Small-Format Food Retailing Memo: Two Dozen Florida USA Shoppers Who've Been Waiting Two Years For An Aldi Store to Open Get Their Day On Thursday

For the two dozen shoppers who've been waiting for two years -- and regularly calling a newspaper reporter for update on the estimated date of arrival -- for small-format, no frills deep discount grocery chain Aldi USA to open its first store in the Tampa Bay region in Florida, the wait ends on Thursday.

Aldi, which operates about 850 stores throughout the Midwest, Mid-Atlantic region and parts of the eastern USA, opens its first store in Florida, in Clearwater, this Thursday. An additional eight Aldi markets also will open on the same dayin the region.

The timing seems right in the minds of a number of the area's shoppers, according to a piece in today's St. Petersburg Times newspaper.

The writer of the story, St. Petersburg Times' staff writer Mark Albright, says a Florida consumer named Johana Szokie "is one of two dozen ardent Aldi fans who have called me for two years to learn when their favorite little grocer finally makes landfall in the Tampa Bay area" in Florida, of which Clearwater is a part.

Those are two dozen very dedicated shoppers. The type any grocery chain would be proud to have.

And in the case of Ms. Szokie, she doesn't even live in Clearwater. However, she tells reporter Mark Albright she will be driving to the Aldi store when it opens in the city on Thursday morning.

Aldi USA, which is the Illinois-based U.S. division of German small-format deep discount grocery chain Aldi International, has big plans in Florida, which is one of the top five food and grocery sales markets in the U.S.

The company expects to open from 25 -to- 50 of the no frills, little deep discount markets in Florida by 2010, with many more coming after that.

Aldi also has built a distribution center in Florida to serve its stores in the region. A grocery chain doesn't do that unless it has big (or big-little in the case of Aldi stores) development plans in terms of having a high store count in a given market.

The St. Petersburg Times story offers a nice local angle on the Aldi stores set to open in parts of Florida on Thursday.

In addition to the excited shoppers, Florida's major supermarket chain's like Publix and Winn-Dixie are watching Aldi closely on their respective home turf.

In fact, you can bet both chains, along with nearly every other supermarket chain in the state, will have "undercover representatives" attending Thursday's Aldi store grand openings, along with those dozen excited shoppers and many others.

Read the St. Petersburg Times' story, "Wait's nearly over for Aldi fans," here

Resources:

To read past stories about Aldi in Natural~Specialty Foods Memo just click the links below:

>Aldi

>Aldi USA

>Aldi International

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, aldifloridajobs.com, 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.

Small-Format Food Retailing Special Report: SuperValue's No Frills, Discount Sav-A-Lot Chain Looking For Big Growth in Two Eastern U.S. States

SuperValu, Inc.'s no frills, small-format discount Sav-A-Lot grocery chain plans to expand its store count significantly in Connecticut and Rhode Island in the eastern United States, Natural~Specialty Foods Memo (NSFM) has learned.

Commercial retail real estate expert Anne O' Neal tells NSFM that SuperValue's Sav-A-Lot is looking for multiple new store sites in both states.

The small-format Sav-A-Lot stores, which average about 13,500 -to- 18,000 square feet, are no frills, limited assortment deep discount stores. The SuperValu, Inc. Sav-A-Lot division currently operates about 1,180 of the small-format discount grocery stores nationwide in the U.S.

Some of the Sav-A-Lot discount grocery stores are operated corporately by SuperValu, Inc., while others are franchised to independent operator groups. SuperValu supplies those independent operator groups from its wholesale division, as well as providing marketing and retail merchandising support through its various corporate divisions. Most recently SuperValu, Inc. has been making a major push in the U.S. to open new, corporately-owned and operated no frills Sav-A-Lot discount grocery stores.

Three new Sav-A-Lot stores will open in the two states this year, with more on the way. According to Ms. O'Neal, Sav-A-Lot is looking for new store location sites in value shopping centers in Connecticut and Rhode Island. The grocery chain is represented in the region by Oxford Real Estate.

Sav-A-Lot likes to locate its small-format, no frills discount grocery stores next to other format discount stores in the shopping centers it selects.

Additionally, the discount food retailer looks for locations that have a population of about 35,000 within a three mile area, with an average household income of about $45,000.

