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Dollar General Expands Capacity to Offer Fresh, Chilled Foods

By James Brumley – Aug 6, 2020 at 2:51PM

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The neighborhood-oriented chain of sundry stores continues to become an alternative grocer too.

Your nearby Dollar General (DG 2.50%) store will soon be more likely to offer frozen and chilled groceries and fresh produce. On Thursday, the retailer revealed plans to build three new DG Fresh facilities to support the effort to expand its grocery lines. The company is also planning a new distribution center for non-grocery goods.

Dollar General has proven surprisingly competitive against bigger rival Walmart (WMT -0.43%), largely by doing things distinctly differently. Whereas Walmart opts to erect fewer but bigger superstores to serve a large area, Dollar General stores are strategically placed closer to people's homes. CEO Todd Vasos noted during an earnings call earlier this year that about three-fourths of the country's consumers live within seven miles of a Dollar General. Its smaller stores also mean customers can usually complete their shopping trip in less than ten minutes. That's less likely with Walmart's typically sprawling superstore.

The front of a Dollar General store.

Image source: Dollar General

The nearby neighborhood retailer has offered fresh produce at a handful of stores for years, and most stores have always carried a moderate selection of grocery items. The company began to rapidly expand its perishables business in 2016, though, coinciding with its purchase of 41 shuttered Walmart Express stores . In 2017 it began adding coolers to select stores to preserve perishables. In 2019 it officially named the expansion initiative DG Fresh and continued to build its own private fleet of trucks that offers the company the flexibility and speed needed to support its fresh-foods initiative.

Dollar General now self-distributes groceries to more than 9000 of its 16,500 stores. The three new DG Fresh facilities announced on Thursday will be able to support around 1500 stores each.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Dollar General Stock Quote
Dollar General
DG
$242.25 (2.50%) $5.91
Walmart Stock Quote
Walmart
WMT
$152.72 (-0.43%) $0.65

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