Food Lion Goes Back to Basics

JON SPRINGER

SALISBURY, N.C. — Food Lion last week moved to change the brand positioning of its stores in two markets, saying consumer research determined the stores needed “more than just price” to make a difference.

Officials described the changes — introduced last week at Food Lion stores in Chattanooga, Tenn., and Raleigh, N.C. — as a “back to basics” strategy that would emphasize freshness, cleanliness and service in addition to accelerated price reductions and increased private-brand selection, Cathy Green Burns, president of Food Lion, said during a conference call discussing financial results for Food Lion parent Delhaize last week.

Burns said the changes — designed to increase market share and top-line growth — come in response to market-wide survey data indicating Food Lion had lost some of its reputation for price and quality.

“Based on what we heard from consumers we need to get back to the basics,” Burns said. “Food Lion has a history of being recognized for its low prices and for the quality and value it delivers better than anyone. Over the years, we lost some of those attributes.

“Customers are telling us that it's more than just price,” she added.

The strategy calls for “very competitive prices” — described as an acceleration of the chainwide pricing strategy in place since 2010 — along with an aggressive goal of increasing private-brand penetration from 26% currently to 35% by 2013, Burns said. A new private label, My Essentials, which will replace the Smart Options brand beginning in the rebranded markets, will be a key component, she added.

The effort will also encompass more attention to on-shelf merchandising plans and off-shelf space allocated to endcaps and other product displays, which Burns said would accompany an integrated marketing strategy. Stores in the program in the meantime will be cleaner and easy to shop, Burns said, with improved lighting in parking lots, and new signs and price tags.

Food Lion will also devote more attention to customer service in the stores, with enhanced employee training and additional staffing in fresh departments and checkout, Burns said.

She added the stores would pay “a lot of attention to produce,” relying on more frequent deliveries, enhanced merchandising and service so “we can ensure that our customers always have the freshest produce.

“This strategy will allow us to deliver simplicity and quality for everything a family needs at leading prices,” Burns said.

Also last week, Food Lion made adjustments to its upscale Bloom stores in Virginia and Maryland, including a greater selection of healthier foods throughout at value prices, a gluten-free center, and an easier way for guests to navigate around the store in most locations.

The announcements came as Delhaize announced that sales were essentially flat at $4.7 billion and comps decreased by 0.3% during the first quarter. Operating profits in the U.S. dropped 13% to $216 million, mainly as a result of higher costs for store construction and maintenance, and sales initiatives at Bottom Dollar Food and Food Lion stores.