414 Parkway
P.O. Box 1719
Denton, TX 76202-1719
940.382.7151
940.243.9695 metro
940.382.0040 fax

Home » News / Reports » Articles of Interest » Discount Grocer - Aldi

Articles of Interest

Grocery bags will cost you, but food will be cheap
By Andrea Jares and Barry Shlachter
Star-Telegram Staff Writer

Aldi, a German chain of small, steep-discount grocery stores, said Monday that it plans to open 25 to 35 outlets in the Metroplex by fall 2009 and a distribution center to serve the Texas region.

So far, two Tarrant County sites for outlet stores, in Hurst and west Fort Worth, were disclosed by the city of Hurst and a Fort Worth construction company.

Eventually, the distribution center could supply 50 to 100 stores, said Scott Huska, the company's vice president for Texas and southern Oklahoma. He said the company, which is privately held, hasn't chosen a site, but an information packet given Hurst City Council members said the structure will be built in Denton.

"We think there's limitless possibilities," said Huska, 40. "There's a huge population, and it's growing. The dynamics of the marketplace are perfect for Aldi."

The Hurst store will be at 1636 Precinct Line Road, just east of Hurst Town Center, according to the city. Another location is planned at Legacy Marketplace Shopping Center at Legacy Drive and Clifford Street near Fort Worth's border with White Settlement, according to Sedalco Construction Services, a Fort Worth contractor that will build it.

Aldi's U.S. operation will be moving into one of the nation's most competitive markets, where Wal-Mart has grabbed nearly a one-third market share from traditional supermarket chains in the past decade, forcing or accelerating the departure of Winn-Dixie and the closing of underperforming stores by Minyard's and Albertsons.

"With their low-cost structure, Spartan appearance and very sharp pricing, there's certainly a place for them here if they pick the real estate right," said Victor Gallese, a Fort Worth-based retail specialist with Deloitte Touche. "I don't think anyone on the low end is tearing up the region except Wal-Mart. I don't think Sav-A-Lot [a unit of Minneapolis-based SuperValu] has hit the ball out of the park either. I would say there's a niche for Aldi."

Huska said the company has signed contracts on property in Hurst, but has not closed.

"We are doing due diligence," he said. Huska said no site has been chosen for the distribution center, but it would likely be within a 100-mile radius of the Metroplex. Such structures are about 500,000 square feet, he said.

Aldi, which charges 5 cents for a paper bag, is known for its inexpensive prices, numerous house brands and low overhead at more than 850 stores in 27 states.

Stores are nearly identical in size: about 17,000 square feet, about the third to a quarter of a typical full-service supermarket. It stocks about 800 items compared to 25,000 or more at typical chain grocers, according to Hoover's, a business reference service.

Checks and credit cards are not accepted at this time, Huska said.

"We're a limited-assortment discount grocer, and you'll find that 90 percent of the items are private label," he said. "We believe we provide incredible value every day to our customers. And we are 20 [percent] to 40 percent below the competition."

Below Wal-Mart?

"That includes all competitors."

Aldi takes a minimalist approach to shopping, offering a limited selection at low costs. Rather than offering several sizes and brands of ketchup, for instance, Aldi will carry one brand in one size.

David Livingston, a Wisconsin grocery-store expert, said Aldi will offer significantly lower prices than Wal-Mart. He said the stores typically open near Wal-Marts.

Livingston listed some of the ways Aldi cuts overhead:

It takes only cash for payment, so there are no bounced checks.

It stocks few high-end items, reducing theft.

It has smaller stores, cutting down on real estate costs.

It charges for grocery bags, encouraging customers to bring their own.

"They will not overpay for anything," Livingston said. "They are one of the most frugal companies you'll find."

Aldi also requires a 25-cent deposit for a grocery cart. The shopper gets the quarter back by returning the carts.

"If you go to the parking lot, you're not going to see shopping carts around, because if you do, you are going to pick it up and get your quarter," Livingston said.

Aldi stores don't employ many people, but the employees normally make more than other grocery workers.

Livingston said a typical Aldi employee generates about $600 worth of sales per employee-hour, while a typical grocery store does about $150 worth of sales per employee-hour.

"When your labor rate is three times as productive as your competitors, then you can afford lower prices," Livingston said.

Along with its main rival, Lidl, Aldi was seen in Europe as being part of the reason why Wal-Mart didn't succeed in the German market and ended up selling all its stores in 2006 after nine years of struggling.

Family-run Aldi was founded in 1913 but expanded rapidly after World War II. Brothers Karl and Theo Albrecht -- Aldi is an acronym for Albrecht Discount -- launched the concept in 1960, splitting into northern and southern companies.

The Essen-based group operates more than 8,000 stores in Europe, the United States and Australia and racked up estimated worldwide sales of 35.7 billion euros (about $48 billion) in 2004, according to Euromonitor International.

The Food Marketing Institute, a nonprofit trade group, estimated Aldi's U.S. 2006 sales at $3.2 billion, ranking it 26th among food retailers, just ahead of a sibling company, Trader Joe's.

The southern division runs the Aldi chain in the United States, where it opened its first store in 1976, while the northern division manages Trader Joe's, a steep-discount gourmet chain acquired in 1979.

The expansion in Texas will follow a similar southward push into Florida, where clusters of stores will open next year in Tampa and Orlando, Huska said.