Aldi last week announced plans to invest $3 billion to open 650 stores over the next five years, taking its total number of stores in the U.S. to almost 2,000.
The cost includes building a regional headquarters and distribution center in Moreno Valley, CA. The expansion — reaching an average of 130 stores annually up from a rate of 80 per year — comes as Aldi just entered new markets such as Houston, and expanded its presence in competitive markets like South Florida and New York City.
"At Aldi, we believe that great quality can be affordable, and we are eager to bring the Aldi difference to new markets like Southern California," said
Jason Hart, president, Aldi, in a statement.
The limited-assortment, discount grocer is one of the two arms of the supermarket empire founded by Germany's Albrecht brothers. The other arm owns Trader Joe's. Its 1,300 U.S. locations are located mostly in the Midwest and East. The company's closest competitor is Supervalu's Save-A-Lot, which has a similar number of stores but has slowed its expansion in recent years.
The no-frills grocer is known for the quirky ways it keeps prices low to hold to its promise of offering savings up to 50 percent or more on groceries without the hassle of clipping coupons or buying in bulk. These include charging for shopping bags, requiring a 25-cent deposit for grocery carts, not accepting checks, and displaying product in boxes.
The stores sell more than 1,300 of most commonly purchased grocery items. More than 90 percent are Aldi's exclusive brands that come with a "double guarantee": a cash refund plus a replacement product if not satisfied.
Mr. Hart also said Aldi has updated its new store design "to be brighter and more welcoming than ever before" while continuing to upgrade its healthy food options, including soon introducing a SimplyNature line of natural and organic foods.
Some reports questioned whether Aldi would face the same competitive issues as Fresh & Easy did in California. But Jim Hertel, at Willard Bishop, told the Wall Street Journal that discount, limited-assortment stores overall are finding favor with today's cost-conscious consumers.
"There is a lot of potential in that category that hasn't been realized," he said.
How likely is it that Aldi's U.S. expansion plans will be successful?