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: 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.

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.]

Retail Memo: Latest Sales Figures Show A Flight to Discount Grocers, Including Small-Format Aldi and Lidl, in the UK Market

A no frills, small-format Aldi limited assortment discount grocery store in Spalding, UK, which is in the district of South Holland in the southern part of the county of Lincolnshire, about 110 miles from London, England.

Discount supermarkets in the United Kingdom (UK), including no frills, small-format grocers Aldi and Lidl, are seeing a sales surge as the weakening economy puts a crimp on consumer food budgets in the nation and market.

According to just-released market research data from respected UK international research firm TNS WorldPanel, Aldi- UK experienced year-on-year sales growth of about 19% in the 12 weeks to May 18, 2008, while small-format discount grocer Lidl saw sales growth of about 9%.

Both Aldi and Lidl are Germany-headquartered small-format, no frills discount grocers, offering a limited assortment of mostly store brand (but name brand as well) food and grocery products across all dry and perishables categories.

If the impressive Aldi and Lidl sales gains aren't enough to demonstrate a current shift in UK shopper choices and supermarket preferences in the price-impact retailer direction, two other price-focused discount grocery chains, Iceland and Farm Foods, also posted double-digit sales gains over the same 12 week period, according to TNS WorldPanel data.

One the other hand, Tesco, which is the leading food and grocery retailer in the UK, and Sainsbury's, the UK's number three supermarket chain, saw slight decreases in sales during the same period.

Aldi, which currently operates 300 of its limited assortment, price-impact, no frills small-format discount grocery stores in the UK, was the clear sales increase winner, according to TNS WorldPanel director of research Edward Garner. According to Garner, Aldi's 18.9% sales gain for the period translated to sales of ~577 million pounds.

Even more impressive, the grocer's market share rose from 2.5% to a current 2.8%, says Garner.

While a 2.8% share of the market isn't much in the grand scheme of things, compared to number one Tesco's 31.1% for example, Aldi continues sales period-after-sales period and year-after-year to grow its share of the market in the UK. Further, with only 300 stores, Aldi has about 20% of the total store count in the UK as Tesco has, and only slighlty more than that compared to number two Asda and number three Sainsbury's.

Aldi currently is in a major growth program in the UK, with plans to at least double the number of stores it has in the nation over the next 4 -to- 5 years.

Lidl also is growing its store count aggressively in the UK, and has shown regular sales increases, although not as high as Aldi's, for the last few years.

After Aldi, the next best performer for the 12-week period ending May 18 was Iceland, according to the TNS WorldPanel data. The price-impact grocer's sales increased by a healthy 12.2%, to ~352 million pounds for the sales reporting period, according to Gartner.

This is significant because Iceland hasn't been a player of note in UK food and grocery retailing. However it appears the current economic downturn in the nation, which is leading shoppers to choose more price-focused supermarkets, is benefiting the fledgling discount food retailer.

Farm Foods, another discount grocery chain that hasn't been much of a player historically in the market, saw its sales increase a significant 10.7%, to reach ~100 million pounds, a record for the price-focused supermarket chain.

Small-format discount grocer Lidl had the least sales increase of the four price-impact discount grocery chains. However, at 9.6% the German fighting tiger small-format grocer wasn't too far behind. Lidl's sales for the period were ~478 million pounds, not all that far behind Aldi's considering Lidl has fewer stores in the UK than fellow German grocer Aldi.

Despite the worsening economic conditions in the UK, taken as a whole the nation's supermarket chains still did fairly well, with sales up 6.6% overall in the 12-week period, according to TNS Worldpanel research director Garner.

Sector leader Tesco PLC saw a slight drop in market share of 0.2%, to 31.1% of the total food and grocery sales market, but still turned in period sales of ~6.4 billion pounds, which is a 6% year-on-year sales increase.

UK industry researchers and observers do say they are seeing a current shift from the mainstream supermarket sector--chains like Tesco, Asda, Sainsbury's and Morrisons--to price-focused discounters like Aldi, Lidl, Iceland and Farm Foods, with a particular shift to Aldi.

TNS Worldpanel's Garner says Aldi's heavy investment in new stores "is being rewarded with strong growth in the current climate."

"This is virtually solely fuelled by new shoppers visiting the stores rather than existing shoppers spending more," adds Garner in offering his estimation about UK shoppers' trending towards discount grocers like Aldi.

