Goodlettsville, TN-based Dollar General’s expansion into fresh food is prompting the company to accelerate its self-distribution with a new DG Fresh initiative.
During the company’s Q4 2018 earnings report on March 14, CEO Todd Vasos said DG Fresh should have the company self-distributing fresh food to 5,000 stores by the end of 2019 and chain-wide in three to four years.
When asked “Why now?” by an analyst during the call’s question and answer session, Vasos said the company’s remodel strategy to add cooler space for more fresh foods is one of the biggest traffic drivers it has ever seen and going to self-distribution will improve margin and in-stocks.
“We have a series of distributors out there today across the country and those distributors do a nice job for us, but it comes at a cost and that cost is very high as you can imagine, in many cases a full service program,” he said during the call. “So, we see a real opportunity from a position of strength right now to take that in-house and control our own destiny.”
The move also will help relieve pressure elsewhere in the company’s supply chain, he said.
“We believe that with these fresh distribution centers, we will be able to leverage as well as some of our dry goods, that perhaps we can deliver out of there as well,” he said.
The company currently has one fresh distribution center in the DG Fresh initiative, in Pottsville, PA, and expects to open four new distribution facilities this year.
But will they distribute produce?
Vasos said DG Fresh is primarily focused on distribution of various fresh and frozen products – not specifically produce – the potential for produce is woven into the company’s plans.
“While our initial focus is on distributing the types of fresh and frozen products we already carry, this approach also provides a potential path forward to expanding our produce offering to more of our stores in the future,” he said, during the call.
Dollar General also continues on track to add fresh produce to about 200 stores this year, bringing the total to more than 600 chain-wide.
Executives are pleased with fresh produce results, with same store sales lifts nearly double that of stores without fresh produce.