Suddenly, Aldi, the German food discounter, is expanding rapidly in the U.S. by acquiring Southeastern Grocers of Jacksonville, Fla. The 400 grocery stores are primarily Winn-Dixie and Harveys supermarkets. While some of the stores will be converted to Aldi stores, others will continue to operate under their current nameplates. This is a change in strategy for Aldi since it generally operated only under its own successful discount grocery format.
The acquisition is expected to be completed early in 2024. Aldi Nord is a global company with headquarters in Essen, Germany. The company also owns Trader Joe’s food stores.
Aldi USA (headquarters Batavia Ill.) will operate 2400 stores at the end of the current year; this reflects the addition of 120 stores opening this year. With the new acquisition of about 400 units, it will operate about 2800 stores next year. According to a Progressive Grocer survey, Aldi USA now ranks 24th with $18.2 billion revenues in fiscal 2022, and Winn-Dixie and Harveys combined rank 39th with $9.6 billion revenues in fiscal 2022.
Financial details were not disclosed since both companies are privately held. Aldi said that the acquisition supports its long-term growth strategy in the U.S. The Winn-Dixie and Harveys supermarkets are located in the Southeast – in Alabama, Florida, Georgia, Louisiana, and Mississippi.
There are several good reasons why this Aldi acquisition makes sense for both parties.
1. The Southeastern Grocers’ stores were competing with Publix supermarkets (ranking is 12th with annual revenues of $48 billion). Publix is a very successful, dominant operation. In the last quarter, the company reported a sales increase of +74.7% to $1.1 billion.
2. The inflation rate for supermarkets is abating; many supermarkets are now lowering prices.
3. The supermarkets that aggressively use low prices in the current environment are winners – look at Publix, Costco, and Albertson as well as Aldi and Lidl.
4. There have already been several other grocery-store company mergers, notably the Kroger
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5. Consolidation of smaller supermarket companies makes sense, since combined operations have greater efficiencies and are likely to be more profitable under savvy management.
Reassuring words about this acquisition come from Jason Hart, CEO of Aldi USA: “Like Aldi, Winn-Dixie and Harveys supermarkets have long histories and many loyal customers in the Southeast and we look forward to serving them in the years to come. The time was right to build our growth momentum and help residents in the Southeast save on their grocery bills. The transaction supports our long-term growth strategy across the United States, including plans to add 120 new stores nationwide this year to reach a total of more than 2400 stores at year end.”
POSTSCRIPT: It is likely that there will be additional consolidation of supermarkets in the next few years. The Kroger acquisition of Albertson, the Aldi acquisition of Southeastern Grocers’ stores, and the acquisition of Whole Foods by Amazon
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