Aldi and Lidl are the two best positioned to grow their store counts and capitalize on it if this trend by more shoppers to shop discount grocers continues or increases. Both German chain's are heavily capitalized and growing rapidly internationally.

In fact, Tesco is so concerned about the threat from these two fighting small-format tigers it's currently in the process of designing its own small-format, limited assortment, no frills discount grocery chain in the UK.

Tesco operates the small-format Tesco Express format throughout the UK. But those stores are more of a hybrid neighborhood grocery store/convenience store rather than a no frills, price-impact small-format retail format. Therefore, they don't compete for the same general market that Aldi and Lidl do.

However, since Tesco's internal research started showing a couple years ago the Aldi and Lidl stores were cutting into sales in all its formats, the giant retailer decided to create its own small-format discount grocery store format. There's no word as to when the first store of the new format will open in the UK. Most market observers though say the first one should open by early next year if development continues on track. Tesco isn't currently talking about the project.

It's going to be interesting to see if the sales growth trend which currently is favoring the price-focused retailers in the UK continues into the next reporting period.

Most economists don't expect an improvement in the nation's economy for the rest of the year, so the climate and conditions should remain steady for a repeat perhaps of this period's sales numbers and direction. If not, perhaps the movement towards the price-impact food retailing sector in the UK will then be seen to be more of a fad than an actual trend.

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.

Retail Memo: The International Small Store Format Revolution Marches On

As our regular readers are aware, we've been reporting on, writing about, and offering analysis on the international small format food retailing revolution for the last 4-5 months.

We've written about Tesco's Express stores in Europe, the retailer's new Fresh & Easy Neighborhood Market small store format in the USA, German grocer Aldi's no frills, price-impact, small format grocery markets throughout the world, and others.

Among the others include: U.S. grocer Giant Eagle's Express format stores, Whole Foods Market, Inc.'s Express prototype store soon to open in Boulder, Colorado, Wawa Grocery Markets, Trader Joe's, and Wal-Mart, which is developing two small format stores: a grocery market and a small footprint health and wellness-type store. (Check out the blog's archives for the numerous small format and related stories.)

We've termed the international proliferation of small format stores--some upscale, others no frills with price-impact positioning, and still others somewhere in the middle--no less than a revolution in food retailing.

This isn't because there haven't always been small food stores throughout the world. There has been. But rather it's because of the scale in which various retailers are developing the stores, the number of stores they are building, and the fact that those retailers getting into the small format food retailing business are among the largest chains in the world.

One of those retailers, Tesco, the third-biggest retailer in the world, is a key leader in multi-small format food retailing. It began with its Tesco Express stores in Britain, and is now locating the small format Express stores throughout Europe, and is planning to enter Russia with the convenience-style grocery markets soon.

Tesco also has opened about 30 of its Fresh & Easy Neighborhood Market small format grocery markets in the U.S. thus far--in just a two month period of time. The retailer plans to have as many as 200 of the combination basic grocery markets, fresh, prepared and specialty foods stores opened by the end of this year.

Now, Tesco is at it again: The retailer is developing a new, no frills, price-impact, small format food store for the United Kingdom (UK). The reason the retailer is developing the new format is to counter a growing threat in its home market from German grocers Aldi and Lidl, which operate price-impact, no frills, small format grocery stores throughout the UK.

The Aldi and Lild stores are becoming increasingly popular with UK shoppers, who like their limited assortments, low prices and convenience. Tesco sees these stores as a major threat to its market share in the UK, and has decided to fight back.

According to a story in today's London Telegraph.co.uk, Tesco has been hard at work on a top secret project in an old warehouse owned by its founder Jack Farmer, designing the new format. The retailer has created a mock German small format discount store (read Aldi and Lidl) in the warehouse and is using it as a model for their own future no frills, small format discount stores.

Tesco used this same strategy and model in developing its Fresh & Easy convenience-oriented grocery markets in the U.S. For about two years the retailer worked on the design of what today is a Fresh & Easy Neighborhood Market in an old warehouse in the states. And just like the current project in Britain, Tesco was able to keep its Fresh & Easy project quiet for some time before the press got wind of it.

But the new discount grocery format project is out of the grocery bag now, so to speak. And, once again, we see the small format revolution marching even further on.

