Delhaize threw everything it had at making the Bottom Dollar concept work before concluding that discounting “wasn’t in our DNA,” CEO Frans Muller told SN in a recent interview.
The company late last year sold all 66 of Bottom Dollar’s locations, located mainly in the Philadelphia and Pittsburgh markets, to Aldi for $15 million, and retired the banner, signaling the end of a nearly 10-year experiment with a hard discount format.
Although Bottom Dollar at one time was seen as a major growth vehicle for Brussels-based Delhaize Group, Muller said the company was unable to master the economics in the same manner as rivals like Aldi, despite having created a format he described as well run and well liked by shoppers.
“I am fully convinced that you can only win in the things you are good at. That sounds cliché, but you need focus. You need an understanding of what you’re good at. You need to listen to your DNA,” Muller said.
“We are not a discounter. We do not know how this works. We are a very good supermarket operator. But if you want to complete with Aldi, as we did, then you need a certain P&L. And you need a certain economy in your business model. And those economics did not fit the price and value positioning we need to have,” he added.
Muller joined Delhaize in November of 2013 following a rapid expansion of Bottom Dollar under his predecessor, Pierre-Olivier Beckers. Muller said Delhaize’s instincts were right in identifying discount as a growing phenomenon, but said carrying the losses over so many stores made it “too painful” to continue.
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“I think we went too fast to 60 stores, and then you had a gap in the profitability. You could [withstand that] with 10 stores, but with 60 it was too painful.
“It’s a sad story, because strategically, we saw the [discount] trend quite early,” he added. “We had a very enthusiastic team and great leaders. We were very good with WIC and SNAP and so had great ties with the community. Our customer satisfaction scores were the highest in the company. But in the end you have to make money.”
Muller said the company was in range of Aldi on a number of metrics including real estate and energy costs but noted that assortment and labor remained major differences. He praised Bottom Dollar’s team for finding ways to reduce costs by “tens of millions.”
Aldi has not publicly revealed plans for the acquired stores although observers expect the company could open Aldi stores at several former Bottom Dollar locations shortly.
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