Monday, July 14, 2008

Small-Format Food Retailing Special Report: No Frills, Small-Format Discount Grocer Aldi USA Preparing For Florida USA Store Launch

Aldi USA, the Batavia, Illinios-based U.S. division of International food and grocery retailer Aldi International, based in Germany, has grown to become the 25th-largest grocery retailer in the U.S., with 900 stores and about $5.8 billion in annual sales (2008 estimate), according to the supermarket industry trade publication Supermarket News and Thompson's Grocery Register.

Aldi USA has achieved this goal despite the fact (or perhaps because of it) its stores, which average about 15,000 square feet, are nearly one-third smaller on average than the typical new supermarket opened in the U.S today.

The operator of small-format, no frills discount grocery stores in the Midwest, Mid-Atlantic and eastern USA regions is currently on a rapid new store growth program, with plans to open about 100 new stores per year in the U.S. over the next four -to- five years.

Aldi also is entering new regions in the U.S. as a part of this rapid expansion plan. One of those new market regions is the heavily populated and lucrative state of Florida, which is the fourth-largest state in the U.S.

The discount grocer is currently gearing up to open a number of its small-format grocery stores, along with a distribution facility, in Florida.

As part of its major initiative to enter the Florida market for the first time, Aldi USA has launched a new job recruitment website,, where it is advertising for retail, management and distribution center jobs for its Florida launch.

One the website, Aldi lists an initial 24 stores, located in eastern, western and central Florida, which will begin opening in September, along with a warehouse facility that will open in Haines City, Florida soon. Many more Florida Aldi stores are set to be built after the first batch of 24 open.

The 24 new stores in Florida listed on the website are in the following cities:

Orlando (four stores),Tampa (two), Pinellas Park (two), and one each in Brandon, Clearwater, Daytona, Lady Lake, Lakeland, Largo, Merritt Island, Ocala, Palm Bay, Plant City, Rockledge, Sanford, St. Petersburg, St. Cloud, Titusville and Winter Park.

According to the website, Aldi will be holding job fairs at each of the Florida stores starting this week.

Aldi trys to run each of its approximately 15,000 square foot stores with no more than 15 employees, although the amount per-store varies depending on the region and store neighborhood.

The state of Florida is the third-largest retail food and grocery market in the United States, with annual sales of over $30 billion. That's a very lucrative new market for a discount grocery chain like Aldi.

Florida-based Publix is the state's leading supermarket chain, with about 40% of the food and grocery sales market share, which is a dominant share any way you look at it.

However, mega-retailer Wal-Mart has been gaining on Publix, as it continues to open new Supercenters in the state. Wal-Mart's food and grocery sales market share is currently estimated at about 21% in Florida. The Winn-Dixie chain comes in at number three with an approximately 16% share.

Super-competitive discounter Aldi will likely take share away from all three of these retail chains. However, since Publix is more of an upscale retailer than Wal-Mart and Winn-Dixie, along with being the hometown grocer, it could be less hurt by Aldi, although the jury is obviously still out on that, especially in the currently depressed U.S. national economy.

We expect Aldi's entrance into Florida with its no frills, small-format discount grocery stores to create downward price pressure in the market as well. In other words, since Aldi is a price leader in every market it enters, expect Wal-Mart especially--but also Winn-Dixie, Publix and the state's other grocery chains and independents--to lower their respective everyday retail prices, offer stronger price promotions, and create new value programs.

This phenomenon won't likely happen at first. But once Aldi begins to open a critical mass of stores--for example it's opening four all nearly at the same time in Orlando--you'll see the price competition in the respective Florida markets heat up as the state's established grocers find they are losing business to Aldi stores. There's been what we call "an Aldi (price) effect" in every market the small-format discount grocer has entered in the U.S.

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