Based on the information we have from various sources--in addition to what was reported in the Telegraph.co.uk story--the new Tesco price-impact, small format market looks like it might be similar to its Fresh & Easy stores in the U.S.--a hybrid discount grocery store, combined with low-priced, upscale specialty groceries and prepared foods offerings.

This is largely do to the fact that Aldi, and to a lessor degree Lidl, have been doing extremely well in the UK offering specialty, gourmet and natural foods items at discount prices along with private label (and some national brand) basic groceries.

Aldi has especially become adept at this--no doubt in part because the German grocer has lots of experience with private label specialty items at its Trader Joe's subsidiary in the USA. Yes, it's that same Aldi. The one that operates 900 no frills grocery stores in the U.S., and upscale Trader Joe's as well. It's also the same Aldi that operates throughout the world, and is growing its small format, discount grocery business extensively worldwide.

Tesco, the UK's number one retailer, isn't about to let Aldi and Lidl take market share away from the company in the UK though, if it can help it. Therefore, it is developing its own version of these small, category-killer, discount grocery stores.

Further, Tesco isn't waiting until it has an actual store to fight back against the two German panzer divisions of grocery retailing. Beginning this week, the mega-retailer will match Aldi's and Lidl's retail prices on over 2,000 items the grocers' sell at hot, discount prices. (Aldi and Lidl sell on average about 10,000 grocery items in their small format stores respectively.)

Additionally, Tesco is launching this week a line of 300 no frills grocery products, similar to those sold in Lidl and Aldi's UK discount stores. Further, In a few months the retailer plans to rollout another 200 items in the no frills line. These items will be sold in all of Tesco's UK supermarkets. It's also expected that this will be a good test market for the items in terms of their merchandising potential in the future Tesco no frills, small format , discount food stores.

The small format food retailing revolution may not be being televised, but it's heating up throughout the world. Stay tuned.

Resources:

Read more about the Tesco's new no frills, small format, discount store plans here.

Read more about Tesco's new no frills product line here.

Small-Format Food Retailing Special Report: Germany's No Frills, Small-Format Discount Grocery Chain Lidl is 'Coming to America' By 2012 Says CEO

German small-format discount grocery chain Lidl plans on joining its fellow "fighting tiger," price-focused German food retailing cousin Aldi by expanding into the United States, Natural~Specialty Foods Memo has learned.

In an interview published today in the German newsweekly Focus Magazine ("Trade: Lidl boss Klaus Gehrig will, despite the setbacks by scandals continue to grow--soon in the USA and Switzerland"), Klaus Gehrig, chief executive of Lidl's parent company Schwarz Gruppe, tells the publication: "We are now preparing to enter the U.S. market."

Gehrig tells Focus Magazine Lidl plans to enter the United States food and grocery retailing market by 2012, likely having its first stores in the states before that date.

The small-format grocery retailer's strategy is to significantly build-up its European business, including opening numerous new Lidl discount grocery stores in the region, and then move into the U.S. by 2012, Gehrig says in the interview.

Gehrig also says Lidl plans to have a significant grocery retailing presence in Switzerland with its small-format, price-impact grocery stores. He says the retailer is planning to open about 80 small-format Lidl stores in that nation.

In addition to its plans to grow significantly throughout Europe, including in Tesco's home turf of the United Kingdom where Lidl is becoming a major grocery retailing player, CEO Gehrig says Lidl plans to open 1,000 new stores in Germany, which would put it near German rival Aldi's store count of about 4,000 in the homeland.

Aldi and Lidl are strong competitors in Germany and in other parts of the world, like the UK, where both grocery chains have stores in the same markets. Therefore, it doesn't come as a surprise that Lidl is going after Aldi at home in Germany and in Europe, where Aldi has become a major food and grocery discount retailing force, as is Lidl.

Aldi currently has about 900 of its small-format, limited assortment discount grocery stores in the U.S. and is growing its store count by 75 -to- 100 new stores a year for the next five years, according to an announcement Aldi USA, its American division, made late last year.

Lidl and parent company Schwarz Gruppe has been watching Aldi USA for a long time--Aldi first came to the U.S. in about 1975--as it has been watching Tesco since it opened its first small-format Fresh & Easy Neighborhood Market grocery stores in the Western U.S. beginning in November, 2007.

