Dive Brief:
- One out of every five shoppers who recently switched grocery stores are loyal to Aldi, Bloomberg reported, citing a report by Morgan Stanley. According to the firm, the German discount grocer is getting more new shoppers than Costco, Target, Kroger and Amazon.
- The company, which opened its first U.S. location in Iowa more than 40 years ago, is in the midst of a major store expansion and remodeling campaign. Aldi plans to build 700 new nationwide locations — for a total of 2,500 U.S. stores — in the next four years. It's also remodeling stores, introducing dozens of new products and rolling out home delivery nationwide.
- Walmart and Kroger still account for one-third of the grocery market, with Aldi only controlling 2%. However, about half of those market leaders' locations have an Aldi within five miles, according to Morgan Stanley. The $5.3 billion remodel and expansion plan would make Aldi the nation's third-largest grocer by store count.
Dive Insight:
Aldi is expanding its presence in the U.S. market during a dramatic shake-up in the grocery industry, which could lead to the chain gaining its greatest advantage. Amid mergers and acquisitions, the rise of grocery delivery services, and a push for niche grocers, Aldi sneaked into the mix to offer all of these options — plus discount prices.
The discounter recently announced plans to increase its product assortment by 20% in every store, as well as add 40% more fresh foods. Stores will include more organic and vegan options — perfectly timed to consumers' growing preference for healthy, all-natural items. This shows Aldi's ability to track shopper demand and make key changes in the midst of its breakneck expansion drive.
Agility to adapt to consumer demands in a short period of time should not be glossed over. Rival European discounter Lidl did not have similar success during its first year in the U.S. Traditional grocers are also under intense pressure to make a shift as shoppers drift towards fresher, more curated selections and store brands.
As grocery price wars rage on, Aldi shoppers may be the least likely to make a change. More than 90% of its products are private label and prices can stay low. Many of these exclusive products have no artificial colors, trans fats or MSG, and its dairy is artificial growth hormone free. Aside from the clean label bonafides, Aldi's products are high quality. In 2017 alone, more than 200 Aldi private label products won awards.
Aldi is also wasting no time in ramping up its e-commerce offerings. The formerly brick-and-mortar-only retailer will have online ordering and delivery through Instacart in more than 5,000 ZIP codes — including 75 major markets — by Thanksgiving. The company is also piloting curbside pickup as an e-commerce option.
