Aldi Plans 800 New Stores As It Completes Southeastern Grocers Acquisition

ALDI is investing more than $9 billion over the next five years on its national expansion and will open additional stores in Southern California and Phoenix adding nearly 330 stores in the Northeast and Midwest bringing the total number of new stores to 800. Plans also include entering new markets Aldi CEO, Jason Hart said, including Las Vegas.

The continued expansion of the chain, according to Hart and Dave Behm, co-president of ALDI, the SEG acquisition, is a direct result of the demand that “customers [are] asking for more ALDI stores in their neighborhoods nationwide.” Hart says the stress and hangover consumers feel is a result of inflation over the last few years. It has led to more traffic for ALDI. In fact, he says, according to Circana, Q4 2023 data (excluding e-commerce), a quarter of U.S. households do some shopping at ALDI. The chain, like many other grocers across the nation, has also shifted its ad dollars away from mailed paper circulars and newspaper ads to digital media including television ads which has also increased traffic and awareness. ALDI’s ad spend has changed dramatically over the last several years and Hart says that advertising spending is down but they are doing it smarter and more efficiently.

Hart told me that “when ALDI comes to town prices go down, and consumers save money” and consumers save up to 40 percent on groceries. Jessica Duke, Director of Retail Strategy at Intrics concurs and says that in studying ALDI’s impact on a new market they drive prices down and Walmart
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decreases prices in response to ALDI; and most players in the market follow Walmart, so when Walmart goes down the others reduce prices as well, except for smaller independent grocers.

The supermarket industry has undergone significant changes during and after the pandemic, reflecting broader shifts in consumer behavior, supply chain dynamics, and competitive landscapes. ALDI is no exception. Last summer Hart says, when the supply and demand for transportation equaled out, they saw a big opportunity to extract approximately $60 million out of the cost of transportation and invested that back into lower retail prices last summer which really drove traffic. He also told me that a comparison of the ALDI basket of groceries today versus a year ago is less expensive now. There is little doubt that the shoppers’ price sensitivity has also become more pronounced. The economic aftermath of the pandemic, coupled with recent inflationary pressures, has made consumers more conscious of prices and value for money. Supermarkets throughout the country are responding by emphasizing more value-based offerings, enhanced loyalty programs, and price promotions to keep price-sensitive customers at ALDI’s shops.

When asked about insight into the proposed Kroger
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-Albertsons
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merger, Hart did not comment, but said that ALDI has its heads down and focuses on what they do best, and that is running the most efficient grocery chain in the U.S. with the lowest prices in the U.S. and that competition is good. He did say that the acquisition of Southeastern Grocers received regulatory approval without much issue as it was seen as being good for consumers and communities. The impact of the Kroger-Albertsons deal on consumer prices is being hotly contested and is complex and multifaceted. On one hand, the economies of scale achieved through this consolidation can lead to cost savings, which, in theory, could be passed on to consumers in the form of lower prices as Rodney McMullen, Kroger’s CEO has stated publicly a number of times and on its website, and might also have more leverage to negotiate better deals with suppliers, potentially reducing the cost of goods sold. On the other hand, the reduced competition as a result of the merger, according to the challenge made by the Federal Trade Commission and State Attorney Generals can lead to market dominance by reducing competition, potentially resulting in higher prices. Behm did not discount the idea of future acquisitions for good locations in areas that may become available and said that ALDI is always trying to be aware of opportunities in the market. Hart chimed in and said with the Southeastern Grocers acquisition and adding the already planned new stores, they have their hands full for the next few years, but further acquisitions could be a component of its growth in the future, and they are always looking for more opportunities in different parts of the country.

While ALDI does sell a few national brands of foods and beverages, its stores are stocked with 90% ALDI-exclusive brands. According to the Private Label Manufacturers Association (PLMA) 2024 Private Label Report, store brands accounted for 20.7% of grocery industry unit sales in 2023. FMI – The Food Industry Association’s 2023 Private Brands Survey found that 46% of U.S. consumers say they have been buying more private brands now than before the pandemic and that three-quarters of consumers anticipate continuing to buy more store brands in the future. Hart says they have strong partners with suppliers and enjoy long-term relationships with them. It is a partnership to deliver value for customers – it’s a smarter approach, he says, to retailing that puts the customer front and center. ALDI does not charge suppliers for, unlike most other grocers, slotting fees, shelf space or promotional dollars and its focus is on getting the best quality products from the farmer’s fields to the trucks, to the warehouse, to the stores as efficiently as possible with its supplier partners.

Hart says that while price is the reason why customers come into the store; the simplicity of the shop is what customers appreciate. ALDI super fans, according to Hart, say they don’t have to clip coupons, don’t have to have digital coupons on their mobile device, and love how they can get in and out of the store. They love that ALDI doesn’t have two dozen choices of peanut butter – all they have is creamy, crunchy, and organic in a store with just 5 aisles instead of acres of aisles.

As the supermarket continues to evolve, it will be critical for all grocers, large and small, to be more resilient, innovative, and responsive to consumers’ changing needs and preferences.

ALDI is betting on price and being a simple shop, and so far, it’s been a good bet.