Schwarz Gruppe believes it does small-format, discount food and grocery retailing better than Aldi (and of course Aldi disagrees) in its Lidl stores, and it appears the grocery chain believes it can do well in the United States--which is a potentially lucrative market for international food retailers--so has decided to cast its lot across the Atlantic beginning shortly before or in 2012 when Gehrig says the German "fighting tiger" small-format, price-focused discount grocer plans to enter the U.S. market with its first stores.

There is no information as of yet regarding which regions of the U.S. Lidl plans to target initially. However, Aldi's current 900 stores are located in the Midwestern, Mid-Atlantic and eastern regions of the country.

Lidl could decide to start in one or all of those regions if it wants to go head to head against rival small-format discounter Aldi. Or it could pursue a Western U.S. strategy (or a combo strategy), taking on for example Tesco, which is focusing its Fresh & Easy small-format combination basic grocery and fresh foods grocery markets in the Western U.S. states of California, Arizona and Nevada at present.

Lidl's stores are different than Tesco's Fresh & Easy in that they put more of an emphasis on selling basic grocery items at discounted prices. Although, the Lidl stores in Germany and elsewhere offer an increasing amount of fresh, specialty and natural foods, it isn't as much of a focus as with the Tesco Fresh & Easy stores. Lidl stores average 10,000 -to- 15,000 square feet.

The small-format Lidl discount grocery stores are best described as no frills, warehouse-style stores in design and merchandising philosophy. In fact, in many ways they are like lots of supermarkets from the 1970's and 1980's in the U.S. These stores used a no frills merchandising style which also included the "stack them high (grocery products) and sell them fast" philosophy, which was to fill the store aisles with lots of cut-case product stacks and sell the goods for cheap. High stacks, cheap prices, fast turnover.

Lidl stores also employ what we call the "sell everything but the kitchen sink" in-and-out promotional merchandising strategy just like Aldi does. Lidl and Aldi stores sell everything from television sets, furniture, electronics, clothing, garden supplies and more on an in-and-out promotional basis, advertising the various items in their weekly advertising circulars at hot prices and stacking the goods high and selling them fast in the stores.

Take a look here at Lidl's current advertising newsletter which features bathroom goods like towels, along with Budweiser beer, Pepsi Cola, Ty-phoo brand Tea, Knorr brand sauces, calculators, woman's fashion items and other goods. Like we expect with Aldi, we just know a kitchen sink will show up one day in a Lidl newsletter advertisement.

However, at least half of Fresh & Easy's focus--a focus that's central to the chain's success--is on selling everyday grocery items at discount or affordable prices. Both Lidl, Aldi and Fresh & Easy also focus on store brands over national brands.

Although they are infants in terms of store count in the UK compared to the nation's major food retailing players, both Lidl and Aldi have recently been taking a small amount of market share away from Tesco there, where it's the leading food and grocery retailer with about a 31% share of the market. The two German discount grocery chains also have been taking share away from the UK's number two supermarket chain, Wal-mart-owned Asda, and number three, Sainsbury's.

Schwarz Gruppe, Lidl's parent company, which also owns the Kaufland retail chain based in Germany, is the sixth-largest food and grocery chain in the world, according to the research firm Planet Retail, which annually ranks the top global food and grocery retailing chains by annual sales and other criteria.

Annual sales for Schwarz Gruppe in 2007 was $70 billion dollars (~50 billion Euros), an increase of 5.8% over 2006. Lidl accounts for about $67.869 billion of that total (the rest being Kaufland), according to Planet Retail's latest estimates.

By contrast, Aldi is ranked by Planet Retail as the ninth-largest global retailer, with sales of $57,522 in 2007.

Wal-Mart is the world's largest retailer, followed by France's Carrfour, Tesco, Germany's Metro Group, U.S-based Kroger Co., and then Schwarz Gruppe, parent company of Lidl, at number six.

Schwarz Gruppe currently has its small-format Lidl discount grocery stores, about 8,580 units total to date, in the following nations: Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.

Like Aldi, which essentially operates the same small-format discount grocery store format throughout the world, with some customization depending on the national market, Fresh & Easy Buzz expects Lidl to do the same; to bring its basic Lidl format to the states and only to tweak and customize the merchandising mix based on U.S. consumer tastes and preferences like Aldi USA does.

