If you’re looking for the lowest prices on groceries, industry analysts say you may want to head to the nearest Aldi. And in the next year, you may not have to travel very far to find one.
The German grocery chain is rapidly gaining ground on Wal-Mart in the ever-competitive low-price grocery wars. Aldi’s prices are 21 percent lower than its lowest-priced rivals, including Wal-Mart Stores Inc according to internal studies, said Chief Executive Jason Hart in an exclusive interview with Reuters.
Hart also laid out his strategy saying the company would introduce more private-label (in-house) brands targeting price sensitive customer as well as engage in rapid expansion.
Aldi’s U.S. sales have doubled in the last five years, said Hart. He told Reuters that the company is spending $1.6 billion on expansion and remodeling of 1,300 U.S. stores and they will open 400 new stores (concentrated in Florida, Texas and both coasts) by end of 2018.
“We are re-merchandising, remodeling, enhancing our product range and are focused on gaining volume so more customers start their shopping at Aldi and we are able to complete their shopping lists moreso than we have in the past,” said Hart.
Aldi will also be ready to respond to rivals with more frequent price adjustments if necessary, he said.
Wal-Mart isn’t taking the challenge lightly. While Wal-Mart retains dominance with 22 percent of the grocery market, sales are only estimated to grow about 2 percent this year compared to Aldi’s 15 percent yearly sales growth.
In response, in February Wal-Mart began running prices tests in 11 states in the midwest and southeast, including in Georgia. In these locations, Wal-Mart has started to close the pricing gap and may in some cases, offer lower prices than Aldi.
The competition is only likely to increase as other retail players, such as Amazon, increasingly try to state a claim in the grocery segment.
As a result, Aldi is making other improvements as well to attract and retain customers. Last year, the company began accepting credit card payments. Previously customers could only pay with cash or debit cards.
And in keeping with the health trends, Aldi has increased its offerings of organic, gluten-free and antibiotic-free foods. Aldi private-label foods are all free added MSG, certified synthetic colors, and partially hydrogenated oils. The grocer’s Simply Nature private-label brand grew more than 50 percent from 2015 to 2016.