Dive Brief:

• Aldi has reached an agreement with city officials in Goodyear, Arizona, a suburb of Phoenix, to develop a regional office and distribution center, according to the Arizona Republic. The discount grocer plans to purchase close to 70 acres of public and privately held land in the area.
• A company spokeswoman told the paper that Aldi is surveying sites in Arizona as well as other markets, but did not confirm that the company will, in fact, build stores in the area. 
• According to Supermarket News, the Phoenix area doesn’t have much in the way of discount competitors. Fry’s, which is owned by Kroger, leads market share in the region with 26% of sales, followed by Walmart (19.9%) and Safeway (10.2%).

Dive Insight:

German-owned Aldi is expanding throughout the country as part of an ambitious $3.4 billion plan to add 900 more stores by 2022. The discounter recently entered the crowded Southern California market, where it’s putting pressure on longtime players like Albertsons’ Vons and Pavilions stores, Kroger-owned Ralphs, Walmart and Stater Bros. Aldi currently has around 40 stores in the $45 billion market and plans to expand throughout the state.

Aldi is also rapidly expanding in Florida, where it’s going up against a dominant Publix and Walmart as well as newcomers like Lucky’s, Sprouts Farmers Market and Earth Fare. Despite the influx of new players and strength of established ones like Publix, Aldi is expected to gain share as one of the few discounters in the market.

The chain, which opened its first U.S. store in Iowa in 1976, is focused on building up its store base before fellow discounter Lidl can gain a foothold, according to Bill Bishop, a grocery consultant and chief architect of Brick Meets Click. Lidl, which opened its first stores in mid-June, is set to open 100 stores by the end of this year and more than 600 over the next few years.

“What we’re seeing is Aldi moving as quickly as possible to cover the nation and build a strong footprint so they are the incumbent with a modern hard discount offer,” Bishop told Food Dive.

Arizona appears to be a good fit for Aldi, assuming it does expand there. The state has a strong crop of conventional and natural retailers, but not many discounters to speak of. Other grocers have struggled in the market, most notably Bashas’ and Fresh & Easy, the defunct Tesco chain that also offered discount private label products. But Aldi, which has strong operations and deep roots in the U.S., should be able to capitalize on it.

The discounter’s small format and low overhead costs mean it can open quickly in more places than other retailers. At a time when traditional grocers feel fortunate to add a dozen new stores per year, Aldi plans to add close to 200 stores per year over the next five years.

In addition to its breakneck expansion plans, Aldi is also spending $1.6 billion to remodel most of its existing 1,600 stores. The updates include adding warmer lighting and improved signage, widening aisles and adding more produce and other fresh items. The goal, according to Bishop and other experts, is to “soften” its hard discounter image and expand its customer base.