A decades-long supermarket battle in Europe is moving to the US, adding to the competitive pressure in an industry embroiled in a deflation-fueled price war.
Aldi, known for low prices on its private-label items, plans to spend US$3.4 billion over the next five years to open 900 supermarkets, the company said yesterday.
The investment comes as its European discount rival, Lidl, prepares to open its first US stores this week, with plans for as many as 100 by the summer next year.
The US expansion by the German private-label giants could put more pressure on conventional retailers like Wal-Mart Stores Inc and Kroger Co to lower their prices. The new competition in the low-margin industry arrives during a deflationary spiral that has seen food prices drop for 17 straight months, the longest such streak in more than 60 years.
“There’s a tremendous amount of value at stake that will shift to Lidl and Aldi,” Bain & Co partner Ken Knudson said. “Traditional grocers can’t afford to lose sales right now given how competitive it is — it will be very disruptive.”
Bain predicts that sales in the so-called “deep-discount segment” of the grocery business, which includes Aldi and Lidl, is likely to grow as much as 10 percent annually through 2020, five times higher than for traditional stores.
The battle between the two closely held grocers is expected intensify on Thursday, when Lidl opens nine stores in three US states.
Analysts have estimated that it could roll out as many as 600 US locations over the next five years. Aldi says it expects to have 2,500 US stores by 2022, which would make it the third-largest supermarket chain in the nation, the company said.
Only Kroger and Albertsons Cos, which also owns Safeway, would have more.
Aldi has added more produce and boosted its organic and gluten-free offerings in recent years as it tries to appeal to more mainstream shoppers.
The company has also started offering fresh fish, improved its meat selection and increased its selection of national brands.
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