Aldi supermarkets opening 11 outlets in North Texas

Aldi supermarkets opening 11 outlets in North Texas

By Barry Shlachter
Friday, Mar. 12, 2010
Ft. Worth Star-Telegram

Aldi is not like other supermarkets.

The German-owned chain, set to open 11 North Texas outlets this week and another 21 by year's end, offers no in-store pharmacies, DVD or carpet shampoo machine rentals, deli counters, bakeries, propane tank exchanges, hot takeaway meals, sackers or even free sacks.

Instead, paper bags cost 6 cents each and shoppers "rent" carts for 25 cents -- refunded on their return.

And there are very few familiar brands.

About 95 percent of goods are Aldi "fantasy" brands, all unknown to local shoppers. They don't carry the company banner, but instead are labeled Kirkwood, Grandessa, Priano, Bremer, Clancy's, Casa Mamita, Deutsche Küche or Wernesgrüner, among others.

What Aldi's limited-assortment, 16,000-square-foot stores lack in amenities and selection, they counter with remarkably competitive prices. An 18-ounce box -- there's just one size -- of store-brand corn flakes costs $1.19.

By offering only 1,400 items, compared with 60,000 at its large supermarket rivals, Aldi focuses on buying power. That makes Aldi 30 to 50 percent cheaper than traditional supermarkets and 15 to 25 percent cheaper than big-box discounters like Walmart, says Scott Huska, 43, Aldi's North Texas division vice president.

And the 1,000-store chain is not afraid to take on the behemoth from Bentonville, Ark., head-on.

"Every one of our first 11 stores will be within a mile and a half of a Walmart," Huska said, noting that one new Aldi occupies a third of a failed Tom Thumb supermarket in far south Fort Worth, directly across McCart Avenue from a Walmart SuperCenter. Aldi has been cited as a reason for Walmart's departure from Germany.

Even before Aldi opened here, competitors began rolling back prices, Huska said.

"We see that around the country all the time," he said. "It's awfully coincidental. Why didn't they lower it for customers before?"

Plenty of competition

Rival chains aren't expressing outward alarm.

"Competition always make us better," says Gary Huddleston, a Kroger spokesman in North Texas. "Kroger believes most customers appreciate one-stop shopping, low price, a great shopping experience and exceptional service."

If Aldi is so competitive, why is its market share so minuscule after 34 years in the United States?

In Kansas, it has a 1.16 percent share, compared with 39.5 for Wal-Mart Stores and 24.5 for a Kroger banner, Dillon, according to an Information Resources survey in the March issue of Shelby Report, an industry monthly. By contrast, 46 percent of grocery sales in Germany are made at deep discounters, mainly Aldi and its closest domestic rival, Lidi.

"In Germany, that format -- hard discounters -- has a dominant market share," says Jim Hertel, managing partner of Willard Bishop, industry consultants. "Obviously, we are not in Germany.

"They do have the very best prices in town, even better than Walmart," Hertel said. "But it's not going to be for everybody. Folks who are loyal brand shoppers won't find what they are looking for. If you want a particular flavor or size or style of something, you are not going to find it."

Hertel attributes some of Aldi's small U.S. market share to its policy of restricting its variety of fresh fruits and vegetables. That keeps transport costs and waste down, but makes the chain merely a fill-in shopping destination for many.

That said, Hertel said his firm believes that Aldi was the fastest-growing food retailer in 2008, the latest year analyzed, with same-store sales growing 14.3 percent compared with 2007. Grocery sales at Wal-Mart Stores were up 12.4 percent.

The reason for Aldi's strong performance? House brands meeting or exceeding national counterparts in quality but priced far lower, which works like a charm during an economic downturn, Willard Bishop concluded.

And that can help the push into Texas, Hertel says.

Good timing

"I would say Aldi is looking at the current economic environment and saying, 'This is our time.' People are trying things and buying things that they wouldn't if times were better. But times aren't," Hertel said. What's not clear, he said, is whether they will continue to shop at Aldi when conditions improve and incomes rise again.

To get people try its unfamiliar private-label items, Aldi offers a "double guarantee" -- a full refund plus a free replacement if the product was unsatisfactory.

Risky? Apparently not.

"We almost never get a return," says Chris Daniels, North Texas division director of operations. Huska said that many of the house brands are made by major producers like Tyson Foods.

