Analysts weigh in on the future of Food Lion
SALISBURY — Opinions on the future of Food Lion range from bright with the right changes, to downright dismal.
Three retail experts and grocery industry analysts shared their thoughts on Salisbury’s hometown grocer and what they think the chain needs to do to survive the hyper-competitive world of supermarkets.
Food Lion stores are stagnate and sterile and lack good customer acceptance based on their low sales per square foot compared to competitors, according to David J. Livingston of DJL Research.
“You’ve got Publix on one end and Aldi and Walmart on the other. For a middle-of-the-road, sterile grocery store like Food Lion, there is really not much of a future long-term,” Livingston said. “There is no way they can compete on price and no way they can compete on quality and service.
“Food Lion is quickly becoming a dinosaur.”
Since Food Lion was taken over by Delhaize, the company’s operations have slowly eroded, Livingston said. He said their primary goal is to look good to shareholders, while Aldi is privately owned and Walmart is majority-owned by family.
Delhaize last year tapped Beth Newlands Campbell to take over Food Lion, but Livingston said the leadership change means little. Newlands Campbell made a lateral move, he said, and Food Lion can’t invent a new way to sell groceries.
Livingston predicted the new president’s job will be damage control, not figuring out a way to take sales away from stores like Publix, Whole Foods or Walmart, which he said will take control of the market over time.
Unlike Aldi, “Food Lion hasn’t carved out any differentiation that makes you want to go there,” Livingston said. “They really have none. Convenient locations — that’s it. And as you get more competitors moving in, they will lose that advantage.”
Newlands Campbell has said differentiation — making Food Lion stand out from the competition — is one of her top goals.
‘They get it’
Food Lion has the tools and talent it needs to survive, according to Phil Lempert of the Supermarket Guru.
“Absolutely. They’ve got good store locations, and they know how to sell ‘extra low prices’,” Lempert said. “They can survive if they focus on that millennial generation, price, new tastes and new experiences.”
Lempert was a big fan of Bloom, an experimental format that Food Lion discarded last year.
Lempert said he was disappointed to see Food Lion pull the banner before Bloom had time to prove itself and blamed pressure from Wall Street and investors. But the concept shows that Food Lion can innovate, he said.
“They have had good instincts and were ahead of the curve. However, they haven’t followed through,” Lempert said. “… It’s tough trying to figure out what consumers want and deliver, but it’s in their DNA. They get it.”
He praised Food Lion’s recent changes including cost cuts, layoffs above the store manager level, and a new executive structure. But as Food Lion tries to reinvent itself and the economy rebounds, the company should consider the millennial generation, he said.
“I’ve never seen a generation as passionate or as interested in food, ever. They’re taking pictures of food. They’re lining up for food trucks,” he said. “Retailers need to understand this generation and capitalize on that.”
If Food Lion can take its low-price format and add what Lempert called “sex appeal,” he said, “it could be a huge win.”
Lempert said Food Lion should experiment with opening its parking lots to welcome food trucks and farmers markets. The innovation would give the company a much-needed image boost among young consumers who embrace the local food movement and taste trends, he said.
The walls of the traditional supermarket are blurring, especially for millennials.
“We need to think about food a little differently,” Lempert said. “When we do that, regardless of the retailer, that’s when we really start to see not only a strong store, but a store that meets the needs of its community.”
Doing the right thing
As the conventional supermarket industry downsizes, middle-of-the-road stores like Food Lion face tough competition at both ends of the spectrum, according to David Rogers of DSR Marketing Systems Inc.
Aldi and Walmart are undercutting Food Lion’s prices at one end, while at the other, Harris Teeter offers better customer service to more affluent consumers. The dichotomy will continue, with a growing number of poor and affluent shoppers and a shrinking middle class, Rogers said.
“I’m afraid the middle-of-the-road operations are really getting squeezed,” he said. “They don’t have the image differentiation.”
Rogers called Food Lion’s store design nondescript and “plain vanilla”.
Rogers said parent company Delhaize has no choice but to try to save Food Lion, considering the United States makes up the majority of the group’s international business. Delhaize has given up trying to serve more affluent consumers and must focus on Food Lion, Rogers said.
“They have to redefine Food Lion and make it more attractive,” he said. “They are going in the right direction.”
What are the odds that Food Lion will be around in 20 years?
“Who knows?” Rogers said. “It’s hard to be optimistic, given the trends in the past 10 years.”
He praised recent changes, including cost-cutting measures and trimming the company’s executive structure.
While layoffs are painful, “They are now doing the right thing,” Rogers said. “The changes bode well for the company.”
Contact reporter Emily Ford at 704-797-4264.