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Former Harris Teeter President Talks Snowball Effect of Aldi, Lidl

Hard discounters putting pressure on retailers to address private brand quality and price, Fred Morganthall says
Photograph by WGB Staff

Aldi and Lidl's expansion in the U.S. means that private label manufacturers and retailers must do a quality check, former Harris Teeter President Fred Morganthall said during a keynote breakfast at Private Label Manufacturers Association's (PLMA) annual trade show in Chicago.

“The deep discount is clearly a disruption to traditional grocery,” Morganthall said, pointing out that Aldi has more than 1,750 stores today and its private label products are “equal to or better than national brand.”

“If you're a retailer in the room and you haven't taken your top 20 or 30 items that you sell today and cut it against Aldi, you're gonna be in for a surprise,” he said. “I've done it and even I was surprised. It is amazing the quality that Aldi presents today.”

Morganthall said Aldi is “clearly a leader in quality aspects among brands,” and produce is a “secret weapon” for the retailer.

Lidl's arrival in the U.S. a year ago has “yet to be successful,” Morganthall added, but “the thing to worry about is not necessarily Lidl today, it is what has happened as a result of Lidl's entry with Aldi.”

“Owned brands are gonna have to up their quota level,” he said. “Aldi is now looking at Lidl quality ... so if Aldi wasn't good enough before, Lidl forced them to upgrade the quality again. Aldi is leading every item that they sell. Kroger and Walmart have both looked at the brands offered by Lidl and Aldi and upgraded their quality to keep in line with theirs.”

Aldi's prices are also exerting pressure on retailers, Morganthall said, with companies such as Walmart lowering prices to align themselves with the retailer. 

"The entry of Lidl has really, really brought owned brands to a forefront, in [the] perspective of Aldi, Walmart and Kroger," he said. "Never have they been more important to those retailers than they are today. If you look at the two most important reasons within a store that generated sales, produce is one. Owned brands, private label is two. And clearly Aldi and Lidl are winning in those areas. If you're a national brand manufacturer as well as an owned brand, I would urge you to look at your quality."

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