{"id":39396,"date":"2019-05-17T18:23:06","date_gmt":"2019-05-17T18:23:06","guid":{"rendered":"https:\/\/qatar-news.org\/qatarnewsEn\/?p=39396"},"modified":"2019-05-17T18:23:06","modified_gmt":"2019-05-17T18:23:06","slug":"a-cheap-brutally-efficient-chain-is-reshaping-the-us-grocery-industry","status":"publish","type":"post","link":"https:\/\/qatar-news.org\/qatarnewsEn\/?p=39396","title":{"rendered":"A cheap, brutally efficient chain is reshaping the US grocery industry"},"content":{"rendered":"<div id=\"\">\n<p class=\"cnnix-article__paragraph\">Running a supermarket in America has never been harder.<\/p>\n<p class=\"cnnix-article__paragraph\">Profits are razor thin. Online shopping and home delivery are changing the way people buy their food. Dollar stores and drugstores <a href=\"https:\/\/www.cnn.com\/2018\/12\/05\/business\/dollar-general-stores-food\/index.html\" target=\"_blank\">are selling more groceries<\/a>. Pressures are so intense that regional chains like Southeastern Grocers, the owner of Winn-Dixie and Bi-Lo, filed for bankruptcy. Large companies increasingly control the industry, which had long operated as a dispersed network of smaller, local grocers. And even Walmart \u2014 the largest player of all \u2014 faces new competition from Amazon, which <a href=\"https:\/\/money.cnn.com\/2018\/08\/28\/technology\/business\/amazon-whole-foods-365-walmart-kroger-costco-grocery\/index.html\" target=\"_blank\">bought Whole Foods in 2017 <\/a>for almost $14 billion.<\/p>\n<p class=\"cnnix-article__paragraph\">But when Walmart\u2019s US CEO Greg Foran invokes words like\u00a0\u201cfierce,\u201d \u201cgood\u201d and \u201cclever\u201d in <a href=\"https:\/\/corporate.walmart.com\/media-library\/document\/2019-ubs-global-consumer-retail-conference-webcast-transcript\/_proxyDocument?id=00000169-7873-d4ef-adeb-7b73b8e00000\" target=\"_blank\">speaking almost admiringly<\/a>\u00a0about one of his competitors, he\u2019s not referring to Amazon. He isn\u2019t pointing to large chains like Kroger or Albertsons, dollar stores like Dollar General or online entrants like FreshDirect and Instacart.<\/p>\n<p class=\"cnnix-article__paragraph\">Foran is describing Aldi, the no-frills German discount grocery chain that\u2019s growing aggressively in the United States and reshaping the industry along the way.<\/p>\n<figure class=\"cnnix-article__image--lg\">\n\t<a href=\"media\/01-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/01-aldi-tiny.jpg\" class=\"preview\" alt=\"In recent years, Aldi has expanded its produce and organic offerings to draw in more customers.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\tIn recent years, Aldi has expanded its produce and organic offerings to draw in more customers.<br \/>\n\t<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">New customers may be jolted at first by the experience of shopping at an Aldi, which expects its customers to endure a number of minor inconveniences not typical at other American grocery stores. Shoppers need a quarter to rent a shopping cart. Plastic and paper bags are available only for a fee. And at checkout, cashiers hurry shoppers away, expecting them to bag their own groceries in a separate location away from the cash register.<\/p>\n<p class=\"cnnix-article__paragraph\">But Aldi has built a cult-like following. When it enters a new town, it\u2019s not uncommon for hundreds of people to turn out for the grand opening. The allure is all in the rock-bottom prices, which are so cheap that Aldi often beats Walmart at its own low-price game.<\/p>\n<p class=\"cnnix-article__paragraph\">&#8220;I am willing to do the extra work because the prices are amazing,\u201d said Diane Youngpeter, who runs a fan blog about the grocer called the Aldi Nerd and an <a href=\"https:\/\/www.facebook.com\/groups\/1753737854844689\/\" target=\"_blank\">Aldi Facebook group with 50,000 members<\/a>. \u201cThere\u2019s a lot of Aldi nerds out there,\u201d she said. \u201cI didn\u2019t realize that there were so many of us.\u201d<\/p>\n<figure class=\"cnnix-article__image--split\">\n<div class=\"cnnix-article__image--split-grid\">\n<div class=\"cnnix-article__image--split-grid__item\">\n<p><a href=\"media\/meat-wide.jpg\" class=\"progressive replace\"><br \/>\n\t\t\t\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/meat-wide-tiny.jpg\" class=\"preview\" alt=\"\"><br \/>\n\t\t\t\t<\/a><\/p>\n<\/div>\n<div class=\"cnnix-article__image--split-grid__item\">\n<p><a href=\"media\/chicke-closeup.jpg\" class=\"progressive replace\"><br \/>\n\t\t\t\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/chicke-closeup-tiny.jpg\" class=\"preview\" alt=\"\"><br \/>\n\t\t\t\t<\/a><\/p>\n<\/div>\n<\/div><figcaption class=\"cnnix-article__image-caption\">\n      On a recent trip to an Aldi in New Jersey, antibiotic-free chicken was $4.29 a pound. At nearby competitors, Trader Joe\u2019s \u201cAll Natural Chicken\u201d and Whole Foods\u2019 \u201c365 Organic Fresh Chicken\u201d were $4.99 and $6.99 a pound, respectively.