Repositioning Food Lion's Strategy

RETAIL PERSPECTIVE REPOSITIONING FOOD LION’S STRATEGY epositioning is such a nice, soft, budget. Nevertheless, the store had the potential to do well, but people politically correct word conveying in the community continued shopping at a larger chain supermarket Rlittle to the recipient about business with lower retails a mile away although more difficult to reach by aged activity. On the other hand, creative and disabled, needing public transportation. destruction understood by most economic Several years after Delhaize purchased the Food Town stores, the and business professionals has become a name was changed to Food Lion in 1983 and the company embarked buzzword for both good and bad discussed on a dynamic expansion program only to be followed by substantial in the current presidential campaigns, but geographic contraction during the latter half of the nineties. It was is typified by companies such as IBM’s one- in 2003 a program of Market Revivals began one area at a time time dropping of its PC division with the followed by the introduction of the Bloom banner in 2004, focused on loss of thousands of jobs, then redirecting emphasis to become a more convenience shopping and improved perishable presentation. Still successful dynamic organization. attempting to find focus, the first Bottom Dollar store opened in 2005. Repositioning is the word Food Lion used in announcing the closing Now the remaining Bloom stores will be converted to Food Lions, as of 126 stores, firing nearly 5,000 employees, giving up approximately will the Bottom Dollar’s south of Washington, D.C., although $640 million, or five percent of sales volume. Apply the math, and these hundreds of Bottom Dollars are proposed for selected markets in the stores’ average sales volume only approaches $100,000 per week, in next five years. contrast to the company’s $200,000 average. Not exactly rocket science In 2010, a company study not surprisingly found Food Lion still for reaching the decision when most major competitors have substan- losing low price reputation and produce poorly regarded. Consider- tially greater volume than even able produce department the remaining Food Lions. adjustments have helped reduce But this is just a paper analysis that competitive advantage, but of approximate numbers. When Going upscale from mediocrity provides overall pricing and promotional one looks at individual store a severe challenge to changing programs remain a problem. closures in the Savannah, GA, the consumer mindset about a Now, new repositioning in area one has to wonder about the Raleigh and Chattanooga is managerial analysis and deci- company’s image. showing gains. History shows sions, which initially got the retailers with relatively low company to this stage with store volume consistently repositioning openings occurring in dramati- without a comprehensive long- cally different socio-economic communities. term strategy continue struggling to achieve a positive image in Compare the company’s existing image in respective communi- consumers’ minds. You can name several from the past and others ties to its competition. Since my 1998 arrival in Savannah, the Food currently struggling for identity. Lion image has been one focusing on lower-middle class consumers The overall Delhaize America repositioning effort also includes with little emphasis besides low to moderate prices coupled with infe- ongoing centralizing of major operations from procurement to rior presentation. accounting to Human Relations to reduce costs, but comes at the Is it any wonder several years ago when they decided to build what expense of associate adjustment impacting operations. would become a thoughtfully designed and operated store across Repositioning, including the closing of underperforming stores, is from the main gated entrance to a large upper middle class commu- a decision every retailer faces, but closing recently opened stores located nity that the residents were disappointed a Publix was not the outside their traditional socio-economic market segments brings into occupant? Instead, they continued shopping at the much larger, question the adequacy of prior analysis. several years older Kroger about two miles away, reflecting the long Going upscale from mediocrity provides a severe challenge to held image in the residents’ minds. changing the consumer mindset about a company’s image. Going into On the other end of the economic scale, less than a year ago, Food low-income inner city areas requires both identifying and involve- Lion opened a store serving primarily residents of public housing devel- ment with a community initially not part of a retailer’s previous opments, plus reasonable percentages of senior citizens and nearby overall game plan. college students. Estimated to be in the 25,000 square-foot class, it The Savannah experience brings into question whether corporate nevertheless provided for the community’s basic needs. leadership from distant Belgium truly understands the consequences of My first thoughts were this was going to be a welcome addition. American diversity? Judge 30 years experience. Following the complete However, it appeared store opening promotional effort was minimal withdrawal from Florida, will Food Lion future repositioning in Georgia and members of store management told me initial sales were well below become creative destruction followed by Bottom Dollars? pb By Dave Diver Dave Diver is the former vice president of produce at Hannaford, and a regular columnist for PRODUCE BUSINESS. FEBRUARY 2012 • PRODUCE BUSINESS 99.

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