Dive Brief:

• Dollar General is expanding its assortment of health and wellness products and services, and wants to be a “health destination” for shoppers, according to a Wednesday press release.
• The company has hired its first chief medical officer, Dr. Albert Wu, who previously worked for McKinsey & Company. It’s also increasing its assortment of dental, nutritional, medical, health aids and feminine hygiene products, among other items, according to the announcement.
• With more than 17,000 stores, Dollar General sees an opportunity to provide lucrative health offerings close to where millions of consumers live — especially in rural communities. 

Dive Insight:

Dollar General has been roundly criticized in the past for driving out independent grocers and offering less-than-healthy products in the thousands of communities where its stores are located.

Now, it appears the discount operator is determined to change the narrative surrounding its rapid expansion and the impact it has on those communities. In addition to this latest announcement, Dollar General issued a news release just last week outlining steps to address food insecurity, including a partnership with Feeding America and a previously announced plan to add produce to around 10,000 communities over the next several years.

In addition to potentially boosting its image, taking a healthier stance also offers numerous revenue opportunities for Dollar General. Health and wellness products offer attractive sales margins, while services like nutrition counseling and in-store clinics can boost loyalty. 

Dollar General, which doesn’t currently operate pharmacies at its stores, didn’t specify what its lineup of services might include, saying its new chief medical officer is charged with creating “a comprehensive network of affordable services” for customers. In his time at McKinsey, which began in 2016, Wu created a total cost of care model for 250,000 rural healthcare patients, oversaw multiple hospital provider turnarounds and designed a digitally driven healthcare insurance offering.

Wu began working at Dollar General on Tuesday and reports to Chief Operating Officer Jeff Owen.

In a note to investors on Wednesday, Jefferies Analyst Cory Tarlowe noted Dollar General’s new store formats, which are more than 1,000 square feet larger than the company’s traditional builds, are well suited to fit additional health offerings. He also noted Dollar General’s success in nabbing sales from pharmacy retailers, with prices around 40% cheaper than these outlets.

“This adds yet another growth driver to DG's long list of top-line and margin-enhancing initiatives,” Tarlowe wrote.

By increasing its health offering and stocking more produce, frozen items and other perishables, Dollar General is putting additional pressure on grocers and drug stores, particularly small operators that struggle to compete with the company on price. Dollar General is also expanding alternative formats like DGX and Popshelf, and plans to open more than 1,000 stores while remodeling 1,750 locations this year.