Who doesn't like to hear stories about industry disruptors? Here are some examples:
- Airbnb (versus hotels)
- Netflix streaming (versus TV watching)
- Tesla electric cars
- Uber (versus taxi cabs)
And four epic disruptors of all:
- Apple with its iPod and then iPhone.
- Amazon regarding buying products online.
- Google on finding information.
- Facebook for communicating with people.
Disruptors in business change our lives. And here comes another one possibly -- this one in the grocery space. Find out what Dollar General (NYSE: DG) is up to that could disrupt the grocery industry.
Dollar General -- a grocery store?
Dollar General probably isn't the first store you think of when you need groceries. You probably know the chain as a discount store. And as such, it's done well during recessions when people are tight on cash. Dollar General did extremely well during this most current pandemic-related recession, earning profits of $1.4 billion. Currently, Dollar General doesn't make the cut for the top 10 U.S. grocery chains of 2020, which, in case you're interested, are the following:
- Walmart (includes Sam's Club)
- Kroger (includes Harris Teeter and Smith's)
- Albertsons (includes Safeway, Albertsons, and Vons)
- Ahold Delhaize (includes Food Lion, Stop & Shop, and Hannaford)
- H.E. Butt Grocery Co.
- Wakefern (includes ShopRite, Price Rite, The Fresh Grocer, Dearborn Market, and Gourmet Garage)
- (tie) Aldi and Whole Foods
But Dollar General is planning an enemy attack. Its goal is not only to make this esteemed list and become a top grocery store rather than just a dollar store, but it's also to have a heavy e-commerce presence and possibly being known as the pandemic ender, according to what some Yale professors say.
The Big Pharma plan
Centers for Disease Control and Prevention Director Rochelle Walensky wants Dollar General to become part of the CDC's Federal Retail Pharmacy Program. The reason: To get low-income rural families who might not get the vaccine vaccinated. Dollar General is being considered for vaccine distribution because of its rural footprint. But many of its stores aren't set up to be proper vaccination sites.
Dollar General is aiming to change that. A partnership with the CDC is a large part of the reason for Dollar General's expansion and remodeling plans. Dollar General could be another retail health provider, joining the likes of other retail health giants CVS, Walgreens, and Walmart.
The expansion plan
Dollar General stores already dot the landscape of America, with a focus on folks who live in rural areas (otherwise known as "retail deserts" to industry insiders). There are currently over 57 million people who live in rural areas. And as they say, "If you build it, they will come."
As it stands today, 75% of Americans live within five miles of a Dollar General store. That's pretty impressive. This discount chain currently has 17,266 stores, with a goal of adding many more. Already in 2020, Dollar General has opened 1,000 new stores and remodeled 1,670 existing ones. Last year, the store added more than 62,000 cooler doors in which to keep perishable grocery items. Here are some plans moving forward for 2021:
- Open 1,050 new stores.
- Remodel 1,750 stores.
- Relocate 100 stores.
- Install 65,000 additional cooler doors.
- Further expansion of a private distribution fleet.
- Add self-checkout to the majority of stores.
- Focus more on digital sales.
- Expansion of FedEx package pickup and drop-off service.
- Expand home-goods section.
- Add pop-shelf $5-and-below home- and party-goods store format into Dollar General stores.
- Open two DG Fresh stores (express/convenience stores).
Long-range plans include expanding the stores to have more than 34,000 around the country, according to Dollar General COO Jeff Owen. These stores will mostly be in rural and suburban areas.
Dollar General hasn't been a model corporate citizen
A Brookings report from December 2020 ranked Dollar General dead last of the 13 "essential" retailers it studied that experienced record-breaking profits during the pandemic. During the pandemic, when many businesses went bankrupt, Dollar General made a profit of $1.4 billion, up 77% from the prior year, and it gave only a 3% COVID-19 compensation to employees, raising their hazard pay to $8 an hour. Best Buy, in comparison, profited $591 million, up 17% from the prior year, but gave its employees a 28% raise to $15 an hour.
The Millionacres bottom line
Dollar General is aggressively expanding. It has a solid business plan. And Yale University public health professors might be right in calling this chain a pandemic ender. But Dollar General has not exactly been a model citizen of the corporate landscape. If investing in companies that treat workers fairly is important to you, then Dollar General might not be it, unless it changes its ways. Investors should watch this one, though, because the expansion plans are exciting.