In contrast, Tesco created what essentially was a special format for the U.S. with its Fresh & Easy grocery stores, in that Fresh & Easy is modeled after Tesco's popular European Tesco Express small-format stores, but parts company with those stores in the areas of design and overall merchandising mix, especially the emphasis on fresh, prepared foods. As such, Fresh & Easy qualifies as being a separate format from Tesco Express in our analysis.

Although 2012 is four years away, Lidl will inject much excitement and competition into what already is a small-format food and grocery retailing revolution happening in the United States.

For example, U.S-based SuperValu, Inc. now operates about 1,600 of its small-format Sav-A-Lot discount grocery stores in the U.S., and Aldi USA, as we mentioned, plans to grow its current 900 store base by up to an additional five hundred stores, for a potential total of 1,400 discount grocery markets, over the next five years.

Tesco hopes to have 150 of its small-format Fresh & Easy Neighborhood Market combination basic grocery and fresh foods stores open in California, Nevada and Arizona by the end of this year, with double that amount opened by the end of 2009, including its entering the new markets of Northern California (Bay Area and Sacramento Metro) and California's Central Valley.

Tesco's long terms plans with Fresh & Easy have included moving into Oregon and Washington State from Northern California and into additional states in the Western USA.

As we've reported in the past, Tesco executives also have looked at opening Fresh & Easy stores in the Chicago, Illinois Metropolitan region and in parts of New York and Florida as part of its long term strategy.

Wal-Mart and Safeway stores also are now in the small-format food and grocery retailing business in the U.S. with their "The Market" and "Marketside" 15,000 square foot formats respectively. Safeway opened its first small-format store, "the Market by Vons," in Long Beach, California on May 15, and plans to open more in California and likely elsewhere in the numerous U.S. markets where it does business with its current 1,750 supermarkets.

Wal-Mart's Marketside, which are a combination basic grocery and fresh foods grocery store format similar to Tesco's Fresh & Easy, but with a difference in that the Marketside stores will prepare food right in-store and even have in-store seating for customers to eat-in, will start opening--the first of four initial stores--in the Phoenix, Arizona Metropolitan region this summer, perhaps as soon as July.

Numerous other retailer's are opening small-format grocery stores in the U.S., as we've reported here on Natural~Specialty Foods Memo.

Lidl is a seasoned, major global player though in small-format discount food and grocery retailing. Therefore, its announcement that it's coming to America is a very big deal, both for small-format grocery retailing (and all format retailers) in the U.S. in general, and for all of the retailers currently participating in the small-format food and grocery retailing arena in the U.S.

Lidl, which is currently embroiled in a bit of a scandal in Germany over using cameras to spy on its employees in locations like employee rest rooms, will need to avoid that behavior in the U.S. however. Such behavior not only is considered taboo in American business but can cause a company hundreds of millions of dollars in legal fees and employee settlements and enough bad press to sink it before it even starts.

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.

New TNS Retail Forward Study Looks at What We've Called the Small-Format Grocery Store Retail Revolution in America and Quantifies Our Analysis

As regular Natural~Specialty Foods Memo (NSFM) readers know, in August, 2007 we first suggested there was emerging the beginnings of a small-format grocery store retailing revolution occurring in the United States, in which major grocery chains were more-and-more getting into the game by creating and launching stores ranging in size from about 10,000 -to- 25,000 square feet, which is what we in the main define as small-format.

[Do a key-word search in the search box at the top of the blog using phrases such as small-format grocery retailing revolution, small-format grocery stores, small-format food retailing, Small Marts, small-format revolution, small-format stores, small-format food stores and small-format price-impact stores, (one phrase at a time of course) to get a sampling of those pieces. We also suggest reading through the NSFM archives for more pieces.]

We've sited the success in the U.S. of German Retailer Aldi, with its over 850 small-format, price-impact Aldi USA grocery stores, SuperValu, Inc.'s success with it's growing Sav-A-Lot small- format discount grocery chain, the Trader Joe's phenomenon, with the rapid-growth and high demand all over the U.S. for its specialty grocery stores, which now number well over 300, and the entrance into the Western USA by Tesco, with its small-format, convenience-oriented Fresh & Easy Neighborhood Market grocery stores, as examples of this growing small-format grocery store revolution.