<br \/>\n    <\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">Aldi has more than 1,800 stores in 35 states and is focused on growing in the Midwest, the Mid-Atlantic, Florida and California. It\u2019s on track to become America\u2019s third largest supermarket chain behind Walmart and Kroger, with <a href=\"https:\/\/corporate.aldi.us\/fileadmin\/fm-dam\/news_and_awards\/Press_Release_2017\/ALDI_2017_Growth_Announcement.pdf\" target=\"_blank\">2,500 stores by the end of 2022<\/a>. Its close competitor Lidl, another German grocer with a similar low-cost business model, is racing to grow in the United States, too.<\/p>\n<p class=\"cnnix-article__paragraph\">Amid their aggressive growth push, the two discount chains have forced the rest of the grocery industry to make big changes to hold onto their customers. Aldi has even encroached on Walmart\u2019s turf\u2014 literally. As if throwing down a gauntlet, in October Aldi opened a store in Bentonville, Arkansas, just a mile from Walmart\u2019s corporate headquarters.<\/p>\n<p class=\"cnnix-article__paragraph\">&#8220;I never underestimate them,&#8221; Foran <a href=\"https:\/\/corporate.walmart.com\/media-library\/document\/2019-ubs-global-consumer-retail-conference-webcast-transcript\/_proxyDocument?id=00000169-7873-d4ef-adeb-7b73b8e00000\" target=\"_blank\">said at an industry conference in March<\/a>. \u201cI&#8217;ve been competing against Aldi for 20-plus years. They are fierce and they are good.\u201d<\/p>\n<p class=\"cnnix-article__paragraph\">But as competitors fight back, can the company hold on to its low-cost advantage? Can it stick to what it calls the \u201cAldi way?\u201d<\/p>\n<section class=\"cnnix-article__chart\">\n<!--[if (gte IE 9)|!(IE)]><!-->  <!--<![endif]--> <!--[if lte IE 8]> \n\n<style> .m-infographic--1558042458849{ background: url(\/\/cdn.cnn.com\/cnn\/.e\/interactive\/html5-video-media\/2019\/05\/16\/20190514_walmart_vs_aldi_780c.png) no-repeat 0 0 transparent; height: 999px; width: 1600px; } <\/style>\n\n <![endif]--><br \/>\n<\/section>\n<h2 class=\"cnnix-article__subheader\">The Aldi way: How the chain beats Walmart on price<\/h2>\n<p class=\"cnnix-article__paragraph\">There\u2019s no secret to how Aldi keeps its prices so low: The company strips down the shopping experience in an unapologetically and brutally efficient way.<\/p>\n<p class=\"cnnix-article__paragraph\">\u201cThey are able to drive out every fractional cent of cost without compromising on quality,\u201d said Katrijn Gielens, professor of marketing at UNC&#8217;s Kenan-Flagler Business School.<\/p>\n<p class=\"cnnix-article__paragraph\">Aldi is privately held, and through a spokesperson, the company declined to make its executives available for interviews. But Gielens estimates that its operating costs are about half those of mainstream retailers. The company also operates at a lower profit margin than competitors, she said.<\/p>\n<p class=\"cnnix-article__paragraph\">From a customer\u2019s point of view, the distinct experience starts at the shopping carts, which Aldi keeps locked up.<\/p>\n<section class=\"cnnix-article__info-box\">\n<div class=\"cnnix-article__info-box-inner\" readability=\"32\">\n<div class=\"cnnix-article__info-box-inner__content\" readability=\"34\">\n<h2>25-cent deposit<\/h2>\n<p>Aldi locks up its shopping carts to save on labor costs. Customers deposit a quarter, which they get back when they return the carts.<\/p>\n<\/div>\n<div class=\"cnnix-article__info-box-inner__image\">\n<picture><source media=\"(min-width: 768px)\" ><source media=\"(min-width: 300px)\" ><img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/info-box-cart-quarter.jpg\" alt=\"25-cent deposit\"><br \/>\n    <\/source><\/source><\/picture>\n<\/div>\n<\/div>\n<\/section>\n<p class=\"cnnix-article__paragraph\">Rather than employ a team of runners to retrieve carts from the parking lot all day, Aldi expects its customers to return carts to the store after each shopping trip. It forces that behavior by charging customers a quarter deposit that they get back when they return their carts.<\/p>\n<p class=\"cnnix-article__paragraph\">This is not a novel idea. Several American grocers tried it in the 1980s and 1990s, but abandoned the practice after it annoyed customers who had come to expect more services at \u00a0their grocery stores. Aldi, which opened its <a href=\"https:\/\/corporate.aldi.us\/en\/aldi-history\/\" target=\"_blank\">first US store in Iowa in 1976<\/a>, has stuck with the model, insisting the deposit system is key to its low-price strategy. The store\u2019s most die-hard fans even celebrate it, heralding when Aldi offers \u201cquarter keeper\u201d keychains from time to time. Some fans even knit their own versions. A search on Etsy for \u201cAldi quarter keeper\u201d turns up <a href=\"https:\/\/www.etsy.com\/search?q=Aldi+quarter+keeper\" target=\"_blank\">more than 500 results<\/a>.<\/p>\n<figure class=\"cnnix-article__pullquote--inline\">\n<blockquote><p>\u201cI never underestimate them. I&#8217;ve been competing against Aldi for 20-plus years. They are fierce and they are good.\u201d<\/blockquote><figcaption>Greg Foran, CEO of Walmart&#8217;s US operations<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">The quirks don\u2019t stop there.