RETAILER INSTALLS SUPERVALU DOLLAR AISLE 2004-08-16 (1)

Carol Angrisani

GERMANTOWN HILLS, Ill. -- Jubilee Foods here is fighting back against the burgeoning dollar store channel by making space for a 12-foot "Dollar Smart" section that emphasizes groceries.

Located in the single-unit retailer's health and beauty care aisle, the department contains eight feet of groceries and four feet of nonfood items. Sauces, pet food, instant potatoes and ready-to-eat cereals can be found among the selections. Some of the brands featured are Hospitality, Forrelli, Cheers and Sunshine Mills. All items in the "Dollar Smart" section are priced at $1.

The assortment is performing so well that Jubilee has found evidence of brand-switching once shoppers encounter the section, according to Roger Mohn, store president and owner. Ragu sauce and other popular brands are often discovered on nearby shelves, far from their designated in-line locations.

Even Mohn himself has been satisfied with the selections. He admitted that he frequently purchases the pet food.

The "Dollar Smart" concept came from Jubilee's wholesaler, Supervalu, Minneapolis. It is available to all Supervalu retailers, said Pamela Reilly, category management assistant for Supervalu's Midwest and Southeast division. Retailers can customize it from three feet to 12 feet.

Reilly said many Supervalu customers have ordered the section and are pleased with it. She attributes the program's success to the fact that shoppers will trade down if it equals savings at the checkout.

"People are definitely willing to buy brands they don't know," she said.

"Dollar Smart" has been received so well that Supervalu is in the process of expanding the grocery mix to about 75 stockkeeping units, up from 50, according to Reilly. Tea bags, salad dressing, dry pasta and other Italian consumables are among the planned new items.

Jubilee is among the growing number of retailers that are using dollar promotions to compete against the dollar store channel, which has experienced increases in household penetration across all income groups. From 2000 to 2003, the five major U.S. dollar store players -- Dollar General, Family Dollar, Dollar Tree, Fred's and 99 Cents Only -- added more than 4,445 stores, a 44% increase, revealed ACNielsen, Schaumburg, Ill.

While the biggest categories in terms of dollar sales are primarily cleaning supplies and paper products, seven of the top 10 fastest-growing items are food and beverages, Nielsen research indicates.