launched a number of new initiatives to improve operating
performance,” a June report from Moody’s said. “Although
these initiatives are a step in the right direction, execution
risk is high and success is uncertain.”
The track record of food retailers trying discount con-
cepts on their own in the U.S. is mixed at best. All that’s
left of the millions invested by Delhaize in developing its
Bottom Dollar discount chain are the 30 sites that Aldi
converted to its own banner when it acquired the 66-store
chain at an Aldi-like discount—$15 million—in 2015. Offi-
cials reflecting on Bottom Dollar acknowledge the venture
provided lessons in brand-building and the importance of
price, although they were expensive ones.
Stacey Mack, a former Aldi division president who subsequently spent nine years at Save-A-Lot, was tapped by
food distributor Nash Finch (which has since evolved following a merger as SpartanNash) to develop a limited-assortment concept. But the brand he built, known as Buy
N Save, was doomed in part by an inability of the parent
organization to commit as completely to the ideals of efficiency the concept required.
“It was little things,” recalls Mack, who today runs his
own automotive lift business. “For example, we didn’t want
to have plastic shrink wrap around the canned goods, and
they refused to do it. They said it wouldn’t transfer that
way. I said, ‘Aldi does this every day.’ It was simple things
like that that they just didn’t know how to do.”
Many smaller food discounters, Mack says, underesti-
mate the role that quality plays as a part of the Aldi formula,
showing up everywhere from poorly maintained stores to
cheaply produced goods that may provide the price shop-
pers want but wear away at the brand’s reputation.
The Kroger Co. and Wakefern Food Corp. both operate
their own discount concepts, Ruler Foods and Price Rite,
respectively, but recent overhauls taking place at each indicate they are still working to perfect the offerings.
Kroger tasked a former Aldi leader, Liz Ferneding, to
lead Ruler, which has rolled out a new look at
many of its 50 stores that emphasizes associa-
tions with Kroger’s private brands and makes
a better fresh presentation. Ferneding has
recently moved to a new position at Kroger’s Cincinnati
headquarters, and the company declined to address the
format for this story.
Wakefern’s Price Rite chain made a similar move to a
new look and feel at redesigned Marketplace stores, which
include more fresh foods and “treasure hunt” nonfood
items while leveraging Wakefern’s private brands. This followed a decision to deploy the banner strategically within
markets where Wakefern and its cooperative members
operate full-line ShopRite stores. Previously, Price Rite
was seen primarily as a low-cost vehicle to gain food distribution efficiencies in markets outside its ShopRite core.
Observers emphasize, however, that hard discounting
is but one way to reach the value shopper. One of the reasons established grocers have found it difficult to simply
copy Aldi or Trader Joe’s is that those unique formats come
with shopper expectations allowing them to get away with
an offering other food stores might not. Trader Joe’s tight
product offering and small footprint doesn’t allow it to carry
diapers, for example. Coin-released shopping cart corrals
have become an almost endearing quirk of Aldi, but it’s one
shoppers of other grocery stores wouldn’t welcome nor
tolerate. Similar to the branded goods their private labels
mimic, these formats depend upon an existing status quo
to disrupt. After all, if conventional stores offering high-low
pricing and vast selections of branded goods didn’t exist,
there’d be little argument for a “limited assortment” alternative, much less a proprietary detergent with an orange,
yellow and blue label that vaguely resembles Tide.
“The expectations are different,” says Marion of Hart-
man Group. “A [conventional store] might not be able to
do what Aldi does, even if they wanted to. Because shop-
pers go there expecting to see a full assortment of brands
to choose from.”
Others are showing there’s room for alternatives to the
alternatives. While playing on similar fields of limited
assortment and thrill-of-the-hunt shopping as hard dis-
counters, Emeryville, Calif.-based Grocery Outlet is a kind
of reverse image of Aldi. Its goods are almost exclusively
branded, and its stores aren’t centrally managed but owned
instead by independent operators selling on consignment.
Like Aldi, the “extreme value” retailer owes its pricing mus-
cle to a central buying group, but it specializes in acquiring
overruns, discontinued items and products approaching
“sell-by” dates at steep discounts. Grocery Outlet officials
say there’s also an advantage in independent operators—
frequently, husband and wife teams that not only present
the positive image of a family business but also an efficient
one—marketing and merchandising locally.
Amount of U.S.
that are core
shoppers of the
Lidl is looking to open
25 new stores in the
U.S. by next year.