<\/p>\n<p class=\"cnnix-article__paragraph\">When customers enter stores, they\u2019ll notice they look almost nothing like traditional supermarkets in the United States. With five or six super-wide aisles, Aldi only stocks around <a href=\"https:\/\/www.dailypress.com\/business\/tidewater\/dp-tidewaterbiz-aldi-20170427-story.html\" target=\"_blank\">1,400 items<\/a>\u00a0\u2014 compared to around 40,000 at traditional supermarkets and more than 100,000 at Walmart supercenters.<\/p>\n<figure class=\"cnnix-article__image--xl\">\n\t<a href=\"media\/aldi-shoppers2.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/aldi-shoppers2-tiny.jpg\" class=\"preview\" alt=\"Aldi displays products in their original cardboard shipping boxes, rather than stacking them individually, to save employees time stocking shelves.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\tAldi displays products in their original cardboard shipping boxes, rather than stacking them individually, to save employees time stocking shelves.<br \/>\n\t<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">For time-strapped shoppers like Youngpeter, Aldi\u2019s simple layouts and limited selection save her time. \u201cI\u2019m a busy mom. I don\u2019t have time to navigate a huge grocery store with kids begging to get out and go home,\u201d she said. \u201cI can get in and out of an Aldi in no time. I\u2019m not sifting through 50 different varieties of salsa.\u201d<\/p>\n<p class=\"cnnix-article__paragraph\">And good luck trying to find major name brands. More than 90% of the brands Aldi sells are its own private labels like Simply Nature organic products, Millville cereals, Burman\u2019s ketchup and Specially Selected bread. (If this sounds like Trader Joe\u2019s, that\u2019s not a coincidence. The two companies share a common history.)<\/p>\n<p class=\"cnnix-article__paragraph\">The packaging on these items sometimes looks so similar to \u00a0brand-name alternatives that customers find themselves doing a double-take. Aldi&#8217;s Honey Nut Crispy Oats, for example, come in a box nearly the same shades of orange, yellow and brown as General Mills\u2019 Honey Nut Cheerios, and with a similar font, too. Aldi sells its Tandil laundry detergent in an orange plastic jug with blue and yellow graphics reminiscent of Tide. The Millville Toaster Tarts, an Aldi house brand, look strikingly similar to Pop-Tarts \u2014 but a 12-pack of the Millville version is $1.85 while a 12-pack of Pop-Tarts costs $2.75.<\/p>\n<figure class=\"cnnix-article__image--lg\">\n\t<a href=\"media\/06-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/06-aldi-tiny.jpg\" class=\"preview\" alt=\"More than 90% of the products Aldi sells are its own private labels. In many cases, the packaging closely resembles familiar brands.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\tMore than 90% of the products Aldi sells are its own private labels. In many cases, the packaging closely resembles familiar brands.<br \/>\n\t<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">\u201cI\u2019m like, \u2018these corn flakes are just as good, if not better, than the ones that have a chicken on the box! They\u2019re the same exact ones,\u2019\u201d said Allison Robicelli, a food writer in Baltimore who describes herself as an Aldi loyalist.<\/p>\n<p class=\"cnnix-article__paragraph\">Although it may not be obvious at first glance, Aldi employs several key design details that maximize efficiency at checkout, too. On many of its products, barcodes are either supersized or printed on multiple sides to speed up the scanning process. After groceries are rung up, there\u2019s nowhere for them to linger. The cashier drops them directly into a shopping cart below. Aldi doesn\u2019t waste time bagging groceries. Customers must wheel away their shopping carts to bag their own groceries in a separate section at the front. Since stores don\u2019t offer free bags, customers often scour the store for empty cardboard boxes to use instead.<\/p>\n<p class=\"cnnix-article__paragraph\">\u201cThose lines fly. You\u2019re not waiting for people to bag. They\u2019re not messing around there,\u201d said Robicelli. \u201cOnce you see that kind of efficiency, it makes going to other supermarkets really annoying and really tedious.\u201d<\/p>\n<section class=\"cnnix-article__info-box\">\n<div class=\"cnnix-article__info-box-inner\" readability=\"32\">\n<div class=\"cnnix-article__info-box-inner__content\" readability=\"34\">\n<h2>Speedy cashiers<\/h2>\n<p>Another labor-saving trick: Cashiers don\u2019t bag groceries. Instead, they drop items directly into customers\u2019 carts.<\/p>\n<\/div>\n<div class=\"cnnix-article__info-box-inner__image\">\n<picture><source media=\"(min-width: 768px)\" ><source media=\"(min-width: 300px)\" ><img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/info-box-cashier.jpg\" alt=\"Speedy cashiers\"><br \/>\n    <\/source><\/source><\/picture>\n<\/div>\n<\/div>\n<\/section>\n<p class=\"cnnix-article__paragraph\">Aldi has other tactics to keep real estate and labor costs down. Size is one factor. A Walmart supercenter averages around 178,000 square feet. <a href=\"https:\/\/www.cnn.com\/2018\/09\/14\/business\/costco-warehouse-kirkland-signature-amazon-retail\/index.html\" target=\"_blank\">Costco warehouses<\/a>\u00a0average around 145,000 square feet. Aldi\u2019s\u00a0small box stores, however, take up just a fraction of that space, at 12,000 square feet on average.