SuperValu, Inc.'s major competitor in small-format discount retailing currently is Aldi USA, the U.S. division of Germany-based international discount grocer Aldi International.

Like Sav-A-Lot, small-format Aldi, which operates no frills, discount stores of about 15,000 square feet, is growing fast. Aldi plans to open 100 new stores in the U.S. this year--far more than Sav-A-Lot will open--including moving into the lucrative and highly populated state of Florida this year.

Aldi currently operates about 900 of its small-format discount grocery stores in the U.S.--in the Midwest, Mid Atlantic and eastern USA regions. In addition to Florida, Aldi USA is moving heavily into other southern U.S. states, with future plans to enter other new regions in the country with its stores.

While SuperValu's Sav-A-Lot currently has a store count lead of nearly 300 stores on Aldi USA, that is changing. In addition to opening 100 new stores this year, Aldi USA plans to open nearly 100 new stores a year for the next four to five years in the U.S.

The current poor U.S. economy, with both soaring gasoline prices and fast-rising food prices, is driving more consumers to small-format, no frills discount grocery stores like Sav-A-Lot and Aldi. As a result, these retailers are capitalizing on this trend, growing their respective store counts significantly in the U.S., along with entering new regional markets.

Of course, the small-format grocers also face heavy competition from discounters like Wal-Mart, with its Supercenters and Sam's Club stores, Costco Wholesale, warehouse grocery chains, and numerous other price-impact food and grocery retailers.

However, the no frills smaller-format stores, which require far less monthly rent, have far lower energy costs than the big box discount stores, and require fewer-employees to operate, could be at a competitive advantage because this reduced overhead allows the grocers to sell product for less without hurting margins as much as it does many of the bigger-format discount grocers for the above reasons, along with a few others.

Low fixed operating costs and labor are in part what's allowing these small-format discounters to thrive and grow currently in the U.S.

As we've said, there's a small-format food retailing revolution going on globally, particular in the developed west where the big supermarket and big big box discount store formats have dominated food and grocery retailing for decades. Sav-A-Lot and Aldi are just two of the many retailers that are creating and growing the U.S. version of this revolution in food retailing. Does (store) size matter? It appears it does. But in this case, small can be as powerful as big.

Small-Format Food Retailing Special Report: Brookfield, Wisconsin USA Town Planners Ask: 'What's it All About...Aldi?' Local Columnist Answers Loudly

Should Aldi acquaintance be for naught?
June 10, 2008
By Laurel Walker

Special to Natural~Specialty Foods Memo

From: Milwaukee Journal Sentinal, JS Online

I bought a 12-ounce bag of unsalted almonds at the Waukesha Aldi on Les Paul Parkway and Arcadian Ave. for a mere $3.48 - 29 cents an ounce - Monday.

Had I been inclined to spend $3.99 a gallon of gas driving to a high-end Sendik's or Fresh Market in Brookfield, I'd probably have paid more. At Pick 'n Save, just a stone's throw from the Aldi, the almond price per ounce was nearly double for a pound bag and more than triple for a half-cup-size serving.

I wasn't in the market for one, but I noticed Aldi was offering a big special on cantaloupe - 69 cents apiece. At Pick 'n Save, the deal was two-for-$5.

Maybe Brookfield-area residents don't like almonds or cantaloupe. Or savings on their grocery bills.

Or, to listen to some Brookfield Town Plan Commissioners in turning up their noses to the discount grocer's request to locate in the vacant former Gander Mountain store at Blue Mound and Janacek Roads, it's really the bargain hunters that Brookfield-area residents don't want in the neighborhood.

The Plan Commission recommended denial of Aldi, 3-1. This, even though some plan commissioners had toured Aldi stores elsewhere and, they said, found well-dressed customers, clean stores and enthusiastic shoppers.

Town Chairman Keith Henderson brazenly warned Aldi officials at the meeting that when they come before the Town Board next Tuesday, supervisors' concern would be about clientele drawn to the store. He made that leap by comparing grocery shoppers trying to stretch their food dollars to the recent spate of police calls at the nearby Chuck E. Cheese, where miscreants can guzzle beer while trying to forget that their kids are going wild.

Ridiculous.

