California’s new formats: Aldi Food Market

Date : 21 July 2016

We've been out in California to review three new store formats from Whole Foods Market, Aldi and Target which have launched in the market over recent months. In this first of three features, we provide our perspectives on Aldi Food Market.

Aldi Food Market: the California adventure begins

With Aldi aiming to have 2,000 stores up and running in the US by 2018, coincidentally when Lidl is scheduled to open its first stores in the country, entry into the most populous state was going to be an important element of this. The first of 45 stores which are planned for California this year opened in March, with 28 stores currently trading.

What did we think?

Aldi has been making major format improvements globally including in Australia, the UK and in the US. Launched initially on the US east coast, the retailer has brought its latest concept to California which trades under the Aldi Food Market branding. Having visited a number of the newly launched stores in Southern California, elements from Aldi's global formats program can be seen.

Source: IGD Research

Fresh foods are very much at the heart of the offer, with a strong role for produce, including organics, and extensive chilled food ranges. Store are attractive, bright and spacious, while illuminated graphic boards and contemporary-styled signage explain the value and quality focus which sits at the heart of the Aldi brand. The limited, and almost exclusively private label, product range may be an initial shock to many US consumers who are more familiar with range counts of up to 30,000 products, but as in other parts of the US, the format has proven to be highly successful. This latest iteration can only serve to broaden its appeal.

Source: IGD Research

Competing with Trader Joe's

Smaller format stores don't have the best track record in the US. Both Walmart and Tesco tried to find success in the market with their Marketside and Fresh & Easy formats. However, Trader Joe's, which is part of the Aldi Group, and has many elements in common with this new entrant, (value positioning, smaller format store, almost exclusively private label product range) has expanded across the US based on its success in California. While there will be some overlap in terms of target shoppers for both retailers, Aldi will be looking to gain share from a much broader set of competitors. Walmart, Safeway and Kroger are all in its sights, especially given the close proximity of its initial openings to existing grocery stores (a well-developed global strategy for Aldi).

Price leadership underpinning success

Can Aldi succeed in California where Fresh & Easy faced more challenging conditions? In terms of the in-store experience, there are clear similarities, and many of the criticisms which were made of Tesco's chain (limited product choice, unfamiliar brand names, lack of promotions) hold true for Aldi. However, the total proposition is very different. From the external 'Food Market' branding, a different front-end service proposition, and a very clear focus on value and operational efficiency, which along with its global scale enables it to drive the price agenda, should be enough to ensure success. And Aldi is very experienced in the US; it hasn't got to over 1,500 stores without knowing what it takes to win in the market.

Stewart Samuel, Program Director, IGD Canada
Based in Canada, Stewart heads up all of IGD's research and coverage on North America. He is also responsible for shaping IGD's research program across the region. Contact Stewart at [email protected] for further insight on the leading market trends and retailers.

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