Will Grocery Outlet Find Room for 4,000 Stores?

Through a special arrangement, presented here for discussion is a summary of a current article from October’s Frozen & Refrigerated Buyer magazine.

Grocery Outlet recently opened its 450th store (in Las Vegas) while reaffirming its belief that as many as 4,000 can open in the U.S. CEO RJ Sheedy said on Grocery Outlet’s second quarter earnings call, “We are still in the early stages of our growth story.”

Often described as the T.J.Maxx of supermarkets, Grocery Outlet utilizes a unique opportunistic buying model that makes everyone happy: Manufacturers are able to move surplus inventory that would otherwise go to waste, and consumers get some screamin’ hot deals.

Ever wonder what happens to boxes of frozen pizza that offer a chance to win tickets to Super Bowl LVII (which was played in February)? Or the pocket sandwiches in a funky new flavor that just didn’t resonate with consumers? What about the perfectly good gingerbread-flavored ice cream still available after the holidays? Savvy shoppers can find them all at Grocery Outlet for 40% to 70% less than their suggested retail price. And these aren’t brands you’ve never heard of before. In fact, the frozen aisle is a veritable who’s who of the department’s heavy hitters (think Jimmy Dean, Tyson, Eggo, DiGiorno, and Birds Eye, to name a few), differentiating Grocery Outlet from private label-heavy deep discounters like Aldi.

In the quarter that ended July 1, sales topped $1 billion in a quarter for the first time on the strength of a 12.5% gain. “More customers are shopping us for the first time, existing customers are spending more with us, and overall customer satisfaction continues to increase,” said Sheedy in his remarks.

And those new customers aren’t just lower-income folks, he added, citing survey data that indicates more middle- and higher-income households are shopping at Grocery Outlet than ever before.

A key to its success in every market, however, is its independent operators, who have the autonomy to run their own stores, including selecting localized products. Sheedy added, “The strong partnership we have with operators allows us, as we say, to out-chain the locals and out-local the chains.”

Grocery Outlet also credits its flexibility to work with major brands and upstarts on opportunistic buys, whether short-coded, package changes, or other special inventory situations. Vivian Son, senior director of refrigerated foods, tells RFBuyer, “There is never a quantity too large or too small for us to buy.”