The kind of savings I saw Monday are what brings retirees like Lee Eickstaedt of Waukesha or Jerry and Angie Butalla of Big Bend or couples like Jesse and Shannon Medina of Waukesha, with three small kids to feed, back repeatedly. Nice clients, all of them, it seemed to me.

"I shop here because of value," said Eickstaedt, an Aldi customer for 12 years. "You don't just save pennies. You save dollars."

The Butallas like the quality of products, often off-brands, that are available in small quantities, unlike Sam's Club.

"They always try to please," Angie Butalla said. Besides, you don't end up with shopping carts smashing into your car, she said. Among other cost-saving measures, Aldi saves on labor by refunding a 25-cent cart deposit when you return your cart to the entry.

The Medinas combine Aldi shopping with other stores. With five mouths to feed, they look for food savings anywhere.

"It doesn't make sense for any community to turn down a store that would save residents money," Jesse Medina said.

Aldi already operates in Oconomowoc, Muskego, Waukesha and 14 locations in Milwaukee County.

Zoning Administrator Gary Lake said officials can't legitimately use "clientele" as a basis for rejecting the store, which fits existing zoning. Architectural objections, though, might qualify, he said.

Chris Hewitt, an Aldi vice president in the Oak Creek Division, said store officials will offer pedestrian improvements, like landscaping, as suggested, to satisfy the Town Board.

I'll bet even Aldi clientele appreciate bushes and benches.

Retail Marketing Memo: Ad Circulars, Promotions and the Web: Aldi USA and Tesco's Fresh & Easy as Small-Format Grocery Store Marketers in America

Despite what you may have heard, Tesco's Fresh & Easy Neighborhood Market isn't the fastest growing, and its far from the biggest, small-format, convenience-oriented discount grocery store chain in the United States.

That honor goes to Aldi USA, the U.S. division of German-based retailer Aldi International, which like Tesco PLC has food and grocery stores throughout the world.

Aldi USA, which already has over 850 small-format, no frills (about 13,000 -to- 15,000 square foot) discount grocery stores stretching from the Midwestern USA, to the Mid-Atlantic and Eastern portion of the country, is adding about 100 new grocery stores each year in the U.S. for the next five years.

If Aldi USA stays on that course, the grocer, which already is the 24th-largest in the U.S. based on annual gross sales, will have somewhere in the neighborhood of 1,400 stores in America by 2013.

Aldi in America

Aldi USA, which opened its first U.S. grocery store in 1976, operates its stores under the philosophy of less-is-more.

It's small-format, no frills discount grocery stores average no bigger than 15,000 square feet and look like a slightly modern version of America's 1970's-era neighborhood grocery store.

The grocery markets carry about 1,300 of the most frequently purchased food and grocery items in the U.S., along with a limited selection of specialty items and various non-foods products.

At least 80% of the grocery chain's food and grocery items are under its own private or store brand labels. These store brand products range from basic dry grocery, refrigerated, frozen and fresh products, to specialty and ethnic foods' items.

The small-format, no frills discount grocery chain sells high quality fresh produce and meats at cheap prices, along with its limited assortment grocery and non-foods offerings.

The stores, similar to Tesco's Fresh & Easy Neighborhood Market in design, are essentially shrunk-down versions of a typical American supermarket.

However, unlike Tesco's Fresh & Easy, Aldi USA grocery stores have a much more specifically-positioned merchandising philosophy and format: basic groceries with some specialty items tossed in at the cheapest prices possible, along with a variety of general consumer products advertised each week in-store and in the grocer's weekly advertising circular.

Aldi USA's eclectic weekly promotions

Aldi USA does lots of in-and-out promoting of everything from major national brand groceries, which they don't carry everyday, to gourmet foods on occasion like "Whole Lobster for the best price in the U.S." and numerous ethnic foods items, usually tied-in with major events like Chinese New Years for Asian foods and the like.

But even more interesting, Aldi tends to promote everything--food and grocery products, furniture, computers, consumer electronics, flowers and plants, garden supplies, clothing and more--under the sun except the kitchen sink (which we bet is on the way) in its weekly advertising circular. These non-food durable and consumer products are promoted and sold on an in-and-out basis.

To say the ads are eclectic could be the understatement of the decade.

For example, take a look here at Aldi USA's weekly ad which breaks today, Sunday, May 4.

