Blog: Katy AskewDollar General in rival bid for Family Dollar

Katy Askew | 19 August 2014

Dollar General has moved to derail Dollar Tree's proposed acquisition of Family Dollar Stores by trumping the US$9.2bn offer already on the table with a competing $9.7bn bid.

Dollar General is already the largest of the three retailers and - should it ultimately emerge as the winning bidder - the group would further extend its lead in the US dollar store sector. Dollar General and Family Dollar would generate about US$28bn in annual revenues - more than the $18bn in annualised revenues that would be created by a Family Dollar-Dollar Tree combination.

In many ways, Dollar General and Family Dollar are a more logical fit. Both groups are multi-priced discount retailers that are more heavily reliant on sales of consumables. In contrast, Dollar Tree sells all its products for $1 and is more geared towards the sale of non-consumable goods.

Some FMCG groups may fear that the emergence of a stronger and potentially more demanding customer with greater purchasing power - and therefore more leverage in pricing negotiations - could come as a blow for suppliers.

However, dollar stores have proven an important growth avenue for food companies. As just-food argued in a recent analysis of a possible Family Dollar sale, a larger player could present some significant opportunities for branded and private-label players alike. 

The sector witnessed stellar expansion in the years following the 2008 economic crash and has done decent job in holding onto consumers it won over in the downturn. US shopping patterns witnessed a meteoric shift and a growing number of consumers became willing to shop around for groceries.

With the US economy moving to recovery mode, the factors propelling the growth of the channel have abated somewhat. Dollar stores are no longer benefiting from increased sector-wide revenues - meaning new ways of expanding must be found. Industry pundits have argued a combination of Dollar General and Family Dollar would address Dollar General's perceived under-performance and unlock growth for the discount retailer.

BLOG

Industry needs to nudge consumers along road to health

How can diet-related ill-health be tackled? How can the health and wellbeing of the population improve? Such a complex issue is often reduced to soundbites and brickbats, with industry in the firing l...

BLOG

Australia's dairy industry hails China trade deal

Dairy processors in Australia believe the agreement between Canberra and Beijing will make them more competitive in a key export market....

just-food homepage



Forgot your password?