Aldi has acknowledged plans to open stores in California, the home of its wildly successful cousin, Trader Joe's.
The confirmation came from a report in the Des Moines Register while the Los Angeles Times reported in late June that the limited-assortment grocer was opening a regional headquarters and distribution center in Moreno Valley to expand into California and the Southwest.
The German supermarket giant, which opened its first door in the U.S. in 1976, operates more than 1,200 stores in 32 states in the U.S., largely in the Midwest and Northeast. In 2009, Aldi announced it was ramping up its expansion to 75 stores annually. It entered Houston earlier this year and just opened its first store in Brooklyn, NY.
The expansion was designed to capitalize on increasingly cost-conscious shoppers as well as the success the chain is finding upgrading its offerings, including adding more fresh foods, that have increased its appeal to a wider audience. In May, Aldi introduced Specialty Selected, a high-end line of German coffees, gourmet pastas, and premium packaged meats and cheeses.
"Aldi used to be viewed as a stock-up store where you'd buy a lot of canned goods that were mostly brands you didn't recognize," Matt Lilla, division VP in Aldi's Faribault, MI., office, told the Des Moines Register. "It's changed a lot."
In entering new markets, Aldi often gets compared to Trader Joe's. Aldi's stores are also small, about 10,000 to 17,000 square feet. They carry about 1,400 items, versus traditional grocers that can carry up to 20- to 30,000 items and superstores with over 100,000 items. About 95 percent of its merchandise is private label. Both chains are also owned by Germany's Albrecht family, although operated independently.
The big difference is price, with Aldi promising to save shoppers "up to 50 percent on their grocery bills."
David Livingston, principal at DJL Research and a RetailWire BrainTrust panelist, speaking to the Register, estimated that Aldi shoppers on average save 15 percent to 20 percent more on groceries over Walmart and about 25 percent over Hy-Vee.
The store's look, often described as "bare-bones" and "no-frills," also keeps costs down. Other cost-saving quirks include incentivizing shoppers to bring their own shopping bags and return cards, not accepting credit cards, and its open carton displays.
"If you took a Trader Joe's and made it more for Walmart customers, that's what Aldi is, like a dollar store for food," BB&T Capital Markets analyst Andrew Wolf told the LA Times.
The opening of smaller stores by Walmart and Target promise more competition but Aldi's future stores will increasingly move it closer to traditional grocers and even Trader Joe's locations.
"Twenty years ago, Aldi's target areas were lower-income neighborhoods," Aldi's Mr. Lilla told the Register. "At this point, there is no specific income target."
- No-frills foodstore Aldi is expanding - Des Moines Register
- Discount grocer Aldi USA poised for move into Inland Empire - Los Angeles Times (tiered sub.)
- How Two German-Owned Sister Supermarket Brands Became Hot Trendsetters in the U.S. - Time
- ALDI Redefines Gourmet with New Premium Brand, 'Specially Selected'
National Grocer Introduces Hand-Selected Product Line Available Exclusively at ALDI - Aldi - Aldi Looks to U.S. for Growth - The Wall Street Journal (sub. required)
- Where Wal-Mart Failed, Aldi Succeeds - The New York Times (tiered sub.)
- Select Assortment Discount Grocer ALDI Opens First Houston Stores - Aldi
- Select Assortment Discount Grocer ALDI Opens Eleventh Houston Store June 13 Grocer Introduces Shoppers to Big Savings and Better Quality - Aldi