Sharing space in the current advertising circular with Pillsbury brand refrigerated biscuits, Klondike ice cream bars, fresh peanuts in the shell, fruit juices and frozen pizza, is an electronic video picture frame, a portable GPS navigation system for $189, an under-the-counter AM/FM kitchen radio, numerous gardening supplies for mom for Mother's Day next weekend, cosmetic items for mom, summer dresses for toddlers, and an eclectic assortment of other food and non-food items.

We forgot to mention the USDA Choice Bacon Wrapped Filet Mignon for only $1.99. And...the Vanderwall Bombe Accent Chest furniture piece for $99.99.

Did we say Aldi USA's weekly ads are eclectic ?

They work too: Aldi USA is growing its store-count so fast because the small-format, no frills discount grocery stores are super-popular and successful in the Midwest, Mid-Atlantic and Eastern regions of the USA.

Aldi's aggressive USA growth program

As part of its 100 new stores per-year growth program, Aldi also is moving into new states and further into regions in those states it's already in. For example, the grocer is making a big push into Florida, where it sees lots of opportunity for its brand of grocery retailing.

The no frills, discount small-format grocery chain also is moving into more regions in the eastern U.S., such as New York state and Pennsylvania, as well as filling out with more stores in those places where it already operates numerous grocery markets.

Aldi USA's focus in the Midwest is similar. The grocer is adding more stores in the regions where it already operates to create stronger critical mass and retail brand recognition, while at the same time moving into new, nearby regions where its opening its first stores.

More on Aldi's weekly ads

Aldi's weekly ads are like the one for this week described above each and every week: A mix of store brand grocery products, national brand products, non-foods items, electronics, furniture, clothing, and many other surprises.

For example, take a look here at Aldi's advertising circular for next week, the week of May 11.

The non-foods theme for next week appears to be automobile care. There's a two-ton hydraulic car jack for only $17.99, a "car creeper," those things used to get under the car to change the oil, for $14.99, and a couple more interesting car-related items which you will have to look and see for yourselves.

Most of the food items in the May 11 ad circular are national brands, rather than varieties of Aldi's various store brands, this time around. There's Tyson brand chicken products, Angel brand Soft bathroom tissue, Nestle Juicy Juice fruit juices, Kellogg's and Quaker snack items and a number of other branded offerings.

Aldi USA posts these weekly advertising circulars on its website at least one week in advance of the ad breaking, and it stays on the site until it ends. There's also a function on the website where people can type in their email address so they can receive the weekly ad circulars right in their email box prior to the ad's start-date.

The Aldi ad circulars (printed copies) also are mass mailed out to residents' homes and available in the stores.

Tesco's Fresh & Easy Neighborhood Market also posts its advertising circulars on its website. However, it's ads run for a three-week period on the website rather than weekly like Aldi's do.

Additionally, although we searched for it, we can't seem to find a function on the Fresh & Easy website in which a customer or potential customer can put in their email address and receive the online advertising circular in their email box like one can with Aldi. Adding this function is cheap to do, and Fresh & Easy is missing the boat by not having such a simple yet powerful tool on its website. [If there is such a feature, and we missed it, it means it's hard to find because we searched all over the site for it.]

Lastly, no place on the Fresh & Easy website's home page does it tell you where you can specifically find the advertising circular. Rather, a user has to guess.

Instead of making you guess, we will tell you where it is: the advertising circular can be found by clicking on the link titled "Fresh & Easy Ideas" in the left-hand column on the home page. It is behind that link where you will find the Fresh & Easy promotional advertising circular.

Why not a link right on the website's home page that says: "Click here for Fresh & Easy's advertising circular/specials?" We think such a simple link would not only be fresh--but EASY as well. Doing so also will result in many more sets of eyeballs reading the Fresh & Easy advertising circular on the website, which we would hope if the retailer's goal.

Learning form Aldi USA's website

Tesco's Fresh & Easy could pick up some general marketing tips, as well as communications quality and ease of use tips, from viewing Aldi USA's website.

For example, Fresh & Easy is still using the exact same website it had set up before it even opened its first store in November, 2007.

The website is really a start-up site in terms of how it's set up rather than one for a grocery chain with 61 stores and about 90 more on the way before the end of the year.

