30/03/2012 1:45 AM IST | Updated 31/03/2012 12:46 AM IST

Family Dollar Hopes To Hook Low-Income Shoppers With Cigarettes

UPDATE: This story has been updated to reflect a statement from Leon Levine, founder of Family Dollar.

In the fight for low-income shoppers, Family Dollar has unveiled a new weapon: cigarettes.

The Matthews, N.C.-based dollar store will start selling cigarettes and tobacco products in the next several months, president and Chief Operating Officer Michael Bloom said on a conference call with analysts Wednesday.

Family Dollar shoppers smoke more than average, but until now have been getting their fix elsewhere. "Tobacco is about a $90 billion business that drives very frequent trips," Bloom said. "Our customer research tells us that Family Dollar customers overindex on cigarettes and tobacco products. Soon, our customers will be able to come to our stores for these products."

Family Dollar didn't respond to a request for comment Thursday afternoon.

None of Family Dollar's chief competitors -- Dollar Tree, Dollar General or 99-Cent Only -- sell cigarettes. Dollar stores also typically shy away from selling alcohol, though in the past two years Dollar General and Family Dollar have experimented with selling beer and wine.

Family Dollar's "core customer" is on a tight budget, making $40,000 a year or less per family. Though company officials believe that the economy is improving overall, its "core customer is stressed and continues to be stressed," CEO Howard Levine told analysts on Wednesday's call.

Family Dollar is already using other tactics to lure stressed Americans to its stores. The chain is in the process of reinventing itself as a discount grocer, where shoppers can get packaged and frozen food, as well as staples like milk and eggs, on the cheap. In the last three months, Family Dollar increased its inventory of "consumables," or food and household goods, by 18 percent in the past three months. It's also planning to double its freezer and refrigerator space by the end of 2012.

So far, the strategy is working. Sales in stores open at least a year rose 4.5 percent in the last three months, with sales of consumables increasing 13 percent.

"More and more people are visiting their local Family Dollar to save money on the things they need every day," Levine said on the call.

While Family Dollar shoppers may pick up cigarettes in an attempt to soothe stress, the move likely won't be doing them any favors in terms of health, as doctors at North Carolina's Levine Cancer Institute know too well. The Cancer Institue, which will open this fall, was established thanks to a $20 million donation from Family Dollar founder Leon Levine, father of Howard Levine, the company's CEO.

Leon Levine, Chairman of the Board of Directors of the Leon Levine foundation, retired from the board of Family Dollar in 2003. "Since that time I have held no position with Family Dollar Stores as a director, executive, major shareholder, special advisor or in any other capacity," he wrote in an email. "My foundation fully supports its grant to establish the Levine Cancer Institute and believes that the Institute will improve the lives of thousands as it will redefine the delivery of cancer care in the Carolinas."

Now, at least, North and South Carolina shoppers can rest assured that if they buy cigarettes at Family Dollar, the Cancer Institute will have their backs down the road.