And that's not all. From August, 2007 to the present we've also sighted as evidence of a small format grocery store revolution in America, the fact that mega-retailer Wal-Mart has developed its very own small-format grocery store, it's 15,000 -to- 20,000 square foot Marketside banner, the first stores of which are set to open in the Phoenix, Arizona Metropolitan region this summer.

Additionally, we've reported on and written about Safeway Stores, Inc.'s planned intrance into the small-format grocery store segment. Safeway plans on opening four or five 15,000 -to- 25,000 square foot combined grocery and fresh and specialty foods-oriented grocery stores this summer in the San Jose region in the San Francisco Bay Area.

Other players in this small format revolution we've written about include Pennslyvania-based Wawa Food Markets, which operates hundreds of hybrid small-format grocery markets-convenience stores in the Eastern USA, supermarket chain Hy-Vee, which recently opened its first small-format grocery store in Lincoln, Nebraska, supernatural grocery retailer Whole Foods Market, which has created Whole Foods Express, it new small-format store of about 20,000 square feet, the first of which is set to open soon in a remodeled former Wild Oats Market building in Boulder, Colorado.

These players are just the tip of the small-format grocery store retailing revolution in the USA of which we've reported on, written about and analyzed here in Natural~Speciatly Foods Memo.

Lastly, we've also written about the fact that the original small-format food retailer, the local independent grocer, continues to thrive in Americaby building and operating small-format grocery stores. That independent is in fact the model in many ways for the small-format revolution being created by this larger, chain operators.

International small-format grocery store revolution

Further, we've also said there's an international small-format grocery store revolution occurring. Many of the players are the same--with a few more added--internationally.

Tesco, with its rapidly-growing Tesco Express hybrid grocery store/convenience store chain and German grocery chains Aldi and Lidl are leading the international small-format grocery retailing revolution.

France's Carrfour, the second largest retailer in the world, is becoming a major player in the international small-format grocery store revolution as well, especially in Asia.

And of course, many other smaller players, as is the case in the U.S., are part of the growing small-format grocery store revolution throughout parts of the globe.

New TNS Retail Forward small-format grocery store study

It's seems we were somewhat on track beginning nearly ten months ago when we proclaimed a small-format grocery store revolution was occurring in the U.S., as well as in many other parts of the world.

A new study just released by the well-respected market research firm TNS Forward's Columbus, Ohio office says consumers are ready and willing to shop at small-format grocery stores that feature convenience in shopping and fresh, prepared foods.

The study also includes a caution which we use frequently in our pieces here at NSFM, which is that the jury is still out as to whether small-format grocery stores in general will meet consumer expectations, satisfy their needs as a primary or even secondary shopping venue, and provide a return on investment for the stores' owners.

The study also hits on three key points we make often about small-format grocery stores:

>Research: The study says food retailers considering a small-format grocery store strategy must monitor and analyze shopper needs, attitudes and expectations well in advance of launching a small-format store or chain.

>Localism: The report says paying attention and focusing on local (region and neighborhood) culture (and cultural differences) and demographics is key in launching any small-format grocery store venture.

>Partnering: The research study says retailer's launching a small-format grocery store venture need to seek input from grocery, fresh foods and consumer packaged goods suppliers and partners, as they have national knowledge as well as local experience, among other reasons for doing so.

The above three aspects of small-format grocery store retailing, which we summarize as research, localism and partnering, are themes we've been including in out numerous pieces on the small-format grocery store retailing revolution occurring in the U.S. and in other parts of the world for months.

U.S. Consumer attitudes about small-format grocery stores

The TNS Retail Forward study says 64% of U.S. shoppers surveyed said they would either definitely or probably shop at a small-format grocery store. [Based on our own research and some others we think that number is a bit higher.]

The study also notes consumers surveyed indicated the combination of the small-format (convenience), combined with fresh, prepared foods offerings is a compelling offer for "the time-pressed shopper."

Jennifer Halterman, a senior consultant at TNS Retail Forward and the primary author of the study says, "The small-store trend is part of an ongoing evolution in the retail food sector, and we expect more players to throw their hats into the ring."

We agree completely with the latter part of her quote--that more retailers are throwing, and getting ready to throw, their small-format grocery store retailing hats in the ring. I

In fact, we invite Ms. Halterman--and our readers--to stay tuned over the next couple of weeks as we will be reporting and writing about some new entrants into the small-format grocery store retailing revolution who nobody else has reported on yet. In fact, look for one or more of those fresh pieces later today, along with lots of upcoming analysis in the weeks ahead.