For example, take a look at how the store listing link is set up on the Fresh & Easy website. If a user wants to see where the stores are, he or she has to click on maps, and go through a cumbersome process.

Why not, like nearly every other grocery chain and independent grocer website in the U.S. has, just put a simple list of where the stores are like this one. Fresh & Easy could keep the map function if it likes it, but add a simple store list for quick viewing along with it at least.

There is a zip code box on the Fresh & Easy website, where a user can type in his or her zip code and get a list of stores nearest them. This is a good feature. However, adding a simple store list, and updating it regularly, would make good sense in our analysis.

Food retailer websites are a marketing tool; an extension of the brick and mortar storefront, as well as being a corporate communications and informational tool. As such, they need to look clean, be simple to use, and provide as much information to the user as possible with the least amount of effort.

Fresh & Easy's website has some good features. However, it's overall look, usability and lack of features most other supermarket websites have, just screams "We haven't taken the time to modify the site since we opened our first stores last November." Marketing after all is everything a retailer does--including its website.

Is Aldi USA looking westward?

Meanwhile, there's been some talk since late last year that Aldi USA might start to look west in the USA for some of its small-format, no frills discount grocery stores.

Aldi International already has a western presence in part; the same family that controls the majority of Aldi International in Germany also is the 100% owner of Southern California-based specialty grocery chain Trader Joe's, another small-format success story.

Since the Aldi USA discount format and the Trader Joe's specialty grocery format are different enough that they wouldn't cannibalize each other--many Aldi and Trader Joe's stores exist close by each other in the East, Mid-Atlantic and Midwest already--Aldi USA executives have been exploring coming west with the small-format, no frills discount grocery stores, although it isn't a top priority at present.

The kitchen sink

Meanwhile, we just know one of these weeks we're going to find an Aldi USA weekly advertising circular in our email box that has, along with its normal eclectic mix of food, grocery, nonfood and consumer products...a kitchen sink advertised in it at a bargain price.

We also look forward to seeing Tesco's Fresh & Easy make those needed changes to its website. Tesco in the United Kingdom has one of the finest websites of any supermarket chain in the world. We think its USA Fresh & Easy divsion should have the same.

Small-Format Food Retailing Memo: Aldi USA Creates Promotion That Hits Hot Buttons of Low-Price, Value, Meal Solutions and Quality

Small-format discount grocery chain Aldi USA, which is owned by German-based Aldi International, is launching a promotion in its over 850 U.S. stores this week that offers shoppers excellent value in today's challenging economic times, while at the same time offering consumers the convenience of having three premium-quality meal solutions or full meal menus provided for them in the promotion.

Aldi is calling the promotion "Feed a Family of Four for under $10" The ad in the grocery chain's weekly circular features three complete meals with an outdoor grilling theme. The three "meal solutions" contain a entree, a vegetable side dish and a starch side dish, along with items like marinades and sauces to be used in preparing the meals.

the first $10 dinner for four features chicken breasts (which the customer needs to grill or bake), frozen asparagus spears, a 16oz bottle of BBQ sauce (to use on the grilled chicken) and prepared potato salad from the deli department. The total cost of the complete meal for four people is $9.66.

Meal solution deal number two features fresh jumbo shrimp to grill on the BBQ, bagged garden salad, marinade for the fresh shrimp, along with salad dressing for the salad, all for $9.96 for four people.

The third and last meal solution with an outdoor grilling theme features filet of sirloin steak, a choice of ready-to-prepare scalloped or augratin potatoes and frozen premium green beans. The total cost of this outdoor-grilling meal solution for four people is $9.43, which is the least expensive of the three offerings. Who says you can't eat steak on a budget? At $9.43, that's less than $2.50 per-person for the complete meal.

Aldi, which sells everything from packaged, perishable and frozen groceries, to fresh meats and produce, specialty foods, garden supplies, housewares and more in its little 15,000 square foot small-format discount supermarkets, is even promoting an upscale, high-end propane-powered BBQ grill in the advertising circular as part of the promotion. The grill sells for an advertised price of $229.99

What's most powerful in our analysis about Aldi's "Feed a Family of Four for under $10" promotion isn't particularly the pricing on the grocery products advertised. The advertised prices are fairly low, but many supermarkets are advertising prices this week in their ad circulars that are just as low or even lower on similar items. Rather, its the bundling of the fresh and packaged food and grocery items into compete meals for four for under $10 that's the powerful idea and concept of the promotion. The unique consumer propostition if you will.

