Offering discounted, overstocked, and competitively priced products—including wine, beer, and spirits—Emeryville, California-based Grocery Outlet isn’t your average U.S. supermarket chain. Utilizing an opportunistic buying strategy, Grocery Outlet satisfies the American palate for significant discounts and special deals. “Wine—particularly from California, Oregon, and Washington—is one of the leading predictors as to where someone wants to do their shopping,” says Cameron Wilson, director of wine, beer, and spirits at the chain. “Grocery Outlet customers have high expectations of finding good quality wines from these states at competitive prices. Good value wines from these states bring in a lot of customers who then often shop for other things.”
The wine category presents unique closeout and excessive inventory opportunities for Grocery Outlet and is fueling significant national growth for the chain. “Wineries making 100,000 cases could be 99% right, but they still have 1,000 cases left over when the new vintage comes along,” Wilson explains. “That’s where we come in. Wine, being a dated product, can’t sit around forever. It becomes hard to sell because customers want to move on to the new vintage. We have different relationships with different wineries, but at the end of the day we are relieving them of excess inventory they can no longer move through normal sales channels.”
Founded in 1946, Grocery Outlet became a publicly traded company last June. Since 2006, the number of Grocery Outlet stores has more than doubled from 128 to 353 stores; 202 are located in California, 64 in Washington, 54 in Oregon, eight in Nevada, six in Idaho, and 19 in Pennsylvania (the latter is the only state where Grocery Outlet doesn’t sell beverage alcohol). The chain’s competitive pricing strategy has fueled steady growth over recent years, and the chain plans to open 35 new stores this year. A typical Grocery Outlet store averages about 350-400 wine SKUs. “We love stocking wine that’s local to each state we are in, but most of what we are buying is from California because that’s where a lot of wine is produced and also where a lot of wine is imported into,” Wilson says. “There is a lot to work with in California.”
Grocery Outlet opened 31 new stores in 2019, and total net sales growth increased 11.9% to $2.56 billion. The sweet retail price spot for a 750-ml. bottle of wine for Grocery Outlet shoppers is $4-$6. “We’re known for offering a $5 bottle of wine, vetted and cheaper than you can find anywhere, but still in good shape to buy and drink,” Wilson says. “People get very excited going into the stores and finding wines they can buy at $5.”
With the Covid-19 crisis intensifying, Grocery Outlet customers have been stocking up on staple items, including wine, and paper products. “We haven’t seen a price point that stands out yet,” Wilson says. “We provide significant discounts on all of our name brand-name products, and there are as many as 50 wines in each store that cost $5 or less.”
Inventory from store to store varies as each Grocery Outlet unit is independently owned, but most include competitively priced wine featured in the chain’s weekly circulars. Some stores have end cap wine displays, but the competitive price point is the main sales driver. During the week of February 26-March 3, Grocery Outlet stores in California were selling a 750-ml. of Clos D’Argentine Cabernet Sauvignon Reserva or Malbec Reserva for $6, about half the price charged by major retailers.
Wilson—along with Grocery Outlet wine buyers Steve Beckner, Greg Kobayashi, Carol Yu—specializes in procuring wine from wineries that need to unload in a hurry for reasons including new ownership, label changes, overstocking, or bankruptcies. They taste the wines before acquiring them and stocking them at the warehouse, where individual Grocery Outlet venues can then purchase them. “That’s part of our model as a company. We’re buying excess inventories, and we’re helping wineries from having more than they can sell,” Wilson says.
A unique feature at Grocery Outlet is that, except for what is listed in weekly circulars, consumers must physically go to stores to see what’s on sale. “It’s a selling point for us that you can’t shop us online,” Wilson says. “It keeps sensitive information within our stores. When we deal with people and wineries worried about their prices, we can assure them they don’t have anything to worry about. We work with them.”
From February 19-25, Grocery Outlet stores in California, Washington, Oregon, Idaho, and Nevada featured Robert Hall Syrah at $5 a 750-ml., a savings listed as up to 75%. And some California Grocery Outlets were also selling Walking Dead Chardonnay at $3 a 750-ml. during the same week, a savings of up to $9 a bottle compared to major wine retailers. Beyond its everyday competitive prices, Grocery Outlet has two week-long wines sales a year, one in spring and the other in fall, offering 20% off of all wine in the store, with no buying minimum or maximum. “It’s become extremely popular and it really gets people excited,” Wilson notes. “It’s a ridiculous price.”
Tapping into the “here today, gone tomorrow” mentality, the store creates urgency for bargain hunters to quickly buy up deals before someone else does. “It’s the treasure hunt,” Wilson quips. “We’re constantly bringing in new items and we’re not buying that same item over and over again. There are always dozens of new items coming through.”