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Dollar store value proposition increasing in scope and relevance

BY Michael Johnsen

It’s been the week of the dollar store. Dollar General opened store No. 11,000 last week, and Family Dollar continues to reinvent its brand relevance with the consumer as the company posted monster gains for its fiscal fourth quarter and the year, driven by store experimentation, remodels and the introduction 1,000 SKUs, including many health and beauty items. 

With that kind of store front and store brand ubiquity, respectively, the value proposition inherent in this channel has to be appealing to more than those either on government assistance or recently furloughed by the government. 

Because that makes Dollar General the largest CPG retailer in the country, followed by Walgreens. And with Family Dollar elevating the quality perception across its store brand — total sales for private labels increased by about 10% and by 20% for private label consumables — the company has plans in place to introduce about 200 private-label SKUs in fiscal year 2014.

Truth is, dollar stores are shopped by household incomes of all shapes and sizes. So it only makes sense to offer more — more stores and more products. 

According to a recent research report published by Mintel, half of all dollar channel enthusiasts bank more than $150,000 per household. 

It’s a confluence of factors that’s driving that business — the sluggish economy makes the dollar channel value proposition all the more relevant to today’s consumer. And the proliferation of both mainstream brands and higher-quality private label offerings has helped transform what had been a treasure-hunt trip into the dollar store as a destination visit. 

According to Mintel, three-in-four shoppers think that dollar stores are the best deal going, and more than half of consumers have reported the dollar channel shopping experience and price position rival those of retailers outside of the dollar channel. 

And while Family Dollar is augmenting its private label position (what retailer isn’t these days?), the dollar operator is still pursuing strategic partnerships with mainstream brands

“Retailers are starting to demand customization,” Jocelyn Wong, Family Dollar chief marketing officer, explained to attendees of the 2013 Shopper Marketing Expo. “Retailers are no longer just place[s] where you go to buy things. [They] have become powerhouse brands, and as they start to think of themselves more as brands, there’s a need for greater collaboration [with suppliers],” she said. 

 

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McKesson Health Solutions names SVP and general manager for Decision Management

BY Michael Johnsen

NEWTON, Mass. — McKesson Health Solutions on Thursday announced that Ian Gordon, former president and CEO of Topaz Shared Services, has joined the company’s executive team as SVP and general manager for Decision Management. In his new role, Gordon will head Decision Management business and will help lead the evolution of the company’s innovative payer-provider collaboration agenda and technologies. 

"Ian brings to our team a customer-centric view and 21 years of senior experience as a top payer market executive," stated Emad Rizk, president of McKesson Health Solutions. "His decision management and industry expertise are unparalleled and will be crucial as we operationalize new collaborative technologies, such as coverage decision management, with clients across the payer and provider spectrum," he said. "Ian’s understanding of the challenges ahead will help us take our point-of-care decision support tools to the next level of market adoption, penetration, acceptance and capability."

Gordon will be replacing Matthew Zubiller, who has been promoted to VP strategy and corporate development.

Prior to his tenure at Topaz Shared Services, Gordon served as COO of BlueCross BlueShield of North Carolina and president and COO of Meritain Health. He has also held senior leadership positions at Concentra Preferred Systems, UnitedHealthcare and Aetna.

 

 

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Safeway stock climbs on news of Chicago market exit, despite ‘disappointing’ third quarter

BY Michael Johnsen

PLEASANTON, Calif. — Safeway on Thursday evening may have posted what analysts have described as disappointing earnings, but that’s not stopping Wall Street from recognizing the value Safeway is unlocking with its exit from a pair of markets — Chicago and Canada. After closing at $31.57 Thursday, Safeway’s stock was selling at more than $2 higher early Friday afternoon, and at least one analyst has targeted $40 as the potential inherent in Safeway stock. 

"Q3 earnings disappoint, but does it matter?" asked Credit Suisse analyst Ed Kelly in a note published Thursday. "While the quarter disappointed, we are at least somewhat encouraged by the acceleration in [identical store sales] so far in Q4 — [up] 2.2%, including a small Dominick’s drag — and management’s confidence that shrink has improved. We also believe quarterly earnings have become less important to the new asset sale/buy the last share thesis absent a material blow-up. … The [quarterly] miss was not enough to matter in our view."

Safeway announced that it intends to exit the Chicago market, where it operates 72 Dominick’s stores, by early 2014. Safeway sold the first four of its Dominick’s stores to New Albertsons, which operates Jewel-Osco grocery stores. "This will result in a cash tax benefit of $400 million to $450 million which will be available in the short-term to partly offset the cash tax expense on the sale of the net assets of Canada Safeway Limited," the company noted. "We expect to use the cash tax benefit and any other cash proceeds from the disposal of Dominick’s properties to buy back stock and to invest in growth opportunities."

Safeway may not stop at exiting Chicago and Canada. "As the company announced the exit of Chicago, [they] hinted at a further review of its asset base and telegraphed an avenue to potentially offset at least a portion of its $1.8 billion Canadian tax bill," Kelly wrote. "Further divestitures seem likely. Safeway indicated that the company will continue to review all businesses and allocate resources to improving ‘the core.’"

"One key component of our strategy going forward will be the increased sales and enhanced profitability in core markets," Robert Edwards, CEO, president and director Safeway, told analysts Thursday evening. "We expect to also focus on meaningful differentiation strategies to better serve our diverse shoppers."

One way Safeway will be accomplishing those objectives is through its Just for U loyalty platform, which now stands at more than 6 million registered users. "We are leveraging our data to drive our business," Edwards said. "Our Club Card gives us rich data on our shoppers. We are using our digital Just for U platform to build the basket and reward our most loyal shoppers. We’re also using this data to partner with consumer packaged goods partners to build unique and robust offers," he said. 

"There will be significant benefits from us tailoring the assortment in individual stores to the local demographic," Edwards added. "And the success that we’re seeing, if you combine center of store, premium, Hispanic, if you look at the IDs of those stores relative to the average that we’ve just reported for the quarter, they’re substantially higher than the average for the company. And so we are very encouraged by that and we have plans to significantly expand what we’ve done."

Safeway’s sales and other revenue increased 1.1% to $8.6 billion in the third quarter of 2013, primarily due to an identical-store sales (excluding fuel) increase of 1.9%.

 

 

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