Food Lion Adapts
By George Anderson
Food Lion knows that one size doesn’t fit all and the chain is remodeling stores in Virginia, Maryland and West Virginia to better reflect the customers each unit is looking
to serve.
The company is switching over a number of Food Lion locations to either its Bloom or Bottom Dollar format stores.
Jeffery Lowrance, corporate communications manager for Food Lion said both formats – Bloom serving a more upscale consumer and Bottom Dollar attracting value shoppers – have
an increased focus on fresh foods. “We added new product offerings and stores got new décor packages,” he told the Business Gazette.
Terri Maloney, editor of Food World, discussed the factors behind Food Lion’s remodels.
“I think what we observed the last several years is that Food Lion existed on their business model of everyday low prices. They hadn’t penetrated the market (Baltimore/Washington)
a whole lot and they found that the vanilla approach was not working.”
A factor behind Food Lion’s remodels, said Ms. Maloney, is the advancement of supercenters in the markets the chain serves.
“Food Lion couldn’t continue being the low price place to shop,” she said. “Food Lion might couch [their reasons] that way, but I don’t think it’s coincidence. We do a market
survey, and they’ve struggled in the Baltimore/Washington market.”
Another competitor making waves in the greater Washington area is Wegmans. The chain has been moving into the area with the positive response of consumers typical in other locations
where it has opened stores.
Food Lion is looking to its Bloom format to take on Wegmans in higher income areas although Ms. Maloney is somewhat dubious about the format’s prospects against such a high-powered
competitor.
“I can’t imagine Food Lion being able to quite deliver what Wegmans offers,” she said.
Discussion Questions: What has the expansion of the formats it operates done for Food Lion? What is your assessment
of the Bloom and/or Bottom Dollar operations?
The Washington market will be shaken up with the arrival of Bloom and Bottom Dollar. Shoppers, Giant, Safeway, and even Whole Foods will feel the affect.
A&P is remodeling their Super Fresh stores in anticipation of this. Their “fresh” format is closest to Bloom, but without the TableTop and the self-scanners.
Experimenting with new formats is a positive sign, especially for such a large company as Food Lion. Baltimore-Washington shoppers are among the highest educated in the country with a good deal of income to spend at the retailers of their choice. These days consumers have more and more choices from the traditional supermarket, to niche markets to supercenters to local farmer’s markets. The emergence of new stores like Bloom, Bottom Dollar, Harris Teeter, Wegmans and others brings more competition and that benefits consumers.
A customer can find everything they would want in this market area, but it’s up the today’s retailers to offer the products and services consumers want in convenient and new ways. That is the challenge.
There are a number of retailers talking a good game when it comes to customer-centricity, but few are actually doing something about it. Food Lion has taken a bold step toward focusing on its customers by investing in new banners such as Bloom and Bottom Dollar, and supporting this differentiated portfolio with tailored product assortments aimed at a varied customer base.
This gives Food Lion a real point of difference in a competitive market, which isn’t only based on a lower-price offer. This strategy significantly strengthens their positioning, as they have now ceased to be known only as a discount retailer. By diversifying their portfolio of stores, Food Lion has acted as any smart investor would, namely spreading their risk across a number of different markets, tailored to a variety of customer segments. Perhaps most important is Food Lion’s high levels of operational expertise and recent IT investments.
Food Lion has not only supported its customers with the introduction of these new banners, but the retailer has also recognized the importance of customer segmentation within those banners. To achieve this, Food Lion has selected automated solutions to seamlessly support this level of granularity. But more than just tailoring assortments and making sure inventory requirements are met on a store by store basis, Food Lion has taken the customer experience a step further. It offers customers the “total package” with store-level technology such as kiosks and scanners as well as improved aesthetics.
These well-thought investments will undoubtedly help Food Lion support a clever customer strategy with in-store execution.
Having Food Lion as a client allows me to recognize the quality of thinking of their senior management team. They truly understand the difference between mere remodeling and retail format innovation. Bloom is a bona fide format innovation that delivers a hassle free shopping experience. Bottom Dollar is a very low price format, which is still in an evolving stage, and I suspect will undergo more obvious innovations in the future.
Food Lion’s turnaround reflects a leadership team that truly understands the distinction of competitor-proofing strategy vs merely copying tactics. They also have the courage to take prudent risks with their innovations, by experimenting with test stores, learning, and refining the format, before expanding on a broad scale.
About three-quarters of Delhaize sales and profit comes from their US brands, and most of the US volume is Food Lion. Delhaize is a poster child for supermarket turnarounds. Five years ago the stock was $70, then it crashed to $12 in 2003. Two years ago it was $40, a year ago it was $50 and today it’s $57. Even if Food Lion isn’t successful with its Bloom and Bottom Dollar formats, their management is likely to learn a lot and use that knowledge appropriately.
Food Lion’s development of store formats targets both up (Bloom’s) and down (Bottom Dollar) market opportunities and is perhaps the boldest initiative yet by a large grocery chain to make clear and distinct offers to certain shopper segments.
These new formats have been designed with a lot of thought to the needs of the target shopper segments and in terms of how to execute profitably against these needs.
The new formats offer two additional growth platforms for Food Lion, both of which should produce above-average performance.