Lidl and Aldi expand supermarket clash to US

29 June 2017 Authored by Consulting.us

European discount supermarket giants Lidl and Aldi are both building up their US presence, as a decades-long rivalry crosses the Atlantic. The US food retail market is already embroiled in its own price war, as deflation drives up competitive pressure.

Aldi, known for its low prices and private-label items, is planning to spend $3.4 billion over the next five years to open 900 new locations, the company said Monday. The German supermarket chain has already expanded produce sections and boosted its organic and gluten-free offerings recently in a bid to appeal to a wider range of shoppers. Earlier this year, the company announced plans to spend $1.6 billion renovating its current 1,300 US stores as it attempts to alter its image from that exclusively discount-oriented store.

Aldi’s investment comes as German rival Lidl – who has also made a name for itself by offering inexpensive store-brand products in a no-frills environment– announced the opening of its first U.S. locations in 2017, with plans to open 100 stores by the end of 2018.

According to a recent report from Bain & Company, Aldi is actively positioning itself in the more mainstream grocery segment – which is likely to cause trouble for traditional retailers. The US expansion of the German discount heavy-hitters could put additional pressure on conventional retailers like Walmart and Kroger to lower their prices. Indeed, the report found that 61% of shoppers would try an Aldi if it opened nearby, while 71% said that they would try a Lidl.

Lidl and Aldi expand supermarket clash to US

The new competition in the low-margin industry comes in the midst a deflationary spiral that has seen food prices drop for 17 straight months, the longest such streak in more than 60 years.

Bain & Company, meanwhile, predicts that sales in the so-called “deep discount segment” of the grocery market – which includes Aldi and Lidl – will grow by as much as 10% annually through to 2020, five times higher the predicted growth rate of ‘traditional’ stores.

Aldi says it will have 2,500 stores nationwide by 2022, meaning only Walmart, Kroger and Albertsons – which owns Safeway – would have a greater presence in America. The battle between the grocery retailers is set to grow fiercer, as analysts estimate that newcomer Lidl will open as many as 600 locations in the next five years.

According to Aldi spokesperson Liz Ruggles, however, Lidl’s arrival on the scene will not change how they do business. “We’re doing what we’ve been doing to ensure we’re the low-cost leader,” commented Ruggles. “We’ll continue to maintain that – we’re very diligent.”

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