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Dollar General Quenching Food Deserts Thirst

Dollar General Quenching Food Deserts Thirst

By CultureBanx Team

  • Dollar General is targeting food deserts for their next growth opportunity

  • In 2107, the median income for an African American household was $39,490

Discount retailer Dollar General (DG -3.73%) has strong ambitions to win over more low-end consumers by adding a broader mix of food to its stores. The company sees targeting food deserts, areas not served by supermarkets or nearby grocers as its next great growth opportunity.

Shopping at Dollar General.jpg

Why This Matters: Dollar General relies heavily on low-income shoppers, so attempting to fill this food desert void in many communities could prove to be very profitable for the company’s 15, 227 stores. Their average shopper comes from a household that earns $40,000 or less per year. In 2017, the U.S. Census Bureau released data showing the median income for an African American household was $39,490, putting them right in the Dollar General consumer sweet spot.

"So having those opportunities to put stores ... with a produce selection in the areas that are more food deserts in the United States, both in the rural communities and, by the way, in more metro settings, we find that we can drive a tremendous amount of traffic that way," said Dollar General CEO Todd Vasos on the company’s earnings call last week.

The U.S. Department of Agriculture reported that 23.5 million Americans live in food deserts

In order to really capitalize and increase sales they are going to revamp several stores. "Our remodel store delivers a 4% to 5% comp lift on average and a [Dollar General Traditional Plus] remodel delivers on average a 10% to 15% comp lift, and when produce is included in a DGTP, it delivers a comp lift on average at the high end of that range," Vasos said.

The U.S. Department of Agriculture reported that 23.5 million Americans live in food deserts. As defined by the department, food deserts are low-income communities with limited food access, where residents lack a 1-mile radius to the closest full-service supermarket.

What’s Next: For fiscal 2018, the company lowered its sales growth outlook to just 9.0%, though it shouldn’t weigh on their deeper push into food deserts. In 2019, the company is planning 1,000 store remodels, with produce planned for about 200 of those stores.

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