German supermarket chain Aldi is expanding rapidly in the US thanks to a unique business model that Americans are using.
About 2,400 of its small stores, stocked with a limited range of well-curated but mainly private label items, are now spread across the country, and the company plans to open another 800 over the next four years.
The retailer was recently renamed The according to real estate company JLL, it is the fastest growing grocer in the US for the fifth year in a row, and the third largest in terms of number of stores.
“Nobody else is opening 100 stores a year in the grocery industry,” said Michael Infranco, assistant vice president at RetailStat.
‘That’s impressive. And they have been doing that for a number of years.’
Aldi is the fastest growing supermarket chain in the US and plans to open an additional 800 locations over the next four years. Pictured is an Aldi food market in East Harlem
Aldi has benefited from an increasingly large market for counterfeit products in the US, something it specialized in as it conquered much of Europe
Although the retailer has been in the US since 1976, it only recently began to capture a larger share of the market.
Its popularity is driven by inflation, which has forced consumers to look for alternatives to increasingly expensive branded items like Heinz Ketchup, Kellogg’s Frosted Flakes and soft drinks like Coca-Cola.
Aldi instead offers much cheaper imitations or ‘dupes’, which it has been selling in Europe for years.
The chain is also experienced when it comes to rapid expansion.
According to data from Kantar, the company has more than quadrupled its market share in Britain to 10 percent over the past decade.
Demand for dupes has also skyrocketed in North America. The volume of private label products sold by U.S. grocers has increased by about 34 percent since 2019.
“Aldi has certainly benefited from a US market that is receptive to private label products,” Infranco said.
For example, Aldi’s own brand ketchup comes in packaging that looks similar to the Heinz product, but costs about half the price.
A 38-ounce bottle of Burman brand ketchup costs about $1.35, while a bottle of Heinz of the same size at Kroger typically costs more than $3.
An Aldi in Milwaukee, Wisconsin, sells Clancy’s brand potato chips, which look a lot like Pringles, for just $1.89, while the original product costs $2.85 at the same store.
Aldi is known for selling various imitation products at significantly lower prices. In the photo, Pringles on the left and the Aldi imitation product on the right
Aldi USA CEO Jason Hart said there was demand for well-priced goods as inflation has made groceries increasingly unaffordable
Aldi also sells basics such as eggs, milk, sugar, flour and pasta, and has a devout following. One fan is Lydia Beiler, author of the blog Thrifty Frugal Mom.
She even created one meal plan based on Aldi essentials: ‘Seven dinners for under $50 for a family of five.’
The rise is also fueled by the “aisle of shame,” a aisle in the middle of stores filled with fairly random items like kitchen gadgets, toys and home accessories.
Aldi stores are smaller than those of most supermarket chains, averaging around 10,000 square meters. They also only stock about 12,000 different products, which are placed in their delivery boxes to reduce the need for staff.
“It’s utilitarian,” Infranco said. “You don’t have twelve versions of an Oreo cookie with different fillings, you have one type of cookie, and that saves shelf space and money that would go to distribution and inventory.”
This approach sets it apart from other well-known retail giants that offer a more complete supermarket experience.
“In their space, I think they’re king of the hill, but they’re not going down Walmart or Kroger soon,” Infranco said. ‘In general, people who shop at an Aldi or Lidl do the rest of their shopping elsewhere.’
However, Aldi’s lesser-known German rival, Lidl, was slightly less successful. Last year it closed 10 underperforming stores and laid off about 200 employees.
The country only entered the US in 2017 and has gone through five CEOs in just seven years as it tries to navigate a notoriously difficult market.
Lidl is known for its range of fresh fruit and vegetables, but also for European pastries
‘Aldi has the advantage of the first mover advantage. It established itself in the US long before Lidl and that has given it an advantage, especially in terms of brand recognition,” said Neil Saunders, managing director of GlobalData.
‘Aldi has also been smart in terms of expansion. It has selected neighborhoods where American workers live who will be interested in the proposal,” he added.
A recent report from analytics company Placer.ai discovered that Aldi focuses more on lower-income households. Lidl stores also tend to be larger in terms of square footage and stock.
Aldi’s planned expansion will be accelerated by last year’s acquisition of Winn-Dixie and Harvey’s Supermarket, which together operate more than 600 stores in the Southeast.
About 50 of these will be converted into Aldi locations in the second half of the year and open in 2025. Many will also remain under their existing franchises, Aldi said.
According to Infranco, what it does with the Winn-Dixie and Harvey’s Supermarket locations will inform its next steps, as they are larger than the existing stores.
“They definitely have a plan that we don’t know about yet,” Infranco said.
“But I’m a little concerned that they might also want to be a traditional grocer. When companies deviate from what they are really good at, they don’t always do so well.’