Grocery Outlet CEO Eric Lindberg on inflation, a new mobile app and growth in the mid-Atlantic market

Emeryville, California-based Grocery Outlet recently reported its second quarter earnings of $20.1 million—an increase of 2.3% compared to a year ago. The retailer raised its fiscal 2022 sales guidance to between $3.46 billion and $3.48 billion. A destination for bargain-seeking shoppers during these inflationary times, Grocery Outlet CEO Eric Lindberg is steering the company’s growth. Next month, he and other Grocery Outlet executives will participate in a fireside chat at the Goldman Sachs 29th Annual Global Retailing Conference in New York City. Winsight Grocery Business spoke with Lindberg to discuss inflation, e-commerce post pandemic and the company's store expansion momentum.

Diane Adam: Last August, you mentioned Grocery Outlet’s approach to e-commerce would be cautious and exploratory in nature. This month, Grocery Outlet announced it will now offer on-demand grocery delivery from more than 398 locations across the country following a partnership with DoorDash. At a time when every penny counts for shoppers, what is the momentum and new initiatives planned for Grocery Outlet’s e-commerce post pandemic?

Eric Lindberg: Our e-commerce presence is still growing, and we are pleased with the progress and excited about the long-term potential. Being available on these platforms allows us to reach even more consumers during this time of extreme inflation, helping them stretch their dollar.

We are also exploring a Grocery Outlet mobile app, where customers will be able to see trending items and curated product recommendations based on their preferences. While this app is still in early development, we are planning to pilot the initiative in Washington state over the coming weeks.

In Grocery Outlet’s latest earnings call, the company raised its fiscal 2022 sales guidance to between $3.46 billion and $3.48 billion. Turning to financials, over the last four quarters, Grocery Outlet has surpassed consensus EPS estimates three times. What are some of the strengths in the company which have led to this growth?

Since our founding in 1946, we have been committed to our opportunistic buying model which subsequently developed into our independent operator model. These differentiating factors have been the mission that still guides Grocery Outlet today.

All of our stores offer a fun, treasure hunt experience. Everyday staple products are complimented by “WOW!” deals that generate customer excitement and encourage “treasure hunt” visits from bargain-minded shoppers.

Dubbed the TJ Maxx of the grocery space, you have mentioned that Grocery Outlet has a dynamic inventory that the company is constantly pricing. How has this worked to your advantage in the grocery space, especially during these inflationary times with strong supply chain headwinds?

As an extreme-value retailer, we are able to offer name-brand opportunistic products at prices 40% to 70% below conventional retailers. As inflation continues to rise, consumers are coming to us to stretch their dollar and our stores are able to help communities across the country that are being hit the hardest.

Our sustainable business model of purchasing surplus goods from other retailers has been able to help us navigate strong supply chain headwinds. We work with thousands of domestic suppliers to identify bargain sourcing opportunities, which has provided a buffer from the macro supply chain issues affecting larger chains.

Turning to inflation, the Bureau of Labor Statistics' July Consumer Price Index revealed inflation remains elevated and that the food index is up 10.9%—the largest 12-month increase since May 1979. As Americans wrestle with inflation, do you see high food prices sticking?

For decades food prices have fluctuated based on market conditions, and today’s environment is no different. Grocery Outlet’s role in any environment is to provide name-brand products at a discounted rate.

With the opening of Grocery Outlet’s new store in Maryland, the store marks the extreme-value grocer's entrance into its eighth state. As a third-generation, family-led company founded in 1946, with locations throughout California, Idaho, New Jersey, Nevada, Oregon, Pennsylvania, Washington and now Maryland, will another state be added to this list and what plans do you have for expansion?

We are very excited about our growth in the mid-Atlantic market and look forward to building our brand awareness in this region. We plan to open 28 new stores across the country this year and will continue to evaluate new opportunities in additional regions.

Grocery Outlet prides itself on an entrepreneurial team of independent operators. On the sustainability front, can you share some initiatives the company has done to reduce food waste while saving customers money? 

Grocery Outlet has been committed to reducing food waste for decades and we have been able to do so by keeping surplus items and food out of landfills, taking in excess goods from other retailers looking to unload. Our independent operators are also empowered to help their communities in the best ways they see fit, as our Independence from Hunger campaign proves.  

Our annual Independence from Hunger campaign is a national food drive that helps to collect food and cash donations for food banks across the country. We have successfully raised over $16 million and supported over 450 local food banks through our 12 years, including $2.5 million in 2022 alone.