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How Aldi Is 'Keeping It Simple'

The retailer offered a peek inside its remodel and expansion strategy.

lempert

Aldi's executives gave a tour of their newly remodeled St. Charles, Ill., store, which they say represents how they are spending $5.3 billion to remodel their existing more than 1,800 stores and open 800 new ones.

Their plan is to use this investment to become the third-largest grocer by store count, with over 2,500 stores by 2022, putting them right behind Walmart and Kroger. Their strategy includes expansion in more suburban middle and upper middle class neighborhoods. 

The new format, which is 12,000 square foot (20% larger than their previous footprint), has just five aisles with an expanded produce, refrigerated and freezer sections. In fact, the company has expanded fresh food offerings by 40%.

The company, known for its low prices and award-winning private label foods and beverages for the past 40 plus years, seems to have a new focus to expand beyond their core price-conscious customer to a much broader and, dare I say, more foodie-oriented shopper. The retailer plans to do this by touting its award-winning wines, Specially Selected brand of more upscale foods, “fresh never frozen” seafood, organic meats, a Never Any brand of chicken (that has no antibiotics, hormones, animal byproducts, steroids, or salt and are fed a 100% vegetarian diet) and, of course, its Earth Grown kale veggie burgers. 

CEO Jason Hart said that by the end of their five-year plan, they want to serve 100 million people. ALDI is a very close-to-the-vest company, and is privately held, so when asked Hart would not share specifics on the number of SKUs in the store, how store sales have increased with the new format or its daily transactions.

Scott Patton and Joan Kavanaugh, both who have the title of VP of corporate buying, led our small group throughout the store showcasing innovations in fresh, organic and trendy offerings. Patton used their olive oil offerings as an example of just how they satisfy just about every customer. Ten years ago, they didn’t even carry olive oil and today they have four. One basic olive oil that is the lowest price, one extra virgin, one organic and their Specially Selected olive oil, which is imported from a specific area in Sicily for the demanding palate. 

Aldi's assortment is made up of approximately 90% of their exclusive brands, SimplyNature, Earth Grown, Specially Selected, Never Any, LiveGFree (gluten-free) and Little Journey (baby products), which according to their test kitchen director undergoes over 50,000 well-controlled tests to insure their recipes and ingredients are strictly adhered to by their suppliers. There is little doubt they are a demanding and strict buyer, but they relish their long-term relationships with suppliers and think of them as partners for the long term. 

Patton shared that their produce section, which by the way is very impressive both in quality and in price, is growing twice as fast as any other category in the store (although he too would share any financial metrics). The department also includes a “Produce Picks” section that has a limited number of items, recently the display was all about blueberries and strawberries offered at super low prices. An interesting note is that unlike most grocers, their produce department is located in the back of the store rather than up front, which is a tool most food retailers use to shout “fresh” and set the stage for a more enjoyable shopping trip with a vast array of colors and aromas. 

Aldi Finds are 30 to 50 foods and beverages that are spot buys that they try to time seasonally, leaving them in the store for about a week. They have another 30 to 50 products that are household and nonfoods items such as carpets and drawers for student dorm rooms as they head back to college. 

The Aldi execs reinforced over and over how they “keep it simple.” Simple for the customer by not inundating them with too many choices (after all, Kavanaugh said, does a shopper really need dozens of choices of peanut butters?) and simple for their store and internal operations. When asked why they don’t do in-store sampling, the response was that it just adds cost to the system and they “want to keep it simple.”

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