Food Lion Renewed

Food Lion Renewed

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It’s fair to say that , LLC, the 1,300-store supermarket chain in the southeastern United States, is nothing like it used to be. What was once a chain that appealed to priceconscious consumers and few others has been transformed in the past four years into a company that’s determined to respond to the specific traits that drive its customers – whether they’re intent on saving every penny possible or shopping in an upscale atmosphere – with its own fun and unique culture. 
 
That transformation has seen the Salisbury, N.C.-based Delhaize division evolve from the former one-sizefits- all format of the old Food Lion stores, where every unit was virtually the same, to four distinct brands, each with its own personality and brand characteristics: Bloom, Food Lion, Harveys and Bottom Dollar Food.
 
Today’s Food Lion includes Bloom, aimed at upscale shoppers; Food Lion, for more middle-of-theroad consumers; Bottom Dollar Food, for budget-conscious grocery buyers; and Harveys, a Georgia regional chain acquired by Delhaize Group in 2003, for those who prefer a hometown, neighbourhood shopping experience. Organising its store base into a number of individual “clusters” with specific characteristics is at the heart of Food Lion’s efforts to achieve that objective, Cathy Green, Food Lion’s COO, told the Snack Food Association’s 2009 SFA Management Workshop in Charlotte, N.C., in late September
last year.
 
The move was necessitated by changes in customer shopping behavior causing the grocery channel to decline from an 85 percent share of the market in 1998 to just 59 percent in 2008, while the dollar store share increased from 9 percent to 13 percent during that period, and supercenters jumped from 14 percent to 26 percent. 
 
As a result, Food Lion created eight customer segments, each with its own characteristics, including Dinks with Dollars, Comfortably Carpooling, Country Living, Getting By, Babies & Bills, Wealthy Elite, Golden Years and Savvy Singles. Those segments are combined into store “clusters,” as appropriate.
 
For example, Bloom, with its 38,000-square-foot footprint, is designed to appeal to the Affluent Bunch cluster of customers, Green explained, while the 19,000-squarefoot Bottom Dollar Food stores are geared to the Stretching Every Dollar group. Each, along with Food Lion stores and Harveys, has its own specific brand positioning, product assortments, and levels of customer service. “Even training of employees depends on the cluster,” Green said. 
 
Green said Bloom is seen as “straightforward, thoughtful, optimistic,” while Food Lion’s characteristics are “neighborly, practical, dependable,” and Bottom Dollar Food is focused on being “lighthearted, candid, energetic.” At the last-named banner, she said, “it’s all about saving money and having fun doing it.” Pricing is specifically designed to be 5 percent below Walmart in a “soft discount” format. At Harveys, which has grown from 45 stores when it was acquired to 70 stores as a result of the conversion of some Food Lion units in southern Georgia and Florida, the focus is on being a local, neighborly market, with its characteristics seen as “genuine, caring and appreciative.” 
 
“We are going through all of our stores to redo them according to the clusters,” Green said, explaining that segmentation and clustering are used at the corporate level to set store strategy, marketing and advertising approaches, future site selection, and store layout. The strategy is also used to determine department design, core lists, planogram assortment, promotions, pricing and product Launches.
 
“The days of ‘same, same, same’ have become more dynamic and more complex,” Green elaborated. “We feel very bullish about what this will do for us in the future, reducing SKUs and making the stores very efficient.” 
 
Seeking Supplier Support 
 
With the implementation of its store segmentation strategy, dramatic changes in store assortment became necessary, causing the company to launch major “assortment renewal,” an effort to more sharply tailor products within each category at each store. 
 
Now, Food Lion is reaching out to suppliers encouraging them to offer new and exciting ways to help trading partners increase short-term sales and profit, and also to work with them strategically for future success.
 