Huska draws a picture of a highly simplified approach that enables to Aldi open 27 stores in nine weeks. "I don't know of any retailer that has done that," he said. His managers wear many hats -- there's no human resource department in Denton -- and they are committed, "bleeding blue," he said, referring to Aldi's logo color.

New employees have been attracted by medical benefits, including vision and dental coverage, offered even for workers on a 20-hour weekly schedule. And they receive among the industry's highest wages -- $10 an hour for cashiers, $20 for manager trainees, he said.

Store managers can earn $65,000 to $85,000. Huska declined to say how many hours a manager -- or himself -- puts in, citing a lawsuit filed in Cleveland by former Aldi managers who claim they were not fairly compensated. Aldi disputes the allegations in the suit.

For Texas, product selection was tweaked for local buying habits, said Hector Alejandro, a Houston native who serves as division purchasing director.

Added were larger, three-gallon jugs of water, year-round bags of charcoal for grilling, bologna with red casing, Southwestern-style beans, Earl Campbell brand sausage, gallon containers of sweet tea, and five tortilla items, up from two.

And there's a small section of Hispanic-oriented products -- 50 items, up from 25 -- with corn flour in 10-pound bags but priced cheaper, per pound, than larger sizes at specialty retailers, Alejandro says. But it's a very limited selection -- no mole, for example.

In for the long haul

Huska asserts that Aldi has never failed in a U.S. regional market and is in Texas for the long haul. "Our goals are for five years, 10 years."

Only once before, in Florida, did it open a slew of stores at once instead of pushing out, daisy-chain style, until enough stores justified opening a distribution center. In North Texas, Aldi built a distribution center in Denton, then secured store sites. Complications with the $54 million warehouse set back the target store opening from 2009, Huska said.

The competition here -- among the fiercest in the country -- doesn't faze Aldi, says Huska, who thinks increasing the store count to 100 in a few years will be "very easy."

Safeway left North Texas in 1987, but returned 12 years later through the acquisition of Tom Thumb. In the past decade, Winn-Dixie pulled out, as did Grocery Outlet, a limited assortment discounter from California. Remaining are national powerhouses like Wal-Mart, Kroger, Target, Supervalu's Save-A-Lot and regional players like Brookshire's, United Supermarket's Market Street, Minyard and a number of growing Hispanic-oriented retailers like Fiesta.

The new Aldi stores are somewhat larger and brighter than ones that first dotted the Midwestern landscape in 1976. And while there is no freshly made sushi or from-scratch bakery, Aldi periodically offers some quixotic nonfood specials -- from $17 toaster ovens to $69.99 wheelchairs.

Whose customers?

And the customers they attract are more up-market than their old image might suggest.

According to a February survey by Kantar Retail, Aldi is attracting a slightly higher percentage of shoppers earning between $25,000 and $49,999 and also those earning $50,000 and $74,999, and its share of consumers in the $75,000 to $99,000 range is only slightly down. The big drop is with people earning above $100,000.

Aldi customers come from all walks of life, Huska says.

"We attract smart shoppers -- value-oriented Middle Americans looking to stretch their budget as well as higher earners who recognize high quality and ask themselves, 'Why pay more?' The money they save can pay for a golf trip," he said.

Larry Chiagouris, a marketing professor at New York's Pace University, praises Aldi for sticking to its steep discount, limited assortment philosophy. His book, The Wheel of Retailing, details how other retailers succeeded early by cutting prices and keeping costs down but then added inventory and began "to look like the competitors it had taken market share from."

"In challenging economic times like now, Aldi should be thriving with its low-cost private label items," said Chiagouris, a Chicago native familiar with the chain.

"But when the economy comes back, will demand for branded goods return or will people stay loyal to price point? Loyalty to Aldi's remains to be seen."

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Article built for BubbleBliss!

Us Germans love our Aldi. There's actually one here in Lexington right across from one of our 6 local WalMarts. It does offer cheaper prices but the same quality. Many times, the food comes out of the same manufacturing place but just has a different label on it. For example Milk. The milk that's in a WalMart shelf could come from the same cow as the milk on the Aldi shelf.

And the paper bags costing money and the 25 cents cart rental is normal in Germany, every supermarket has that there. Aldis here and Aldis in German look exactly the same.

