Delhaize Executives Detail Food Lion Repositioning Effort

RALEIGH, N.C. — The evolution of the Food Lion brand — a process officials say is turning secondary shoppers into primary shoppers and increasing sales volume — flows from fundamental changes in how Food Lion does its business, Cathy Green Burns, president of the Delhaize-owned chain, said.

Green's remarks at Delhaize's annual analyst meeting here last week represented the first in-depth communication about the new Food Lion positioning since the chain introduced the concept, which the chain refers to as a “rebranding,” in its Raleigh and Chattanooga, Tenn., markets earlier this year. Encouraged by volume and basket growth in those markets, she reiterated a plan to implement the new strategy in as many as 800 Food Lion stores by the end of 2012 and convert the entire network by 2013.

The investment represents further evolution of the “New Game Plan” strategy first announced two years ago, Pierre-Olivier Beckers, Delhaize's chief executive officer, said. Beckers said Delhaize would look to add “hundreds” of Bottom Dollar discount stores in the U.S. over the next five years as part of a plan to add 450 new stores worldwide. Between new stores and strengthened brands, Delhaize is aiming for 5% to 7% revenue growth within three years, he said.

Food Lion's repositioning grew from a 2010 study indicating the chain was losing some of its longstanding reputation for price while lacking in other areas that shoppers also found important, Green Burns said. “People continue to expect good prices from the Food Lion brand, but that's not all they expect,” she said.

The revamp calls for customers to recognize Food Lion as a price leader; to offer the greatest value in private brands; to be clean and easy to shop; to “do the basics” better than anyone; to have familiar and dependable workers; and to provide fresh produce at all times.

“We took all the research and boiled it down to what should the Food Lion brand stand for and from there we learned there is significant sales growth within the four walls of existing stores that we can go after,” Green Burns said.

In addition to targeted price investments, Food Lion has employed simpler pricing messages and fewer pricing tactics to better communicate the message, Green Burns said. The new MyEssentials private-brand line is priced competitively with market leaders, providing a strong value tier that was missing in Food Lion's stores before the repositioning, she added. Private brands are also getting more merchandising opportunities.

Perhaps the most fundamental change is the approach to produce, which customers held in poor regard at Food Lion, the company's study showed. This sentiment was a partial side effect of the chain's longstanding emphasis on inventory control and shrink, Green Burns said.

“Prior to the brand strategy, produce was undervalued at Food Lion,” she said. “We were inventory-control focused, making sure we had just enough product — not to maximize sales, but to minimize the shrink potential.”

The new positioning effort addresses store cleanliness by introducing quality assurance standards and reducing heavy merchandise displays in the aisles and perimeter. Updated checkout lines, simpler labor standards and improved in-stock positions — what Green Burns called “doing the basics” — address perceptions that checkout speed was slow and service was limited.

During the third quarter, units per transaction at revamped stores comped between 1% and 4% above the rest of the chain, and the number of transactions were up by 6% to 8%.