Green said Food Lion is open to teaming with suppliers, and invitedthem to offer “innovative selling ideas” directed at specific needs and opportunities, such as weekend “pantry-packing” shopping trips, increasing center store sales, and even bundling their products with Food Lion’s private label brands. “Bring us your innovative selling ideas,” Green said. “How can you tap into our sales initiatives? Bring us pantry-packing tactics. Bring us programs that leverage center store ingredients. How can you tie into our private brand push?” She encouraged suppliers to “engage in Food Lion’s 2010 strategic initiatives where it makes sense for you,” inviting them to use the company’s vendor portal on its Web site, www.foodlion.com/vendors, and its “collaboration insights to drive our mutual businesses.”
 
“Deploy your research and analytical capability against our data to add value to our businesses,” she said, stressing that “segmentation” is the key for Food Lion’s success. “The days of hoarding information are over,” Green declared. “We need to get it right, and your partnership will be helpful. This is about making sure we have the right variety in the right stores in the right location.”
 
Green’s comments regarding bundling private label dovetail with a study published last October by Jim Hertel, managing partner at Barrington, Ill.-based industry consulting firm Willard Bishop, which urged brand manufacturers to recognise the reality that house brands are here to stay and to take advantage of co-marketing opportunities.  
 
“Private brands are part of the landscape now and in the future, based on their role in best meeting shopper needs,” Hertel wrote, adding: Long-term collaboration is in CPGs’ best interests – they will need to find ways not only to co-exist, but also to create value for themselves and their trading partners to truly succeed Collaborative merchandising is a low-risk, high-return starting point for CPGs to identify productive responses to the growth of private brands Retailers can expect national brands to fund collaborative merchandising with incremental national marketing dollars if 1) the national brand can achieve scale efficiencies (i.e., provide similar programs across all retailers during the same time frame), and 2) retailers don’t require national brands to be unduly discounted as part of this collaborative promotion. It’s clear, Hertel said, “that there are opportunities that can result in mutual benefits as long as both retailers and manufacturers are willing to explore new approaches to working together, including joint, relateditem merchandising.”
 
Clearly, that is exactly what Green had in mind when she invited snack manufacturers to come up with ideas for product “bundling” with Food Lion private brands.
 
Success, Despite the Economy
 
Broadening Food Lion’s approach beyond the virtually identical footprint in every store has enabled the grocer to attract a broad spectrum of consumers and has proved to be successful despite the current economic climate.
 
Green pointed out that the foreclosure rate in Food Lion’s trading areas in the southeastern United States increased 39 percent from 2008 to 2009, vs. the national average of 30 percent for the rest of the United States. “One in every four homes in Florida is under foreclosure,” she said, “so what consumers are demanding from us is unprecedented.”
 
Likewise, the combination of unemployment and underemployment is higher in many of those states than in the United States as a whole, which stands at 13.7 percent. South Carolina’s combined rate is 16.8 percent.
 
All of this is forcing consumers to economise to make their foodshopping dollars go further, resulting in a marked increase in private label sales at Food Lion. “Private label is growing like crazy,” Green said, “so it’s now a point of strength for us.” Many consumers are purchasing more snacks than ever before, she added. “Snacks are up for us. People are skipping meals and using snacks to fill in, so that’s a huge opportunity for our manufacturing partners.” To plan for the future, Food Lion executives began with what they hope to achieve by 2018 and then mapped back to the present with milestones along the way, Green said. “That informs our three-year plan and budgeting for the year,” she Added.
 
But Green acknowledged that massive changes can be expected in the economy and among consumers during that 10-year period. To help with its planning, the company retained the Palo Alto, Calif.-based Institute for the Future to outline the major trends to come. Some of them, she said, will include “deep personalisation – an attitude of ‘me, me, me’”; a desire for increased sustainability; and health “insecurity.”
 
“When the day is done, we are going to be the trusted agent around all of these concerns,” she said. “We want to be the solution provider for every stage of your life, and we believe that, on a macro level, this [approach] will help us get there. We have a purpose: profits will follow.”