Family Dollar Antes Up On Food and More
Family Dollar recently announced plans to add tobacco, PepsiCo beverages, and name brand cosmetics from L’Oreal and Maybelline as it looks to drive traffic and capture greater share of its customer’s wallet.
The move follows the previous success of Family Dollar, as well as competitors including Dollar General and Fred’s, in increasing trips to its stores by expanding consumable offerings.
On its fiscal second quarter conference call with analysts, Michael Bloom, president and COO, noted that over the last 18 months food assortments have been expanded by about 20 percent, driving an 18 percent sales increase in the food category so far in fiscal 2012. Over the next few months, another 500 food items will be added, including new brands such as Red Bull, Wise Snacks and Gerber baby food. PepsiCo beverages, including Pepsi and Mountain Dew, will join Coca-Cola’s brands.
At the same time, refrigeration expansion will yield an average of about eight cooler doors per store in the second half. Said Mr. Bloom, "The increased capacity will enable us to offer customers more options for breakfast, lunch and dinner."
Tobacco, described as a category that drives "very frequent trips," will also be added to stores. Mr. Bloom noted that its down-market customers over index in cigarettes. (An advocacy group, Campaign for Tobacco-Free Kids and Break Free Alliance, is protesting the decision to sell tobacco.)
In a bid to increase its average basket size, HBC assortments have been expanded by about 25 percent over the last 18 months and an additional 500 items will be added over the next few months. New brands will include Maybelline and L’Oreal. Mr. Bloom said Family Dollar’s assortments aren’t broad enough for its customers. He added, "As we consider the average age of our baby boomer customer and her health-related ailments, we have a significant opportunity to increase our relevance and capture more of her wallet."
Finally, a new fixture at checkout to include candy bars, snacks, magazines and gift cards will be added to stores to drive impulse buys (magazines and gift cards represent new categories).
"The channel is growing," said Mr. Bloom. "The customer base is expanding, and I truly believe that we have tremendous opportunity to further expand our market share and take Family Dollar to new levels of profitability."
- Family Dollar Reports Record Second Quarter Earnings – Family Dollar
- Family Dollar Stores’ CEO Discusses Q2 2012 Results – Earnings Call Transcript – Seeking Alpha
- Health Groups: Family Dollar Stores Should Reverse Decision to Start Selling Tobacco Products – Campaign for Tobacco-Free Kids
- Retailer to sell more national brands, add to private labels – Charlotte Business Journal
Discussion Questions: What do you think of Family Dollar’s merchandise expansion? Which channel (supermarket, c-store, drug, discount, etc.) will likely be affected most by Family Dollar’s changes?