<\/p>\n<figure class=\"cnnix-article__stat--right\" readability=\"29\">\n<div class=\"cnnix-article__stat-logo\">\n<p><img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/bubbles.png\" alt=\"Aldi only stocks about 1,400 items compared to 40,000 at traditional supermarkets.\"><\/p>\n<\/div>\n<p class=\"cnnix-article__stat-vs\"><span class=\"number\">1,400<\/span> VS <span class=\"number-2\">40,000<\/span><\/p>\n<p class=\"cnnix-article__stat-copy cnnix-article__stat-copy--right\">Aldi only stocks about 1,400 items compared to 40,000 at traditional supermarkets.<\/p>\n<\/figure>\n<p class=\"cnnix-article__paragraph\">And unlike other stores, where there\u2019s a clear division of labor \u2014 runners retrieve carts, cashiers ring up customers and clerks stock shelves \u2014 Aldi employees are cross-trained to perform every function. Their duties are also streamlined. Aldi displays products in their original cardboard shipping boxes, rather than stacking them individually, to save employees time stocking shelves. Most stores don\u2019t list their phone numbers publicly because Aldi doesn\u2019t want its workers to spend time answering calls.<\/p>\n<p class=\"cnnix-article__paragraph\">The result: A single Aldi might have only three to five employees in the store at any given time, and only 15 to 20 on the entire payroll. The company claims to pay its workers above the industry average, but still saves on overall labor costs simply by having fewer people.<\/p>\n<p class=\"cnnix-article__paragraph\">All of these cost savings add up and are passed on to customers. Aldi claims its prices are up to 50% cheaper than traditional supermarkets, and independent analysis by Wolfe Research shows its prices are around 15% cheaper than Walmart in markets like Houston and Chicago.<\/p>\n<figure class=\"cnnix-article__image--lg\">\n\t<a href=\"media\/08-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/08-aldi-tiny.jpg\" class=\"preview\" alt=\"Aldi is investing $1.9 billion in remodeling 1,300 US stores, including expanded frozen and refrigerated sections.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\tAldi is investing $1.9 billion in remodeling 1,300 US stores, including expanded frozen and refrigerated sections.<br \/>\n\t<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">&#8220;They&#8217;ve driven prices down, cleverly,&#8221; Walmart&#8217;s Foran said. Last year, <a href=\"https:\/\/corporate.walmart.com\/media-library\/document\/2018-investment-community-meeting-meeting-transcript\/_proxyDocument?id=00000166-82dd-ddfc-a3f6-d2ff4f800001\" target=\"_blank\">he noted<\/a>\u00a0that when he visited Aldi, a gallon of milk and a dozen eggs each cost 99 cents. Foran said he and his team could not risk losing on those popular items.<\/p>\n<p class=\"cnnix-article__paragraph\">Despite the stripped-down store experience, Aldi scores <a href=\"https:\/\/talkbusiness.net\/2019\/01\/new-survey-shows-walmart-ranks-below-aldi-supermarket-chains-in-overall-satisfaction\/\" target=\"_blank\">higher on customer satisfaction surveys<\/a>\u00a0and benefits far more from word-of-mouth marketing than Walmart and other supermarkets. It has one of the highest Net Promoter Scores \u2014 a key measure of how likely customers are to recommend the brand to their friends and family \u2014 in the grocery industry, according to Bain &#038; Company.<\/p>\n<h2 class=\"cnnix-article__subheader\">Cheap kombucha on the shelves, BMWs in the parking lots<\/h2>\n<p class=\"cnnix-article__paragraph\">After Aldi first entered the United States, it took two decades for the company to expand to 500 stores.<\/p>\n<p class=\"cnnix-article__paragraph\">Now, in its rapid growth phase, Aldi is on track to open more than 130 new stores just this year alone.<\/p>\n<figure class=\"cnnix-article__image--xl\">\n\t<a href=\"media\/09-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/09-aldi-tiny.jpg\" class=\"preview\" alt=\"It\u2019s not uncommon to see luxury cars in Aldi\u2019s parking lots \u2014 a detail even a top Walmart executive has noted.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\tIt\u2019s not uncommon to see luxury cars in Aldi\u2019s parking lots \u2014 a detail even a top Walmart executive has noted.<br \/>\n\t<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">The Great Recession and its slow recovery helped the discount grocer gain popularity among budget-conscious shoppers in the United States. Aldi\u2019s latest expansion builds on that momentum. &#8220;Over the last 10 years, they\u2019ve really flourished in the US,\u201d said Mikey Vu, partner at Bain. \u201cThere\u2019s instability in the economy. People are worried. They\u2019re paying much closer attention to pennies on their grocery purchases than ever before.\u201d<\/p>\n<figure class=\"cnnix-article__stat--left\" readability=\"29\">\n<div class=\"cnnix-article__stat-logo\">\n<p><img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/us-shoppers.png\" alt=\"85% of US shoppers say they're open to trying store brands.