market share, it is my humble opinion that the alcohol market is always expanding and DG will simply grab a piece of the business. Depending upon their assortment and where they price the product, they could have a significant impact on c-stores and grocery store sales.

Charles P. Walsh, President, OmniQuest Resources, Inc

4,500 new places to buy beer and wine, easy parking, fast in and out, a destination item, and something your customer is buying some place else.

Good for them and good for their customer.

Interesting to see what it does for the c-store and the drug store distribution channels.

Mel Kleiman, President, Humetrics

While DG will probably do well selling beer and wine, its price point will limit its selection--no craft beers or better-quality wines. This will definitely offer competition to supermarkets, discounters and c-stores, but they should be able to handle it.

Dan Berthiaume, Editor, Independent consultant

Six pack for a dollar...no brainer.

Mike Rich, Partner, Centergys

The "dollar store" locations are going to fill a void in the ongoing demise of the "package liquor" stores, which continue to shrink in size. They will take a dent out of the small merchant, and do well with the product line.

This move is not going to hurt the big-box stores, or the Walgreens-type merchants who are getting back into the alcoholic beverage space.

Roger Saunders, Managing Director, PROSPER BUSINESS DEVELOPMENT / BIGinsight

Admittedly, I'm a bit of wine and beer snob, so I have a hard time imagining myself shopping for mine at a dollar store. Quality, selection, freshness? Certainly not in any dollar store I've been in.

Setting that aside though, there is a huge market that would "drink" this up. I think DG has the potential to win on a couple of angles. First, beer and wine are destination purchases in most cases, so it gets them added footsteps. Second, the reality is that beer and wine is also an impulse purchase (just watch how consumers toss an extra bottle of wine or six pack in the cart at the grocery store...and it wasn't on their list). Positioned right in the stores, this would continue to help them grow the average transaction values.

Just please don't bring the wine you bought at the dollar store to my house for dinner.

Kevin Graff, President, Graff Retail

$2 Buck Chuck worked at Trader Joe's. I could see Dollar stores soaking up business from smaller mom & pop outlets. I don't see premium or import brands wanting to participate because of the perception. Private label and low-priced beer and wine should do really well.

John Boccuzzi, Jr., SVP National Retail Sales, Affinion Group

Back to my mantra about play to participate vs. play to win. Dollar General isn't attempting to dominate beer and wine sales or win over snobs (though Trader Joe's Two Buck Chuck certainly changed the rules in that regard). This is a perfect complement to DG's forays into food and it will ding convenience stores and put others with neighborhood small footprint aspirations on notice before they even arrive (Walmart, Walgreens and others). Dollar General, the affordable little package store. Has a nice ring to it!

Carol Spieckerman, President, newmarketbuilders

This totally depends on the marketing tact DG takes. If they are offering B&W as a convenience they will market(A) Bud, Miller and table wines heavily. If they are going after dollars they will market (B) Malt Liquor and high alcohol content wine. My guess is that they will try both and if they don't experience too much "drink it now" and "hanging out" I expect they will drift toward (B). If they do, they will threaten local liquor stores and party shops which typically price (B) items at a premium. If DG decides to go with (A) then they won't threaten anyone.

Ed Dennis, president, Dennis Enterprises

How can they compete with Aldi's surprisingly good Winking Owl wine at $2.99 a bottle?

Maybe OK for beer but I doubt if their clientele is much of a wine-drinking group.

'wdiyc'

I wonder how Dollar Tree will respond with their actual 'Dollar' limitation...? Can't even sell Two Buck Chuck--perhaps "One Buck 'Cold' Duck" instead?

Jack Pansegrau, Vice President, Gumberg Asset Management

I'm going to go out on a limb here and disagree with most of my fellow respondents: I don't think this will be either a major competitive threat or particularly successful. For one thing, as few have noted (though it should be obvious) alcohol isn't like "other" things: sale is prohibited in some areas, restricted to state outlets in others, and heavily regulated (pricing, marketing, etc.) everywhere else (the pricing issue seems particularly onerous as it will restrict their major selling point, i.e. low cost).

And of course, the price point of dollar stores eliminates whole classes of product lines (craft beers, most wines, premium liquors)...yes, they might become the local HQ for sales of Keystone Light 18 packs, but I don't see that as very exciting.

'notcom'

There is something inherently inert with this whole idea. It makes me feel like when I buy a product at a convenience store because I'm there and I need it--I know it's old and more expensive than I want to pay. DG is going to need one hell of a marketing campaign to pull this off.

Michael L. Howatt, Retail and Shopper Insights Consultant, Ascension Growth & Innovation Strategies

I agree with comments on increased foot traffic and impulse purchases which any retailer is keen to improve. However, I am concerned about erosion of the Dollar General brand as it is unlikely that any beer or wine will actually be sold for $1. As the price creeps up into the $2 plus range, the competitive advantage that DG has built on price starts to fade and lack of differentiation will ultimately undo this chain.

Kate Ellis, Lecturer, Schulich School of Business

Whether this works is almost beside the point. Frankly, there's no reason why it wouldn't generate incremental sales.

The bigger question however is about the future evolution of Dollar General. Anytime you begin to go wide, you cease to be deep. Dollar General's strength has been in the utter simplicity of its proposition. Loads of locations--dirt cheap stuff.

With this and other line expansions, DG threatens to water the proposition down and become just another general merchant. If that happens, they immediately put themselves at risk.

Doug Stephens, President, Retail Prophet

What a plan! Dollar General is going to sell beer & wine in half their 9,000 (and growing) stores. Can Dollar Tree be far behind?

Let's do a little bit of simple math. 4,500 stores with easy parking, conveniently located for their clientele selling, for this example, only four six packs a day. That's only one case per store and it totals 4,500 cases a day. WOW! I am certain the local distributors are salivating to start these deliveries.

The demographics will show the stores are in areas where beer consumption will be higher than wine or even liquor. The stores affected will be the local area convenience stores. Just think how much higher beer sales will be if they start cashing paychecks too.

Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I have not been to a Dollar General in a while, but I would think that Budweiser could come out with a specially designed bottle/can for the demographic. It would add to the convenience factor; purchase a six pack, toothpaste, tp and snack. Then you have a party.

Mark Johnson, President and CEO, Loyalty 360