This offers numerous consumer benefits. First, it solves the problem most consumers have today when it comes to food at home. That problem is most Americans either can't figure out what to cook for dinner or don't do much home cooking in general. By bundling up the items as a complete meal, Aldo offers these time-pressed and home cooking-challenged shoppers three complete meal solutions (and menus) all at one time in the ad.

Second, by bundling the promoted items as complete meals, Aldi allows the shopper to immediate see the value he or she is getting. For example, four people, less than $10--good deal. After all, Burger King or McDonald's costs nearly twice as much per person for a burger, fries and a soda pop. The meal solution promotion not only offers readily realized value but also lends it self to such comparisons as the fast food alternative just mentioned.

Lastly, by offering quality meal solutions at affordable prices, Aldi's promotion appeals to a wide cross-range of shoppers, yet offers them all the same thing--value. Even a higher-end food consumer would have a hard time complaining about having three meals this week which featured grilled steak, chicken breast and shrimp. At the same time, lower-income shoppers, who you bet most likely spend far more than $10 per meal for a family of four, can actually spend less than normal and eat like the more upscale consumer described previously.

In other words, we think the Aldi meal solution promotion hits all the current hot buttons in the market: low-cost and value, a solution to not knowing what to have for dinner, quality ingredients and products at a reasonable price, and outdoor grilling with the warm weather season having arrived in most places in the U.S.

And of course, offering the $229.99 high-end grill as part of the promotion and advertisement is a very smart way to get the stores average ring or market basket up. A shopper might just cherry-pick the ad, buying each of the three meal solution with their various items and thus spending less than $30. However, all it takes is for them to buy the grill and that average ring just went through the ceiling based on a one-item purchase.

In its online version of the promotion and advertising circular, which consumers can sign up for via email, Aldi has an electronic "meal planner" which shoppers can use to plan further simple, inexpensive but quality meals like the three advertised this week. Click here to visit Aldi's online meal planner feature.

View the three-meal-solution promotion page from the advertising circular here.

View the additional food, grocery and non-food items (including more grills) here.

Retail Memo: The Small Format Revolution Continues to Heat Up

German food retailer ALDI is planning a major expansion of its small format, no-frills, price-impact supermarket chain in the U.S. The small format food retailing revolution in the USA is growing fast at both ends (low and high) of the food retailing spectrum, as well as in the middle. Where is it going? How fast will it get there?

ALDI USA's small format, limited assortment supermarkets (above) have about 15,000 square feet of retail selling space. The small format grocery stores are attractive but basic in design.

As our regular readers are aware, we've been writing about what we believe is nothing short of a small format food retailing revolution taking place in the U.S. It's not that small, neighborhood-style grocery stores haven't existed in the U.S. forever--they have. Rather, the reason we're calling it a small-format food retailing revolution is do to the scale of what's occurring, how fast it's happening, and the involvement of two large international retailers--Tesco and ALDI--who are leading the charge.

The catalyst for this so called small-format food retailing revolution is British grocer Tesco, which launched it's first Fresh & Easy Neighborhood Markets stores in Southern California and Las Vegas, Nevada in mid-November, and in Arizona three weeks ago. Tesco has opened nearly 30 of the small format grocery markets in just a little over a month. The retailer plans to have 200 of the stores open by the end of 2008, and up to 500 stores in the U.S. in five years.

In addition to Southern California, Nevada and Arizona, Tesco will begin opening Fresh & Easy grocery markets in Northern California next year. Further, as we've reported and written about here, the grocer is looking for store sights in New York, Florida and Chicago, along with land to built a distribution center on near Chicago.

Fresh & Easy grocery markets average about 10,000 to 13,000 square feet. They're a hybrid basic neighborhood grocery store and semi-upscale prepared, fresh food retailer. We describe the store format as low-price leader, limited format grocery store meets Trader Joe's.

Price-point is a big focus on the basic grocery side of the operation. The stores' thus far opened have lower retails on national brand (a limited selection though) grocery items than traditional supermarkets like Ralph's, Von's, Stater Bros. and others in their trading regions. In fact, the prices are more in-line with the deep-discount limited assortment and warehouse format stores in Fresh & Easy's current operating areas.

