ALDI a Growing Menace To Grocery Retailers

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ALDIALDI is hard at work redefining the rules of shopper engagement and, in the process, eating away at the market share of many of America?s most venerable food retailers ? and food manufacturers. Through a relentless pursuit of perfecting its own store brands portfolio and unique shopping experience, ALDI has become more than a nuisance ? it is a major force that is on the verge of changing the grocery retailing landscape. One should not underestimate ALDI in the U.S. market.

From a consumer packaged goods (CPG) company perspective it is easy to understand why. The German chain is a control label retail operator, selling primarily, if not entirely, its own privately branded knockoffs of established American foods. ALDI?s retail strategy has combined a control label National Brand Equivalent (NBE) portfolio with an equally impressive deletion of conventional supermarket services:

There are no counter service departments; everything is packaged and everything is self-service.

No shelving means no stockboys to hire; product is wheeled in on pallets by forklift, unwrapped and quickly signed.

Carts must be paid for by deposit (25 cents) and returned by the shopper to eliminate staff needed to wrangle shopping carts.

There are no baskets to manage.

The only staff in an ALDI store are: forklift operators bringing in new pallets, a cashier (or two) and possibly a third-party loss-prevention agent.

Customers check out produce prices after a ribbon cutting at a new ALDI grocery store in Katy, TX on Monday, April 8, 2013. ALDI exclusive brand products and produce items are sold for up to 50 percent less than at traditional grocers. (Michael Stravato/ AP Images for ALDI)

Normally, one might assume that reducing service for NBE products would just create an annoyed shopper who can?t find what they want. Except that it actually creates an ecstatic shopper. Why? Because, by deleting brand as a shopping variable (including the deletion of brand-based shopper marketing), ALDI focuses the entire shopping experience on a simple aggregation of cost savings, a slow and steady cartwheeling trade-down ritual whose foundation, price leadership, has been rigidly defended in virtually every market they?ve entered.

The deletion of brand as a shopping variable is something that ALDI has perfected like no other store label program in the U.S. They accomplish this by simulating the color scheme and front panel symbolism of national brand products in very exacting detail. In doing so, they trigger near instant equivalency between a name-brand, iconic product and the one they are selling as a replacement.

For example, ALDI sells a cereal called Frosted Flakes that, like Kellogg’s K -1.01% Frosted Flakes, is packaged in a blue box featuring the image of a white bowl of cereal flanked by a cartoon animal giving a thumb?s up, in this case a polar bear rather than Kellogg?s Tony the Tiger.

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