The Friday Checkout is a weekly column providing more insight on the news, rounding up the announcements you may have missed and sharing what’s to come.
Kroger’s plan to buy Albertsons has everyone from politicians and anti-trust experts to labor advocates and community activists abuzz about whether the megadeal would snuff out competition in the supermarket business. But could Kroger also be looking to disrupt the dollar store space?
In an exchange during Tuesday’s U.S. Senate hearing about the controversial merger proposal with Sen. Dick Durbin (D-Illinois), Kroger Chairman and CEO Rodney McMullen said the retailer has been piloting “a couple” of smaller stores in rural communities — where many dollar stores are located — as part of an effort to make headway in small-town America.
McMullen added that Kroger is also trying a service it launched last year known as Hometown Pickup that allows online shoppers to pick up orders at sites other than stores by meeting a Kroger truck at a location they choose.
“We're testing several different areas because we think it's a business opportunity that the dollar stores principally get. And we're trying several different approaches to that,” McMullen said, referring to the chain’s efforts to reach rural shoppers.
Durbin said he was concerned about the rise of dollar stores in areas that have seen their access to groceries dwindle. “I'm challenging you to think if you're envisioning the future of supermarkets to consider what's going on in rural America, in inner cities. The markets are closing but dollar stores are opening. And sadly, the groceries that are available to people in those dollar stores are limited, expensive, and really don't embrace things like fresh produce very often.”
McMullen used Durbin’s comments to underscore what he described as a concerted effort by grocery store operators to serve people in rural communities, calling out one prominent discount chain by name.
“If you look at Dollar General, for example, they have 18,000 locations, we've seen that as a business opportunity in terms of serving where they serve, and for us fresh is one of our differences on go to market,” McMullen said.
Dollar General has sought in recent years to expand the assortment of fresh food it carries and said food sales are playing a key role in driving its performance. The retailer sells produce in several thousand stores and has seen sales penetration across its frozen and refrigerated categories grow following the expansion of DG Fresh, Dollar General’s program to self-distribute frozen and refrigerated goods, to all of the chain’s stores at the end of 2021.
In case you missed it
Turkey Wednesday recap
Grocery stores’ busiest day saw visits up 4.5% compared to 2019’s Turkey Wednesday, but still fell short of 2021’s visits by 2.5%, according to recent Placer.ai data. The report states that, even with a year-over-year drop in visits, “the overall sector was given a long-term boost by the pandemic’s retail impact.” And this trend isn’t only relevant to Turkey Wednesday: Grocery trends throughout 2022 have shown growth or matched pre-pandemic numbers, but are down from peaks hit in 2021.
Pre-Turkey Wednesday numbers proved that grocery retail during the holidays still has a powerful draw, according to Placer.ai. Visits to grocery stores on the day before Thanksgiving were up 87.8% compared to the average number of daily visits during the first nine months of 2022.
Placer.ai also notes that these increases and Turkey Wednesday visiting spikes are more common among traditional grocers like Albertsons and Publix rather than discount grocers like Lidl and Aldi.
On the 15th day of savings…
As shoppers continue to grapple with inflation this holiday season, Giant announced its 15 Days of Savings campaign, which will offer daily deals on baking ingredients, desserts, snacks, prepared foods and other holiday items, according to a Thursday press release.
Shoppers can gain access to these deals from Dec. 1-15 by using Giant’s Flexible Rewards loyalty program as well as digital offers. The 15 Days of Savings campaign deals can be redeemed at any Giant store as well as via same-day delivery or pickup orders.
New snow day hot drinks
Save A Lot is expanding its McDaniel’s brand drink collection, which already carries a range of coffees and creamers, to include holiday favorite hot drinks, according to a Tuesday press release. The grocer is introducing four new drinks: milk chocolate with mini-marshmallows, peppermint hot cocoa, salted caramel hot cocoa and hot apple cider.
Number of the week: $418,000
That’s the amount of savings Grocery Outlet has achieved in the first three months of using Axiom Cloud’s solutions to reduce refrigerant leak rates and automate processes. Axiom Cloud announced earlier this week that Grocery Outlet has brought the firm’s refrigerant technology to 79 out of its 430 locations, scaling the tech from a pilot to a regional deployment in California.
The expansion comes at a time when grocers are giving more attention to refrigerant management as one of the areas where they are tackling sustainability. Eco-friendly operations can improve grocers’ bottom lines, according to Alvarez & Marsal, and Grocery Outlet’s partnership provides one such example.
Earnings season continues
United Natural Foods, Inc. (UNFI) is set to report its first-quarter results for fiscal year 2023 next Wednesday morning. The grocery wholesaler may address how its extensive leadership restructuring earlier this year has impacted its ambitions for more “value creation for our shareholders, and long-term sustainable growth for our customers and suppliers.” In its most recent earnings call, executives noted that the company is increasing its use of automation as part of its plan to strengthen its finances and fuel growth.
The latest dividend drama
A Washington state court is set to hold a hearing next Friday on Albertsons’ $4 billion special dividend payment, which was originally scheduled for early November but was halted by a temporary restraining order in the state.
Opponents have argued the dividend could financially weaken Albertsons and make it harder for the grocery company to remain competitive while its proposed merger with Kroger undergoes regulatory review. Albertsons has refuted those claims.
Meanwhile, a group of attorneys general for California, Illinois and Washington, D.C., are taking another crack at blocking the dividend. In early November, a federal court in Washington, D.C., denied the group’s attempt to get a temporary restraining order. Earlier this week, the attorneys general asked the same judge to temporarily block the payment.