\"><\/p>\n<\/div>\n<p class=\"cnnix-article__stat-copy cnnix-article__stat-copy--left\"><span class=\"number\">85%<\/span>85% of US shoppers say they&#8217;re open to trying store brands.<\/p>\n<p class=\"cnnix-article__stat-credit\">Source: Bain &#038; Company survey<\/p>\n<\/figure>\n<p class=\"cnnix-article__paragraph\">Of course, Aldi is not the only discount store growing in retail. <a href=\"https:\/\/money.cnn.com\/2018\/07\/30\/news\/companies\/ross-stores-tj-maxx-burlington-off-price-discount-retail\/index.html\" target=\"_blank\">TJMaxx, Ross <\/a>and Burlington are all opening new doors, and their cheap prices have put pressure on department stores. <a href=\"https:\/\/www.cnn.com\/2019\/01\/11\/business\/ollies-buys-toys-r-us\/index.html\" target=\"_blank\">Ollie\u2019s Bargain Outlet<\/a>\u00a0and Five Below are growing rapidly. <a href=\"https:\/\/www.cnn.com\/2019\/05\/14\/business\/dollar-general-app\/index.html\" target=\"_blank\">Dollar General has opened up thousands<\/a>\u00a0of stores in recent years.<\/p>\n<p class=\"cnnix-article__paragraph\">For Aldi, part of its success lies in appealing not only to low or mid-income shoppers, but to wealthier ones as well. Aldi\u2019s core shopper tends to make more money and have a slightly higher education level than the overall grocery shopper, according to Bain. On a recent trip to an Aldi in Hackensack, New Jersey, luxury vehicles, including a $50,000 Jaguar and an $80,000 Tesla Model X, dotted the small parking lot alongside Toyotas, Fords and Hondas.\u00a0Walmart\u2019s Foran has marveled that when he visited an Aldi in Australia, BMWs and Mercedes were in the parking lot there, too.<\/p>\n<section class=\"cnnix-article__chart\">\n<!--[if (gte IE 9)|!(IE)]><!-->  <!--<![endif]--> <!--[if lte IE 8]> \n\n<style> .m-infographic--1558043220838{ background: url(\/\/cdn.cnn.com\/cnn\/.e\/interactive\/html5-video-media\/2019\/05\/16\/aldi_number_three_chartd.png) no-repeat 0 0 transparent; height: 1003px; width: 1600px; } <\/style>\n\n <![endif]--><br \/>\n<\/section>\n<p class=\"cnnix-article__paragraph\">\u201cPeople love saving money on staples. And it would apply to every single person in this room,\u201d he said to an audience of investors and retail executives at a Four Seasons Hotel in Boston. \u201cYou feel pretty good if you can save $10 on your grocery bill because it makes you feel better when you go out for dinner on Saturday night and spend $200 at a restaurant.\u201d<\/p>\n<p class=\"cnnix-article__paragraph\">In recent years, Aldi has ramped up its efforts to appeal to high-income shoppers by offering more fresh, organic produce as well as imported items like Irish cheese, <a href=\"https:\/\/www.aldi.us\/en\/grocery-goods\/quality-brands\/specially-selected\/pantry\/pantry-detail\/ps\/p\/specially-selected-sliced-brioche-loaf-2\/\" target=\"_blank\">brioche from France<\/a>\u00a0and pastas from Italy. The stores now offer private-label versions of kombucha, cold-pressed juices, an array of gluten-free products and peanut butter powder.<\/p>\n<figure class=\"cnnix-article__pullquote--inline\">\n<blockquote><p>\u201cIt used to be the white label knock-off stuff that you were a little bit embarrassed to buy, but it was cheap. Now, people don&#8217;t care anymore about the big brands the way they used to. That plays right into the Aldi playbook.\u201d<\/blockquote><figcaption>Mikey Vu, partner at Bain &#038; Company<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">Aldi is investing $1.9 billion to remodel 1,300 stores with natural lighting and refreshed produce, diary and meat sections. Since 2017, its new stores have been concentrated in more populous, upper middle-class suburbs, according to Bain. Aldi\u2019s new stores are in zip codes with a $65,822 household income on average \u2014 about $4,500 above the national average. \u201cThey\u2019re clearly trying to go after a more upmarket customer,\u201d Vu said.<\/p>\n<figure class=\"cnnix-article__image--split\">\n<div class=\"cnnix-article__image--split-grid\">\n<div class=\"cnnix-article__image--split-grid__item\">\n<p><a href=\"media\/11-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t\t\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/11-aldi-tiny.jpg\" class=\"preview\" alt=\"\"><br \/>\n\t\t\t\t<\/a><\/p>\n<\/div>\n<div class=\"cnnix-article__image--split-grid__item\">\n<p><a href=\"media\/aldi-kombucha-closeup.jpg\" class=\"progressive replace\"><br \/>\n\t\t\t\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/aldi-kombucha-closeup-tiny.jpg\" class=\"preview\" alt=\"\"><br \/>\n\t\t\t\t<\/a><\/p>\n<\/div>\n<\/div><figcaption class=\"cnnix-article__image-caption\">\n      As part of its plan to attract a broader range of US shoppers, Aldi is offering more specialty products at low prices, including its own peanut butter powder and kombucha.