Will Aldi and Lidl replicate U.K. success in the U.S.?
The German discount grocers, Aldi and Lidl, have steadily grabbed market share in the U.K. over recent years to the point where the two combined account for a nearly 11 percent share of the grocery market. With Aldi ramping up its expansion in the U.S. and Lidl planning to enter the market in a big way as early as next year, the question is whether the two will achieve a comparable level of success here.
Aldi is a familiar banner in many communities across the U.S. The chain, which has grown to nearly 1,600 stores, began making in-roads with its small box stores in lower income communities that offer a limited assortment of primarily private label groceries.
More recently, however, the company has begun opening locations in towns where the consumers have greater financial resources. According to a Wall Street Journal article, Aldi says the majority of its most recent 500 store openings have been in suburban communities with middle-income consumers or higher.
As it expands, Aldi is counting on the lure of great prices on high quality groceries (Aldi has a no questions asked return policy) will be enough to achieve success in higher income towns. In recent years, Aldi has begun rolling out more upscale items under its SimplyNature line.
Lidl is busy setting up its supply chain system and nailing down store locations along the Eastern seaboard. The chain is also reported to be doing the same in Texas. Kantar Retail, in a new report, “Quantifying the Disruption,” projects Lidl will open around 100 stores per year in the U.S. reaching 630 by 2023. Initially, each store will generate an average of around $10 million in sales, climbing to $15.2 million over that period. If Kantar’s projections hold, Lidl will achieve total sales of $8.8 billion by 2023, more than the $8.1 billion Wegmans will do this year.
- Aldi, Lidl continue to gain market share in the U.K. – MarketWatch
- Discount Grocery Aldi Heads Into Wealthier Areas – The Wall Street Journal (sub. required)
- Aldi wants to make organics affordable for everyone – RetailWire
- Lidl follows Aldi to the U.S. – RetailWire
DISCUSSION QUESTIONS: What is your forecast for Aldi and Lidl in the U.S.? Do you see either chain being able to attract middle- and high-income consumers?