by Sarah Mahoney @mahoney_sarah
Source: www.mediapost.com, March 2024
The latest shake-up in the $1.5 trillion grocery business comes from Aldi, the limited-assortment value brand. The company intends to spend $9 billion to open 800 new locations over the next five years, adding to the 2,300 it already owns in the U.S. And with the recently completed purchase of Southeastern Grocers, which owns Winn-Dixie and Harveys Supermarkets, Aldi is poised to become a much bigger fish in a volatile pond.
The Batavia, Illinois-based chain says the additional locations will come from a combination of new openings and store conversions. And while the latest acquisition will shore up Aldi’s presence in the Southeast, the retailer also intends to add 330 stores in the Northeast and Midwest, where it already has a sizable presence. It is also heading into brand-new markets, including Las Vegas.
Aldi is owned by Albrecht Discounts, a German company.
The aggressive moves come amid gloomy forecasts for the industry, with market researcher Dunnhumby forecasting industrywide growth for groceries of between 0.5% to 1.5%. That would mark the slowest growth since the Great Recession of 2009 and one of the three slowest growth rates in the last 30 years.
Dunnhumby attributes the stalled growth to slowing disposable income growth, lower savings, higher debt and interest rates, and fewer pandemic-related savings buffers.
Aldi isn’t the biggest winner in the latest Dunnhumby Retailer Preference Index, which ranks major grocery stores across numerous dimensions. It comes in Number 7, following H.E.B., the large Texas-based chain, Amazon, Costco, Market Basket, Sam’s Club and Wegmans.
But it lands in the Top Three for the Index’s “price, promotions, rewards” pillar, along with Market Basket and Winco. And with Fareway and Publix, Aldi also makes the Top Three for speed and convenience.
By market share as tracked by Euromonitor, Walmart dominates the field, with a 25.3% market share, followed by Costco, 6.8%, Kroger, 6.7%, Target, 4.9%, and Albertson’s, 4%.
Costco, meanwhile, continues to outperform its competitors, gaining share as it barrels into new categories. In earnings released last week, it beat expectations and saw comparable sales rise 5.8%. “Costco’s traction with consumers has never been stronger,” writes Peter Benedict, an analyst who follows the company for Baird. “Its balance sheet remains best-in-class.”
Meanwhile, the slow-rolling limbo of the Kroger acquisition of Albertson’s continues. Kroger first announced the $24.6 billion deal in October 2022 and has been fending off challenges ever since. The latest comes from a Federal Trade Commission suit, which says that if the deal is allowed to go forward, millions of Americans will be faced with higher food prices, and tens of thousands of employees will be harmed.