<br \/>\n    <\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">Part of Aldi\u2019s appeal is not in a lower grocery bill alone, but in the way Aldi cleverly markets its discounts, UNC\u2019s Gielens said. Bargain hunters across the income ladder end up feeling like they\u2019re outsmarting other, higher-priced supermarkets and big brands when they see their grocery receipts. Aiming to be the &#8220;smart shopping alternative,\u201d Aldi wants to &#8220;spread the message that traditional grocers and brands simply rip off consumers,\u201d she said.<\/p>\n<p class=\"cnnix-article__paragraph\">Aldi hammers home that message on its signs in stores.\u00a0\u201cThe same is always better when it costs less.\u201d \u201cNew deals every week. Find them here. Brag like crazy.\u201d Aldi encourages customers to ditch their grocery stores: \u201cSwitch and save.\u201d<\/p>\n<p class=\"cnnix-article__paragraph\">Americans are listening. Last year, 19% of shoppers who switched retailers started buying at Aldi, according to a Morgan Stanley survey. That was second only to Walmart.<\/p>\n<section class=\"cnnix-article__info-box\">\n<div class=\"cnnix-article__info-box-inner\" readability=\"32\">\n<div class=\"cnnix-article__info-box-inner__content\" readability=\"34\">\n<h2>More Barcodes<\/h2>\n<p>On many products, barcodes are either super large or they&#8217;re printed on multiple sides to speed up the scanning process at the cash register.<\/p>\n<\/div>\n<div class=\"cnnix-article__info-box-inner__image\">\n<picture><source media=\"(min-width: 768px)\" ><source media=\"(min-width: 300px)\" ><img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/desktop-chocolate.jpg\" alt=\"More Barcodes\"><br \/>\n    <\/source><\/source><\/picture>\n<\/div>\n<\/div>\n<\/section>\n<p class=\"cnnix-article__paragraph\">Aldi\u2019s reliance on private-label brands is also helping it win Millennials, who are increasingly brand-agnostic and are instead drawn to lower prices and convenience, according to Bain data. Private-label products have undergone a renaissance in recent years and are now growing faster at supermarkets than the top 20 national brands, <a href=\"https:\/\/www.nielsen.com\/us\/en\/insights\/reports\/2018\/the-rise-and-rise-again-of-private-label.html\" target=\"_blank\">Nielsen data shows<\/a>.<\/p>\n<p class=\"cnnix-article__paragraph\">Stores like Trader Joe\u2019s and Costco have built empires selling their own brands. <a href=\"https:\/\/www.cnn.com\/2019\/01\/10\/business\/costco-kirkland-signature-brand\/index.html\" target=\"_blank\">Costco\u2019s Kirkland Signature<\/a>, for example, raked in nearly $40 billion last year, an 11% increase from 2017. Kirkland\u2019s sales last year beat out Campbell Soup, Kellogg and Hershey put together. Retailers\u2019 brands challenge these consumer goods heavyweights, which spend billions marketing their products.<\/p>\n<p class=\"cnnix-article__paragraph\">\u201cIt used to be the white label knock-off stuff that you were a little bit embarrassed to buy, but it was cheap,\u201d Vu said of store brands. Now, Bain customer surveys show that 85% of US shoppers say they\u2019re open to trying private label products. \u201cPeople don&#8217;t care anymore about the big brands the way they used to,&#8221; he said. &#8220;That plays right into the Aldi playbook.&#8221;<\/p>\n<figure class=\"cnnix-article__image--xl\">\n\t<a href=\"media\/14-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/14-aldi-tiny.jpg\" class=\"preview\" alt=\"The \u201cAldi Finds\u201d aisle, which includes seasonal and quirky items, is popular among regular shoppers.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\tThe \u201cAldi Finds\u201d aisle, which includes seasonal and quirky items, is popular among regular shoppers.<br \/>\n\t<\/figcaption><\/figure>\n<h2 class=\"cnnix-article__subheader\">It all began with a thrifty family<\/h2>\n<p class=\"cnnix-article__paragraph\">Aldi\u2019s obsession with frugality comes from its early owners: <a href=\"https:\/\/corporate.aldi.us\/en\/aldi-history\/\" target=\"_blank\">brothers Theo and Karl Albrecht<\/a>, who took over the family grocery business in Essen, Germany after World War II. Out of necessity, early stores initially stocked only a handful of items, but the brothers planned to expand the selection as the business grew. Over time, however, they recognized that they could be successful selling a narrow range of basics. \u201cIf we did not want to offer customers a wide range of products, then we had at least to offer them some other advantage. From that point on, we sold our products for decisively less,\u201d Karl said in 1953, according to a <a href=\"https:\/\/www.amazon.com\/BARE-ESSENTIALS-Dieter-Brandes\/dp\/3844817026\/ref=pd_lpo_sbs_14_t_0?_encoding=UTF8&#038;psc=1&#038;refRID=YBR6KXMF3D2153HS2KQ9\" target=\"_blank\">book by former Aldi manager Dieter Brandes<\/a>.<\/p>\n<p class=\"cnnix-article__paragraph\">Theo was so insistent on keeping costs low that he was known to take notes on both sides of a piece of paper and to turn off the lights at stores during the daytime. The brothers purposefully kept store aesthetics to a Spartan minimum. \u201cThere are no decorations in stores,\u201d Karl said in 1953. \u201cAll of our promotional efforts are put into discount prices.