Aldi and Lidl take supermarket battle to the US

29 June 2017 Consultancy.uk

European discount supermarkets Aldi and Lidl are both bulking up their US presences, as a decades-long supermarket battle crosses the Atlantic. The industry in the States is already embroiled in its own price-war, as deflation fuels competitive pressure.

Aldi, known for low prices on its private-label items, plans to spend $3.4 billion over the next five years to open 900 supermarkets, the company said Monday. The German supermarket chain has added more produce and boosted its organic and gluten-free offerings recently as it tries to appeal to more mainstream shoppers, and earlier this year, the company announced plans to spend $1.6 billion remodelling 1,300 of its pre-existing US stores as it bids to shed its image an exclusively discount oriented store.

Aldi’s investment comes as European rival Lidl – who have also made a name for themselves by offering inexpensive store-brand alternatives to mainstream brands found in other supermarkets – announced the opening of its first U.S. stores in 2017, with plans for the launch of as many as 100 by the end of 2018.

According to a recent study by Bain & Company, Aldi is actively moving into the more mainstream segments – which is likely to create additional risks for traditional retailers. The US expansion by the German private-label giants could put more pressure on conventional retailers like Wal-Mart Stores and Kroger to lower their prices.

Aldi and Lidl take supermarket battle to the US

The new competition in the low-margin industry arrives during a deflationary spiral that has seen food prices drop for 17 straight months, the longest such streak in more than 60 years. The report also found that 61% of shoppers would try an Aldi if it opened nearby, while 71% said that they would try a Lidl.

Bain & Company meanwhile predicted that sales in the so-called “deep discount segment” of the grocery business, which includes Aldi and Lidl, will grow as much as 10% annually through 2020, five times higher than for traditional stores.

Aldi says it will have 2,500 stores nationwide by 2022, meaning only Kroger and competitors Albertsons, who own Safeway, would have a greater presence in America, however, the battle between them and new-comers Lidl intensified in June 2017, when the rival chain opened 10 stores across three states. Analysts have estimated that Lidl could roll out as many as 600 US locations over the next five years.

According to Liz Ruggles, a spokesperson for Aldi, 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,” Ruggles said. “We’ll continue to maintain that – we’re very diligent.”

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