Dive Brief:

• Aldi recently opened a remodeled store near its Batavia, IL headquarters that includes an in-house bakery and a fresh produce section positioned at the front of the store, according to consulting firm Brick Meets Click. The test store represents an evolution of Aldi's current remodeling campaign, which focuses on adding more fresh items, colorful signage and easier-to-navigate aisles to stores across the country.
• Brick Meets Click noted that organic produce greets customers as they walk in the entrance, while meat, seafood and commercial bread appear along the back wall of the store. The real show-stopper, though, according to the firm, is the in-house bakery, which saw customers lined up for the self-service selection of rolls, pretzels, donuts and more. 
• An Aldi spokeswoman told Food Dive that it began testing in-house bakeries last January, but declined to confirm that this is a new store format for the company. The renovation is part of Aldi’s expansion that will add 2,500 stores and renovate 1,300 by 2022. 

Dive Insight:

Correction: A previous version of this article mistakenly referred to Aldi UK's sales performance rather than that of Aldi US. Aldi US is a privately owned company that does not disclose financial results.

Less than a year after it announced a sweeping store expansion and remodeling campaign, Aldi is taking its new fresh-focused format to the next level. By offering an in-store bakery and placing produce in the first aisle, the discounter is challenging traditional grocers while also offering a response to fellow discounter Lidl, which trades on its own in-house bakery.

Aldi's remodeled stores highlight fresh produce, and the new design takes this focus up a few notches, making it easy for shoppers to immediately see fresh fruits and vegetables upon entering the store. Research indicates consumers increasingly shop the perimeter of the stores in search of nutritious food. Placing those products in high traffic, high visibility areas solidifies Aldi’s branding message.

The addition of the bakery adds another dimension for Aldi shoppers. Now, it’s not just those looking to save money or get fresh produce who will come to the store, but also those who are drawn by the promise of newly baked goods. With the bakery, Aldi is also in a position to entice customers from c-stores and quick-service restaurants who are in search of a speedy breakfast or meal add-on. The addition of a bakery comes at a fortuitous time. According to Nielsen, supermarket bakeries sell $11.6 billion worth of cookies, cakes, breads, pies and other treats annually. In-store bakery sales are set to grow, predicted panelists in Progressive Grocer's 2016 Retail Bakery Review. 

Contacted by Food Dive, a spokeswoman for Aldi noted that the new format is an example of how the company is "continually testing new and exciting items to make grocery shopping smart, fast, easy and affordable." She declined to discuss expansion plans, though Brick Meets Click wrote that it expects the model to show up in more stores, judging by the popularity of the bakery in particular.

"On a busy Saturday, in the early afternoon, customers were waiting in line for their turn to pick out bakery products – it was the clearly the star of the show," the firm wrote in a post this week.

Aldi has quietly become one of the grocery industry's biggest disruptors. Not coincidentally, it announced its plan to remodel older stores and build new ones just three days before Lidl opened the doors to its first store in the U.S. But make no mistake—although Aldi has set itself up to aggressively compete with Lidl, it is looking beyond the discount grocer, and is going up against larger retailers like Kroger and Walmart. Aldi competes fiercely with Walmart on price, and shows no signs of backing down.

With the new store design and additional bakery service, Aldi has sent yet another message to competitors big and small that the no-frills grocer is stepping up its game.