\u201d<\/p>\n<p class=\"cnnix-article__paragraph\">In 1961, the brothers split the business in two, reportedly over a dispute over whether to sell cigarettes in stores. Karl took southern Germany, and Theo ran the North. To this day, Aldi S\u00fcd and Aldi Nord remain separate companies, with the dividing line between the two in Germany known as the \u201cAldi Equator.\u201d<\/p>\n<figure class=\"cnnix-article__image--lg\">\n\t<a href=\"media\/15-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/15-aldi-tiny.jpg\" class=\"preview\" alt=\"Aldi\u2019s stores are smaller than traditional supermarkets and feature wide aisles.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\tAldi\u2019s stores are smaller than traditional supermarkets and feature wide aisles.<br \/>\n\t<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">Aldi S\u00fcd is the company that\u2019s expanding rapidly now in the United States, as well as throughout Europe. Aldi Nord also has an American presence through Trader Joe\u2019s, which it acquired in 1979 \u2014 but its growth is less ambitious than that of its cousin company. Trader Joe\u2019s had 484 stores in United States at the end of 2018.<\/p>\n<p class=\"cnnix-article__paragraph\">The Albrecht brothers both passed away within the last decade. Now, the two chains operate in 18 countries, bringing in an estimated $98 billion in combined sales last year, <a href=\"https:\/\/www2.deloitte.com\/content\/dam\/Deloitte\/global\/Documents\/Consumer-Business\/cons-global-powers-retailing-2019.pdf\" target=\"_blank\">according to Deloitte.<\/a>\u00a0That revenue makes the Aldi companies not only one of the largest grocers, but also the eighth biggest retailer in the world. The two Aldis combined are now larger than CVS or Tesco, and just a few rungs down from Amazon, Home Depot and Walgreens Boots Alliance.<\/p>\n<h2 class=\"cnnix-article__subheader\">Competitors react<\/h2>\n<p class=\"cnnix-article__paragraph\">Aldi S\u00fcd\u2019s rapid growth in the United States mimics its broader international expansion in places like Ireland, Hungary, Switzerland, Australia and even China. The company has also grown quickly in the United Kingdom, where many local grocers ignored Aldi until it was too late.<\/p>\n<p class=\"cnnix-article__paragraph\">But as Aldi scales in the United States, there are real concerns about whether it can maintain its low-cost advantage. American competitors have learned to respond faster when Aldi lowers prices, which could blunt its impact.<\/p>\n<figure class=\"cnnix-article__image--lg\">\n\t<a href=\"media\/16-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/16-aldi-tiny.jpg\" class=\"preview\" alt=\"Customers bag their own groceries at Aldi. It\u2019s yet another way the store saves on labor costs.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\tCustomers bag their own groceries at Aldi. It\u2019s yet another way the store saves on labor costs.<br \/>\n\t<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">\u201cThey\u2019ve taken Aldi as a much more credible threat,\u201d Vu said.<\/p>\n<p class=\"cnnix-article__paragraph\">Walmart has narrowed its price gap with Aldi since July 2017, according to a study conducted by <a href=\"https:\/\/wolferesearch.com\/scott-mushkin\" target=\"_blank\">Wolfe Research analyst Scott Mushkin<\/a>, who recorded prices of 40 top-selling items at a Houston Walmart and an Aldi across the street from one another. Walmart also narrowed that gap with Aldi in Chicago-area stores, he found.<\/p>\n<p class=\"cnnix-article__paragraph\">To counter Walmart and other grocers\u2019 moves, Aldi has started compromising its bare-bones approach. In September, it launched a <a href=\"https:\/\/www.supermarketnews.com\/marketing\/aldi-set-kick-national-ad-campaign\" target=\"_blank\">national advertising campaign<\/a>, including television commercials, to drive the message that it sells high-quality products. Aldi also recently pledged to cut plastic and transition to 100% sustainable packaging by 2025 \u2014 not a cheap endeavor. Aldi increased its fresh food offerings by 40% in 2018 by expanding its produce selection and adding new vegan and vegetarian options. And it started offering more alternative milks, including soy and almond.<\/p>\n<p class=\"cnnix-article__paragraph\">Those changes are expensive and could eat away at Aldi\u2019s margins. \u201cThe model only works if they are the actual cheapest,\u201d said Simon Johnstone, analyst at Kantar.<\/p>\n<figure class=\"cnnix-article__image--lg\">\n\t<a href=\"media\/17-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/17-aldi-tiny.jpg\" class=\"preview\" alt=\"\u201cThose lines fly. You\u2019re not waiting for people to bag. They\u2019re not messing around there,\u201d said Allison Robicelli, a frequent Aldi shopper.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\t\u201cThose lines fly. You\u2019re not waiting for people to bag. They\u2019re not messing around there,\u201d said Allison Robicelli, a frequent Aldi shopper.