Is ALDI the ‘most underestimated grocery retailer in the US?'

By Elaine Watson contact

- Last updated on GMT

"The ALDI proposition is not one that uniquely orients to struggling, down-market consumers. In fact, its primary shopper base looks virtually identical to Walmart’s," says Hartman Group.
"The ALDI proposition is not one that uniquely orients to struggling, down-market consumers. In fact, its primary shopper base looks virtually identical to Walmart’s," says Hartman Group.

Related tags: Aldi, Grocery store

While Trader Joe’s gets plenty of plaudits, its German parent company ALDI – which operates nearly 1,400 stores in 32 US states - is probably “the most underestimated grocery retailer” in the nation, according to a new report from market researcher Hartman Group.

ALDI, which recently acquired 66 Bottom Dollar stores from Delhaize, plans to open 650 new stores across the country in the next four years, including expanding to Southern California, bringing its total number of US stores to almost 2,000 by the end of 2018.

Like Trader Joe’s, ALDI’s strength comes from its high-quality, but limited assortment (around 1,400 SKUs vs the typical 30,000+ in a regular supermarket), of primarily private label products at low prices.

And this is made possible in part because of its low overheads and no frills approach to food retail, says the report​, which notes ALDI’s “impressive deletion of conventional supermarket services”.

For example, at ALDI there are no counter service departments as everything is packaged and self-service (you bag your own groceries). As product is wheeled in on pallets by forklift, shelf stackers are not needed. Carts require a 25c deposit, so shoppers return them (so staff don’t have to); there are no baskets to manage; opening hours are slightly more limited than rivals (typically 9am to 9pm); and stores only accept cash, debit and EBT cards.

The only staff at ALDI – which entered the US market in 1976 - are forklift operators, a cashier or two and possibly a third-party loss-prevention agent, notes Hartman Group.

ALDI ground beef square
ALDI US chief executive Jason Hart: 'We continue to increase our healthy food and on-trend options, including fresh produce, USDA choice meats, dairy products and baked goods.'

“The ALDI operational formula requires a level of financial discipline largely alien to midmarket grocery chains with their large head counts, large corporate overhead and expensive service mix.”

ALDI has made it radically simpler, cognitively, to execute a shopping trip

As for the product range, while the absence of recognizable national brands might sound like a recipe for “annoyed shoppers who can’t find what they want​”, ALDI simulates the color scheme and front panel symbolism of their national brand equivalents “in very exacting detail”​ so shoppers know exactly where to find things, notes the report.

“In doing so, they trigger near instant equivalency between a name-brand, iconic, UPC and the one they are selling as a replacement.”

As store brands are not sitting alongside recognizable national brands, meanwhile, ALDI has “also eliminated the variable of price, for there are no price comparisons in a store with only one offering in every category​”, adds the report.

“They have made it radically simpler, cognitively, to execute a shopping trip. No thinking about brands, BOGOs, deals, price comps, coupons, sudden endcap promotions or in-aisle shopper marketing. The trip is also super-fast, because the stores are only about 18 -20,000 square feet.”

ALDI simply nature spaghetti
Who shops at ALDI? “Ordinary middle-class Americans,” says Hartman Group. “The ALDI proposition is not one that uniquely orients to struggling, down-market consumers."

ALDI’s expansion into premium control label is a sign of its growing reach midmarket and upmarket

So who shops at ALDI?

“Ordinary middle-class Americans​,” says Hartman Group. “The ALDI proposition is not one that uniquely orients to struggling, down-market consumers. In fact, its primary shopper base looks virtually identical to Walmart’s.”

ALDI simply nature granola portrait
ALDI plans to open 650 new stores in the next four years, including expanding to Southern California, bringing its total number of US stores to almost 2,000 by the end of 2018

However, ALDI is also beginning to appeal to midmarket and upmarket consumers, who are more connected to urban food trends, developing its LivGfree gluten-free range and a natural and organic range called SimplyNature, which adheres to strict sourcing criteria that exclude 125 ingredients such as potassium benzoate, propylparaben, aspartame, high fructose corn syrup and TBHQ (click HERE​ for a full list).

 “ALDI’s expansion into premium control label is a sign of its growing reach midmarket and upmarket," ​says Hartman Group. "ALDI has no intention of letting emerging food trends steal share as it grows. It is incorporating gluten-free, natural and more culinary offerings under specialized control labels.”

ALDI has also begun to stock national brands in specific categories, presumably where it has been unable or unwilling to invest in a private label equivalent, adds the report, noting that it has spotted brands from Naked Juice to Amy’s frozen pizza and Bolthouse Farms in selected ALDI stores.

“We remain convinced that the portion of the U.S. population most aligned to traditional processed, packaged food will find ALDI a seductive option for years to come.”

ALDI simply nature
ALDI is seeking to boost its appeal to midmarket and upmarket consumers with new ranges such as LivGfree gluten-free and the natural and organic range SimplyNature

ALDI US CEO: ‘We continue to increase our healthy food and on-trend options

ALDI US chief executive Jason Hart recently attributed ALDI’s growth to “its unique business model that lets smart shoppers save up to 50% on more than 1,300 of the most commonly purchased grocery items, including more than 70 varieties of fresh fruits and vegetables, including organic produce​”.

Aldi Specially selected
ALDI introduced its premium private label range ‘Specially Selected’ to US stores in 2013 after it proved a big hit in Europe. The range - which includes specialty products from German coffees and gourmet pastas to premium meats and cheeses - has won several awards

In a press release issued in March, he added: “Not only are we growing our geographic footprint, but we’re expanding our product offerings as well. We continue to increase our healthy food and on-trend options, including fresh produce, USDA choice meats, dairy products and baked goods, along with our new SimplyNature line that includes several organic items, and our liveGfree line of gluten-free products.”

Privately held by brothers Theo and Karl Albrecht, Aldi Group is Germany's leading grocery store chain and a leading player in the global retail food industry.

According to a 2014 report from retail consultancy Willard Bishop, limited assortment stores such as Trader Joe’s and ALDI are predicted to grow at a CAGR of 5.9% in the next four years, ahead of all channels except fresh format stores and e-commerce.

Click HERE​ to read more about Hartman Group.

Aldi USA Flickr-Brandon King
ALDI is looking for 17,000+ square foot buildings with a minimum of 85 dedicated parking spaces. Picture: Brandon King, Flickr

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