On the fresh, prepared foods side of the business, Fresh & Easy offers a wide variety of ready-to-eat, ready-to-heat and grab-and-go prepared foods. These range from basics like mac n' cheese and meat loaf, to more high-end offerings like Beef Tips in Burgundy Sauce and upscale, ethnic prepared foods featuring Indian, Asian and other cuisines. The stores' even sell fully-prepared complete meals that come with dessert and a bottle of wine. The prices on the prepared foods, which are all branded under the Fresh & Easy private label, are very reasonable.

In addition to the basic grocery items and prepared foods, the stores' offer fresh produce, fresh meats, other perishables and a selection of specialty and natural grocery items. About 65% of the items in the grocery markets' are private label, including fresh milk and eggs, and about 35% are national brands.

Aldi to expand its small format, no frills, limited assortment supermarkets

German food retailer ALDI was operating in the U.S. long before Tesco even thought about and created its Fresh & Easy Neighborhood Markets concept and venture. Unlike the big splash--and rapid store opening strategy--Tesco made in the U.S. with Fresh & Easy, ALDI USA's venture has followed a low-key, low-publicity, gradual-growth model.

The international food retailer first entered the U.S. market in 1976 with a handful of stores in southeastern Iowa. Today, nearly 32 years later, the international grocer with stores in 18 countries, is a major player in U.S. food retailing.

ALDI USA currently operates over 850 stores in 26 states, and is ranked as the country's 24th highest grossing (sales) supermarket chain. The stores' are located from the Midwestern USA (Kansas, Iowa, Illinois) to the Eastern Seaboard. (you can view a map of all 26 states ALDI USA has stores in here. When you get to the linked page, go to "What is ALDI and click where it says "view a map of where we operate and divisional offices."

The German grocer's U.S. supermarkets not only are small format (they average about 15,000 square feet), limited product assortment, and price-impact focused, they're also totally no-frills. The stores' design is attractive but bare bones. If customers want to use a shopping cart they have to pay 25-cents to do so. Aldi USA stores also charge for paper and plastic grocery bags, and encourage shoppers to bring their own reusable grocery carriers. The chain's retail positioning can be summed up as "Less is More."

The small format stores' sell their own branded private label grocery items almost exclusively; with the exception of a handful of national brands, which they primarily offer only on an in-and-out basis. The grocer uses sku rationalization to its fullest, constantly evaluating categories and items and adjusting store category and item assortments. The no-frills markets offer fresh produce, fresh meats, perishables, frozen foods and non-food items, all based on that same limited-assortment merchandising philosophy.

The no-frills markets carry a total of slightly over 1,000 items across all categories. Low-price is the prime category-wide focus of the small format stores. In their trading areas, the stores' generally undercut all food retailing formats on price, including Wal-Mart, warehouse stores, and other deep discounters. ALDI supermarkets have the reputation as being the low-price leader stores in the communities they operate in.

Bring on the revolution: ALDI USA's slow growth model is about to change

With 850 stores in the USA, ALDI is considered a major food retailing player based on any score card one uses. That it is 24th in the U.S. in gross sales is impressive considering its stores are a third or more smaller than today's average American supermarket.

But the small-format, price-impact grocer is about to explode on the American food retailing scene in an even bigger way. ALDI USA just announced it is going to excelerate its new store building program in the U.S. from about 20-30 stores per year, which is it's current rate, to as many as 100 stores a year beginning next year. Additionally, the small-format grocer is going to enter Florida and Rhode Island for the first time next year, and is planning a major new expansion into Texas in 2009.

With stores in Texas and Florida, the grocer will be entering two of the most competitive and lucrative states for food retailing in the U.S., as well as establishing a retail presence in the number two and three largest states in the country respectively.

It might be televised, but the small format revolution is real

ALDI USA's rapid growth plan is predicated on the huge success the grocer has had with its 850-plus store chain. It, along with others like Supervalu Inc.'s Save-A-Lot small format, price-impact chain, have proven not only the viability but success of the format at the lower-end of the food retailing spectrum.

