Dollar Stores Become Grocery Stores as Food Prices Climb

As food costs rise, consumers are turning to dollar stores to buy groceries.

More than 20% of consumers purchase their groceries at stores such as Dollar Tree and Dollar General, CNBC reported Sunday (Feb. 5), citing research from Coresight.

The report also points to a study published in the American Journal of Public Health showing that dollar stores were the fastest-growing food retailers in the country.

That’s in keeping with PYMNTS’ past reporting that showed discount retailers and dollar stores expanding to keep up with growing demand.

Dollar General, for example, plans to fund another 3,170 real estate projects in the United States during fiscal year 2023, with the goal of opening 1,050 new stores and remodeling 2,000 others.

Meanwhile, Dollar Tree has embarked on a chain-wide remodeling and store refresh program aimed at the growing demand for food and drink.

“We are developing an assortment to meet our shoppers’ family needs as they are looking to save money by dining at home,” Dollar Tree CEO Mike Witynski said during a quarterly earnings call in November.

Research by PYMNTS has found that consumers are purchasing fewer items and “trading down” at the retail level due to recession and inflation worries.

The PYMNTS report “Consumer Inflation Sentiment: Perception Is Reality” showed that shoppers were “actively trimming goods from their grocery lists or even downgrading the quality of their purchases to make ends meet.”

As reported here recently, consumers “outsized perception of fresh food inflation” disproportionately harms brick-and-mortar grocers.

It also hurt food brands as well, as seen in company earnings reports last week.

“We are not in a situation where we can say that costs are coming down,” Dirk Van de Put, CEO of snack and candy giant Mondelēz, said on a recent earnings call. “If anything, they’re up versus last year.”

The company recently hiked prices in the United States and is in the process of doing the same in Europe, even as cost-conscious shoppers scale back on indulgences such as cookies and chocolate. Van de Put said that sales of these items have dropped in Europe, attributing this decline to “the consumer feeling some recession.”

Last week also saw Dole sell its fresh vegetables division to Fresh Express, a subsidiary of its rival Chiquita.

Chiquita Chairman Jose Luis Cutrale Jr. noted in a news release that combining Fresh Express and Dole’s fresh vegetables unit will “help partially mitigate the recent period of inflationary pressures experienced throughout the produce, food and beverage sectors,” citing challenges posed by the labor market and supply chain.