Target Offers Food for Thought

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Everybody loves a good deal. The explosive growth of discount giants such as Wal-Mart (NYSE: WMT), Target (NYSE: TGT), and Costco (Nasdaq: COST) attest to this fact. Still, as eager as consumers are to lock in a low price, they also don't want to feel cheap. Target carefully caters to both of these impulses, and the retailer's latest offering aims to take this strategy to a new level. In this case, though, Target may be making a mistake.

Target has long been mixing style with low prices in its clothing area. After all, marketing agreements with fashion brands such as Mossimo (Nasdaq: MOSS) have been the company's bread and butter. More recently, Target also has been moving into high-end services, such as tailoring.

Now, though, Target is taking the idea of mixing exclusive offerings with lower-priced wares to the food space. According to Star Tribune, Target recently launched a new line of premium steaks under the label Sutton & Dodge in its SuperTarget grocery stores. The discount retailer is hoping the meat, produced by Hormel Foods (NYSE: HRL), catches the eyes of consumers who are looking for steakhouse-quality cuts of beef.

While this plan mimics Target's approach with clothing, it's questionable whether the firm will see any real gains from Sutton & Dodge. Granted, consumers are eager to buy premium groceries. But the niche foods market is already pretty competitive, given the presence of pure plays such as Whole Foods (Nasdaq: WFMI) and Wild Oats Markets (Nasdaq: OATS). Further, managing the sales and inventory of a perishable item such as meat will be more complex than Target's efforts in clothing. In this case, Target may be off course.

For more on Target, see:

• Target Hits the Mark
• Is It Time to Sell Target?

Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.