Of course, the international grocer isn't a stranger to high-end, small store format food retailing in the U.S. either. It owns the fabulously successful Trader Joe's specialty grocery chain, which is expanding rapidly into new markets in the U.S. as well.

We don't think it's an accident Tesco positioned it's Fresh & Easy grocery markets as a combination price-impact, specialty and prepared foods hybrid market. They saw the success of no-frills, small format operations like ALDI USA , Save-A-Lot and others--as well as the success of Trader Joe's on the higher, specialty end. In part, this influenced Tesco to craft a format they believe can serve both customer demographics--price-conscious, basic grocery shoppers tired of huge superstores, and time-pressed consumers who are looking for specialty-oriented and convenient prepared foods at not out of this world prices. Like we said earlier, it's low-price, limited assortment grocery market meets Trader Joe's.

Of course the jury is still out on Fresh & Easy. They just opened their first stores last month after all. However, Tesco's plans are to have as many as 500 stores operating in the U.S. in five years. As such, Fresh & Easy isn't an experiment. Rather, it's a full-fledged venture.

Onward small format food retailing revolution

We see what we are calling the small format food retailing revolution going full-steam ahead. As we've reported recently, Safeway Stores, Inc. is currently negotiating with real estate interests in the San Jose, California area of the San Francisco Bay Area for locations to build five stores of a new and yet unnamed small format food retailing venture. The stores will be about 20,000 square feet, and it's believed will offer a wide variety of fresh, prepared foods in addition to groceries and other offerings.

We've also written much about Wal-Mart's research into two small store formats--one a small footprint grocery/food market and the other a small format health and wellness-oriented store, which would include a health clinic in-store. The mega-retailer had a team of executives working on the concepts in the San Francisco Bay Area for a number of months earlier this year. We expect some announcements as to what they might--or might not--do in terms of their small format retailing plans by early next year.

Other retailers like supermarket chain Giant Eagle are testing the small format food retailing waters. The chain, which operates primarily superstores and conventional supermarkets, has opened two Giant Eagle Express stores. The grocery markets are about 15,000 square feet and feature a mix of basic groceries, fresh produce and meats, and upscale offerings, including prepared foods, along with specialty, natural and organic groceries. The express markets also offer some standard convenience store items and have fueling pumps next door.

Further, supernatural grocer Whole Foods Market, Inc. plans to open a small format, convenience-oriented prototype store early next year in a former Wild Oats store in Boulder, Colorado. The grocer is currently remodeling the store into its Whole Foods Express prototype format. The express store will offer lots of prepared foods, especially convenient grab-and-go items. It's also expected to have a limited assortment of natural and organic groceries, fresh produce and meats. An in-store cafe also is likely.

Other food retailers are looking closely at the small format concept and thinking about whether or not it's something they should experiment with. And of course, the original small format food retailer, the neighborhood independent grocer, is smiling and thinking perhaps he was right all along.

We also must mention Pennsylvania-based Wawa Food Markets, which is the prime chain store innovator in the U.S. in terms of mixing convenience store-type retailing and more upscale grocery and specialty store merchandising into a single format.

For decades, Wawa has been successful in building a large chain of such hybrid stores throughout the eastern U.S. The retailer also is one of the early pioneers in offering quality prepared foods offerings in a convenience store setting. Its also one of the first chains to include larger than average grocery and perishables sections in its convenience stores, offering basic groceries at a decent price, compared to the normal convenience store retail prices in the category.

Hold on to your shopping carts folks. We're just seeing the beginnings of a small format food retailing revolution. The format's success on the no-frills, price-impact end is proven--and growing. Success stories like Wawa Food Markets and Trader Joe's--and the initial popularity of Tesco's first Fresh & Easy stores--are beginning to suggest that the small format hybrid food store concept also could become a big success at the middle-to-higher end of the spectrum as well.

Which retailer will be next to test the small format store retail waters; be it low-end, high-end, in the middle, or some combination of all three? We'll let you know. And, if you know of one--do let us know.

[To read numerous stories on the small format food retailing revolution search the blog using key words: Fresh and Easy, Fresh & Easy Neighborhood Markets, Small Marts, The Invasion of the Small Marts, Whole Foods Express, Whole Foods Market, Giant Eagle Express, Wawa Food Markets, Safeway Stores, Inc. and Small Format Food Retailing.]