Dollar General turns to AI-based Shelf Engine to sustainably grow produce business

While Dollar General operates a chain of grocery stores with Dollar General Markets, most of its stores aren't classified as grocers because of the lack of fresh produce and other grocery staples. To address food insecurity and availability of fresh fruits and vegetables, the retailer is bringing produce to more than 10,000 of its stores in the next several years, with about 5,000 stores currently offering fresh food, Dollar General stated​. 

Dollar General not only wants to expand access to fresh food in its stores, but it wants to do so efficiently to cut waste and reduce shrink, Stefan Kalb, co-founder and CEO of Shelf Engine, told FoodNavigator-USA. Food waste is estimated to be between 30-40% of the supply chain, with 31% of the loss coming at the retail and consumer level, according to the USDA.​

He explained Dollar General "came to us saying, 'We have this program [that's] growing incredibly quickly, and we have a couple of challenges. One of those challenges is we have a lot of stores — 18,000 stores — and the second challenge is they are all over the country, which means it's much harder to manage. We need to get produce right; produce is very hard to manage.’" 

‘A forecasting model for every SKU for every store for every day’ 

Leveraging multiple data sources, Shelf Engine “focuses purely on forecasting and submitting the order,” and integrates with a retailer’s existing supply-chain management system, Kalb said. With Shelf Engine, retailers can more accurately predict how much stock they need, so it reduces food waste and keeps store shelves stocked, he explained.

“Basically, what we do is we ingest data from what the vendors are delivering and what the retailers are selling, and then we have a bunch of external datasets that we ingest, everything from what are the promotions that are happening to delivery schedules [to] case packs and ... process it into the AI. Basically, it creates a forecasting model for every SKU for every store for every day.” 

Dollar General initially partnered with Shelf Engine for a two-phase pilot program that started in December 2022, which saw the technology roll out to 60 stores then 400 Dollar General stores, Kalb explained. After the successful pilot project, Dollar General rolled out to more of its stores and is currently in about 3,000 stores.

“Adopting Shelf Engine’s AI solutions aligns seamlessly with our mission of serving others, helping our teams enhance value and convenience for our customers. This collaboration is a strategic step towards improving our operational efficiency while serving our customers with improved in-stock levels of fresh produce,” Allen Warch, VP division merchandise manager with leadership of fresh merchandise at Dollar General, shared in a press release. 

Dollar General's relative newcomer status in selling produce also provided a leg up on implementing the technology, where other retailers had to deal with decade-old supply-chain management systems that largely were not cloud-based, Kalb said. Dollar General was effectively “leap-frogging old technologies,” he added. 

"The reality is the amount of pen and paper and old technology that is in place today is striking, especially [given] the scale of this industry. A lot of the retailers out there have systems that they've installed from decades ago," Kalb said. "Every time we on-board a new grocer, they have a lot of IT work to do to get to a place where they can use our software."

Consumers want fresh foods across channels, including convenience

Increasingly, retailers of all shapes and sizes are focusing on the produce department to grow their businesses and meet consumer demands for fresh and healthy foods, Kalb shared.

In a survey of 100 grocery retail executives, Deloitte found​ that 64% said fresh food is the most strategically important department for their company growth in the next year to three years. In the same report, Deloitte surveyed 2,000 consumers, and 57% said they prefer to shop at a store that is meaningfully reducing food waste, and 39% want detailed data on how the fresh food they buy moves from farm to store.

Consumers also are buying produce in the convenience channel, Kalb noted. Last year, retailer H-E-B rebranded its convenience stores to H-E-B Fresh Bites​ to focus on providing more fresh options like produce, convenient meals, and prepared foods.   

"If you look at a grocery store, produce is really, really hard. It’s very difficult part of the store to manage. And we look at all the fresh categories in the store, you can say, ‘Okay, well, there's some easier ones,’ some portion of dairy that's much easier to manage than say the deli section of the produce section. And so, it’s bold for Dollar General to take on produce in this way, but that's the same thing that we're seeing in some of the other convenience channels now.”