Non-Grocery Retailers Moving to Food

Regular subscribers to our subscription service Food Industry Newsletter already know that non-food retailers, especially Target, are looking to emulate Wal-Mart’s success during the Great Recession by selling more food (currently 40% of Target’s sales).

Now Family Dollar Stores (FDO) is ramping up its food sales with national brands like Jif peanut butter and Triscuits driving its recent 6.4% surge in sales. Even Toys R Us is pleased with its food offerings aimed at parents. In the past, these same retailers turned up their noses at the thin margins in the food category, but hard times are making foodies of them, especially as cost-cutting regimes put into place in past years to compete with Wal-Mart are paying dividends in efficiency.


Groceries and health & wellness products sold $243 billion last year making up 60% of Wal-Mart’s total revenue $405.6bn. With shoppers spending less, frequent repeats are key, something Family Dollar Stores has discovered by upping its food offerings. Overall, without Wal-Mart’s food sales, same store sales across the retailing sector would have fallen 4% in 2008 compared to the actual decline of just 0.5%. Profits were off 12% across the board, but would have tumbled 17%. The gap between the Bentonville Behemoth and the rest of the retail industry has closed as everyone has learned to cut costs from suppliers and in stores. The stock prices for retail have swung 180 degrees during the interim as Wall Street has lost its enthusiasm for discounters and are betting on discretionary retailers like Macy’s and Target once the economy recovers.


Wal-Mart’s customer base is also more vulnerable to tight credit and the soft job market, but the company insists new customers will make the difference. So far 17% of its increased traffic came from new customers, with new shoppers spending 40% more per visit than the company’s average transaction.

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