Delhaize Expands Bottom Dollar

PHILADELPHIA — A determination to grow where there’s growth to be had is sparking a rapid expansion for Bottom Dollar Food, Delhaize executives said.

Meg Ham, who heads the discount banner, in an investor meeting here discussed expanding the nascent discount chain to 250 new locations in the next three years, beginning with its previously announced entry into the Pittsburgh market early next year. She described the banner as key engine of Delhaize’s “new game plan” strategy, which relies on organic store growth.

With Delhaize’s core U.S. banners Hannaford Bros., Food Lion and Sweetbay all serving a mature, slow-growing conventional supermarket space, a banner in the fast-growing discount sector is the way to go, Ham said.

“It’s critical for us to grow where business is growing, and that’s in the value segment, and that’s where Bottom Dollar plays,” Ham said.

She said the discount field has grown from around 28% of the U.S. food retail market in 2003 to 33% in 2009. Delhaize projects discount to grow to 37% of the market in 2014.

Although Ham said the chain is poised to pounce on the growth opportunity ahead, getting to the point where Bottom Dollar was ready to grow was a gradual process.

The banner was founded in 2005 when Delhaize converted a Food Lion to Bottom Dollar, and followed with another 26 conversions over the following two years. Those stores provided the beginnings of a strategy refined in 2008 with the opening of a new prototype in Mooresville, N.C. At 19,800 square feet, that store was considerably smaller than its converted predecessors —some of which were as large as 44,000 square feet. Other refinements served as a model for the chain’s foray into the Philadelphia region beginning last year.

Ham said the Bottom Dollar brand combines a powerful price perception with an energetic, full-shop experience. It promises “unbelievable prices,” backed by a money-back guarantee; a selection of 6,000 of the most popular SKUs with a mix of national brands and Delhaize’s private label products; clean and consistent store presentation and employees who deliver the brand message in a light-hearted and energetic fashion, she said.

A focus on generating trial and brand awareness in Philadelphia has helped sales grow by 74% since the beginning of the year, Ham said. Sales are growing as a result of new shoppers, and items per transaction are higher at Bottom Dollar than any other Delhaize banner.

Consumers give the chain high marks for service, pricing, produce and variety, although surveys show it has an opportunity to improve in meat, Ham said.

Lower costs for building and operating stores relative to Food Lion help Bottom Dollar Food nearly match the former’s return on invested capital, despite carrying only 21% of the SKUs.

The company will have 29 stores open in the greater Philadelphia area by year-end and will continue opening new stores there in 2012, Ham said. The Pittsburgh expansion begins with 14 stores scheduled in the first quarter.