ALDI spending $5 billion to open new stores, remodel old ones in order to attract 100 million shoppers by 2020 and is poised to be the number three food retailer by store count
Yesterday I was invited to meet with a few of ALDI’s top execs and take a tour of their newly remodeled St. Charles, Illinois store. This store, according to the company, represents how they are spending $5.3 billion to remodel their existing 1,800+ stores and open 800 new ones. Their plan is to use this investment to become the third largest grocer, by store count, with over 2,500 stores by 2022 putting them right behind Walmart and Kroger. Their strategy includes expansion in more suburban middle and upper middle class neighborhoods.
The new format, which is 12,000 square foot, and is 20 percent larger than their previous footprint, has just five aisles with an expanded produce, refrigerated and freezer sections. In fact the company has expanded fresh food offerings by 40 percent. The company, known for its low prices and award winning private label foods and beverages for the past 40 plus years, seems to have a new focus which is to expand beyond their core price-conscious customer to a much broader, and dare I say, more foodie oriented shopper by touting their award winning wines, their Specially Selected brand of more upscale foods, “fresh never frozen” seafood, organic meats, a Never Any! brand of chicken (that has no antibiotics, hormones, animal by-products, steroids, or salt and are fed a 100% vegetarian diet) and, of course, their Earth Grown kale veggie burgers.
CEO Jason Hart who said that by the end of their 5-year plan, they want to serve 100 million people led the store tour. ALDI is a very close-to-the-vest company, and is privately held. When asked, he would not share specifics on the number of SKUs in the store, how store sales have increased with the new format or it’s daily transactions. Scott Patton and Joan Kavanaugh, both who have the title of VP of Corporate Buying led our small group throughout the store showcasing innovations in fresh, organic, and trendy offerings. Patton used their olive oil offerings as an example of just how they satisfy just about every customer. Ten years ago, they didn’t even carry olive oil. Today they have four. One basic olive oil that is the lowest price, one extra virgin, one organic and their Specially Selected olive oil, which is imported from a specific area in Sicily for the demanding palate.
ALDI’s assortment is made up of approximately 90 percent of their exclusive brands, SimplyNature, Earth Grown, Specially Selected, Never Any!, LiveGFree (gluten free) and little JOURNEY (baby products) which according to their test kitchen director undergoes over 50,000 well controlled tests to insure their recipes and ingredients are strictly adhered to by their suppliers.
Patton shared that their produce section, which by the way is very impressive both in quality and in price, is growing twice as fast as any other category in the store (although he too would share any financial metrics). The department also includes a “Produce Picks” section that has a limited number of items, yesterday the display was all about blueberries and strawberries offered at super low prices. An interesting note is that unlike most grocers, their produce department is located in the back of the store, rather than up front which is a tool most food retailers use to shout “fresh” and set the stage for a more enjoyable shopping trip with a vast array of colors and aromas.
They embarked on a program back in 2015 to reformulate and remove more than 125 ingredients in their SimplyNature products to meet the needs of shoppers who want a clean label approach to the foods they consume.
I asked Patton about their position on what is currently the fastest growing category in a traditional supermarket: foodservice. He said currently they have no plans to add prepared foods, meal kits or in-store foodservice. Instead, he said, they are focused on offering foods that are more convenient for the shopper, which he feels is a much bigger opportunity. Examples are their meats and chickens that are marinated and ready-to-cook, quinoa bowls and salad kits.
ALDI Finds are 30-50 foods and beverages that are spot buys that they try to time seasonally that are in the store for just about one week, they have another 30-50 products that are household and non-food items that yesterday offered products like carpets and drawers for student dorm rooms as they head back to college.
The ALDI execs reinforced over and over how they “keep it simple.” Simple for the customer by not inundating them with too many choices (after all, Kavanaugh said, does a shopper really need dozens of choices of peanut butters?) and simple for their store and internal operations. When asked why they don’t do in-store sampling the response was that it just adds cost to the system and they “want to keep it simple.”
Without knowing customer counts or sales it is hard to say if their strategy is working; but being able to invest $5 billion in expansion does assume that they are profitable and growing. As far as their expanding reach to other types of customers, the proof is in the aisles; I saw a mom shopping with three kids, with a full shopping cart that included many fresh foods, a genuine Louis Vuitton handbag hanging on the cart and three gallons of Friendly Farms milk for 95 cents a gallon.