They also pay well. A cashier makes $13 starting out at our Aldi here compared to $7.25 at any other supermarket. However, there are only 2 cash registers, and 3 workers at the most. 1 person working the register, 1 manager and 1 to restock and work in the back. When it's busy though, everybody has to help wherever help is needed. The cashier also has to be A LOT faster than any other cashier because people tend to buy lots of things and lines can get pretty long.

One of the 2 Aldi brothers is also the richest guy in Germany.

I love Aldi.

I generally use it for everything aside from baked goods, and meats.

Yup, it's a good store.


The only reason why people don't shop there more often is because they don't carry any brand names.

BubbleBliss wrote:Yup, it's a good store.


The only reason why people don't shop there more often is because they don't carry any brand names.

I agree. From an American standpoint, it's all in the "name brands" for some...our "culture" has made it so.

IDK more often than not, (perhaps because I'm fiscally conservative, and have always used "off name" products) I find the quality, & flavor of Aldi's products, (non-name brand that is) better than "name brand"....and I'm a chef....

I'm a stickler on generic named products. The local grocery store here has Club Food brand. I tried a can of chicken noodle soup by that generic brand. I couldn't sh!t for 2 days. Unreal. Tasted good but..........

TexasBlue wrote:I'm a stickler on generic named products. The local grocery store here has Club Food brand. I tried a can of chicken noodle soup by that generic brand. I couldn't sh!t for 2 days. Unreal. Tasted good but..........

HAHAHHAHAHAHAHAHAHA!

Yeah, I should qualify my statements to say that I don't buy many canned goods like that.

LOL I'm "old school"..make most of the family's food from scratch.

There is a difference between brand name and generic food, but not in things like toothpaste, laundry detergent or anything of that sort.
I mean, chips are chips and water is water, but on certain things, brand names do have better quality, for example soda because Pepsi and Coke keep their recipes a secret.
But honestly, when it comes to just comparing the ingredients on a laundry detergent container, it's always the same ingredients and the same amount. It's the same damn thing.

Yeah, it's hard to fµq up a loaf of bread. I buy the generic bread there. Same with the milk. I stay away from the generic cereal and canned goods.

TexasBlue wrote:Yeah, it's hard to fµq up a loaf of bread. I buy the generic bread there. Same with the milk. I stay away from the generic cereal and canned goods.

Yeah, I go for the fresh veggies, canned veggies, canned stock, (when running low on home made) "dry goods" more or less.

I'm single... so i eat like sh!t to start with. Might as well eat sh!t.

LOL!

OMFG! I just spewed coffee ALL OVER my monitor!

Probably too much info, huh? That's twice in this thread.

TexasBlue wrote:Probably too much info, huh? That's twice in this thread.

I'll get over it I'm sure...(at least I'll TRY to!)

BTW, I see the multi-quote button now.

I love Aldi too. Started shopping there as a student (and Lidl) and still swear by both of them. A recent study over here showed that their non-brand items were cheaper and healthier than most brand items because they have less salt, fat and sugar in them.

They are looked down on as being for the really poor but if you are onto a good thing, why not shop there? I'd rather encourage these smaller businesses than throw money at the megacorps like Tesco and Sainsbury.

Always worth shopping in them for their German Christmas goods. Aldi's Stollen is superb and Lidl's Gluhwein is amazing.

Lidl is international too? I didn't know that!

Yeah, that's what I've heard. Aldi brands are better for your wallet and your health!

Funny thing is that everybody makes fun of Aldi because of the low prices, but when you go in there, you see everybody from the lawyer to the bus driver. Like I said, Germans love Aldi and Lidl too for that matter.

Yup, that's were I get my fix of German goods from. The international section at Wal Mart is rediculously expensive so I don't shop there, I just get it at Aldi for about 1/4 of the price.

Yes we have had Lidl in the UK for about ten years now. They came over at roughly the same time. My Unviersity town has two of each supermarket and my home town is currenty building a second of each of them. They were the only two supermarkets that saw an increase in profits through the recession here.

And you're right about all kinds of people shopping there. I've generally found that the really poor people are too snobby(!) to shop there but richer people have no such qualms.

That's interesting, I didn't know that.

haha Yup, it's like shopping at Aldi makes the poor feel poor so they don't like doing it.

We have two grocery stores here where i live (town of 3,000). A Coborn's and a thrift supermarket called S.A.V.E.

I get depressed shopping at S.A.V.E. because the really poor shop there. I shop at the other place. The money dfference isn't that drastic.