<br \/>\n\t<\/figcaption><\/figure>\n<p class=\"cnnix-article__paragraph\">Customers also say they\u2019re starting to notice a few more brand-name goods on the shelves, such as Coca-Cola, Tide and Old Spice deodorant. \u201cI honestly don\u2019t like it when they bring in national brands. I like the sanctity of Aldi,\u201d Robicelli\u00a0said, adding that she worries prices might go up.<\/p>\n<p class=\"cnnix-article__paragraph\">At the same time, Aldi faces heightened competition from its closest rival, Lidl. Lidl cut the ribbon on its first US stores in Virginia, North Carolina and South Carolina in 2017 and recently opened three stores outside of Atlanta. It\u2019s expanding in upper income communities, too. Now, Lidl operates more than 60 stores in the country.<\/p>\n<p class=\"cnnix-article__paragraph\">Aldi is closely monitoring Lidl\u2019s growth. In a <a href=\"https:\/\/www.supermarketnews.com\/retail-financial\/aldi-names-lidl-lawsuit-against-two-ex-employees\" target=\"_blank\">federal lawsuit filed in March<\/a>, Aldi alleged that two of its former US employees illegally shared confidential information about its sales, future store locations and real estate strategy with Lidl.<\/p>\n<p class=\"cnnix-article__paragraph\">A spokesperson for Lidl said the company &#8220;believes in fair competition and the allegations in the lawsuit are not consistent with our business practices and values. We are looking into the claims, which we take seriously.&#8221;<\/p>\n<figure class=\"cnnix-article__image--lg\">\n\t<a href=\"media\/18-aldi.jpg\" class=\"progressive replace\"><br \/>\n\t\t<img decoding=\"async\" src=\"http:\/\/cdn.cnn.com\/cnn\/interactive\/2019\/05\/business\/aldi-walmart-low-food-prices\/media\/18-aldi-tiny.jpg\" class=\"preview\" alt=\"Other American grocers have tried shopping cart deposits but abandoned the practice after it irritated shoppers. Aldi has stuck with the model, insisting it\u2019s core to the store\u2019s low-cost strategy.\"><br \/>\n\t<\/a><figcaption class=\"cnnix-article__image-caption\">\n\t\tOther American grocers have tried shopping cart deposits but abandoned the practice after it irritated shoppers. Aldi has stuck with the model, insisting it\u2019s core to the store\u2019s low-cost strategy.<br \/>\n\t<\/figcaption><\/figure>\n<h2 class=\"cnnix-article__subheader\">Aldi\u2019s lasting impact: Lower prices and fewer grocers<\/h2>\n<p class=\"cnnix-article__paragraph\">Although huge competitors can reduce prices to compete with Aldi, regional supermarkets are getting squeezed by the grocery price war.<\/p>\n<p class=\"cnnix-article__paragraph\">Tops Markets and Southeastern Grocers, the owner of Winn-Dixie and Bi-Lo, have <a href=\"https:\/\/www.supermarketnews.com\/retail-financial\/courts-ok-southeastern-grocers-tops-restructuring-plans\" target=\"_blank\">recently filed for bankruptcy<\/a>. Save-A-Lot, the second-largest discount grocery chain in the United States after Aldi, is deep in debt and can\u2019t afford to continue lowering prices without sacrificing profit.<\/p>\n<p class=\"cnnix-article__paragraph\">\u201cAldi and Lidl will be a significant disrupting force in the US, threatening smaller regional supermarket chains and forcing larger players to cut prices,\u201d Fitch Solutions said in a research report in March.<\/p>\n<p class=\"cnnix-article__paragraph\">More bankruptcies are on the way for America\u2019s grocery stores, analysts predict. &#8220;The US has a much bigger tranche of second and third tier grocery retailers,\u201d said Vu from Bain. \u201cThose are the ones that are dying off.\u201d<\/p>\n<p class=\"cnnix-article__paragraph\">With smaller grocers disappearing, there\u2019s probably room for both Walmart and Aldi to pick up the pieces, Vu added. In the meantime, Aldi will keep leading the price wars, putting pressure on the bigger players, too.<\/p>\n<p class=\"cnnix-article__paragraph\">&#8220;They&#8217;re incredibly successful,&#8221; he said. &#8220;We haven&#8217;t seen a disrupter in the grocery space like this in a long time.&#8221;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Running a supermarket in America has never been harder. Profits are razor thin. Online shopping and home delivery are changing the way people buy their food. Dollar stores and drugstores are selling more groceries. Pressures are so intense that regional chains like Southeastern Grocers, the owner of Winn-Dixie and Bi-Lo, filed for bankruptcy. Large companies&hellip;<\/p>\n","protected":false},"author":10,"featured_media":39397,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-39396","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-world_news"],"_links":{"self":[{"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=\/wp\/v2\/posts\/39396","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=39396"}],"version-history":[{"count":0,"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=\/wp\/v2\/posts\/39396\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=\/wp\/v2\/media\/39397"}],"wp:attachment":[{"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=39396"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=39396"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/qatar-news.org\/qatarnewsEn\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=39396"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}