Small-Format Food Retailing Memo: Independents Help Fuel Small-Format Food Retailing Revolution in the U.S. By Reinventing the 'Corner Grocery Store'

A 1920's corner grocery store in the United States.

The Return of the corner grocery store

As regular Natural~Specialty Foods Memo readers are aware, a year ago we started writing extensively about what we've deemed to be a revolution in small-format grocery store retailing internationally and in the United States.

[Click here to read a sampling of some of our stories on the topic. Also do a search in the box at the top of the blog. Search terms: small-format food retailing, small-format food retailing special report, small-format grocery stores, international small-format food retailing revolution, small-format food retailing memo, independent grocer memo.]

In the U.S., this small-format food retailing revolution continues to grow. In fact, in just the last year hundreds of new small-format food and grocery stores have opened throughout the U.S., despite the poor state of the economy.

That's evidence--along with a few other criteria like the fact giant retailers like Wal-Mart, Tesco, Aldi, Safeway and SuperValu all are committed to small-format store development-- to us it's a trend, rather than a mere fad.

SuperValu, Inc. is even extending its involvement in small-format food and grocery retailing beyond its discount Sav-a-Lot chain, into its Jewel supermarkets division. This fall it will open the first store of what are likely to be many "Urban Fresh by Jewel" stores, which are 15,000 square foot specialty food and grocery stores with an emphasis on fresh and specialty products. The first "Urban Fresh by Jewel" small-format market will be in Chicago.

We've identified the food retailing chain leaders in this revolution as no frills discount grocer Aldi USA (with around 900 stores), the U.S. division of Germany-based Aldi International; Supervalu, Inc.'s no frills, discount Sav-A-Lot chain (about 1,600 stores); specialty grocery chain Trader Joe's (300 stores) Tesco's Fresh & Easy Neighborhood Market (currently 67 stores and growing fast) Safeway Stores, Inc., with its new small-format "The Market" stores; Wal-Mart with its soon to open first four Marketside stores; and numerous others.

Independent grocers, America's original small-format grocers, also are putting a renewed focus on opening small-format grocery stores, especially in urban neighborhoods and in the down towns of suburban and small cities. We call this phenomenon the "new corner grocery store." The phrase is more metaphorical to describe the phenomenon rather than literal to mean a small grocery store right on the corner, although that applies as well.

And it's not just experienced and independents currently operating supermarkets and grocery stores that are opening these new small-format "new corner grocery stores." For the first time in decades, we are seeing numerous entrepreneurs, some with food retailing backgrounds, others with restaurant backgrounds (and some with both), along with entrepreneurs from other walks of professional life, starting to open small-format grocery stores throughout the U.S.

Just like the big chains--where the small-format grocery stores range from no frills, deep discount markets like Adli's and Sav-A-Lot's and combination basic grocery and fresh foods stores like Tesco's Fresh & Easy, Safeway's "The Market" and Wal-Mart's Marketside, which will open this fall in the Phoenix, Arizona region, to natural and specialty format stores like Trader Joe's and others--these independents also are opening up a variety of formats of small-format grocery stores. These markets range from upscale fresh, specialty and natural foods stores, to modern versions more basic grocery stores modeled after the corner grocery store of the past. Hence the title we are giving them: the "new corner grocery store."

Although in our analysis the small-format food retailing revolution is still in its infancy in the U.S. (and in many parts of the world as well), it is beginning to have positive effects on numerous cities and towns throughout the U.S., as well as on consumers.

Not only are the stores serving shoppers in locations often previously underserved, but the small-format grocery store revolution is starting to have a positive effect on urban, suburban and small town down towns because many of the grocery stores being opened in such areas are going into buildings which were either previously empty or rundown. In other words, grocers are improving these buildings and thus the neighborhoods in these communities, providing a higher and better use for the existing buildings and therefore the community as a whole.

This morning we read a story in the Rutland (Vermont) Herald newspaper about three independents and how they are making a go with three small-format grocer stores in three different towns in Vermont.

Those grocers--Bellomo's Market in Rutland, West Street Market in Proctor, Vermont, and California Fruit Market--are three excellent examples of independents who are helping to create this small-format food retailing revolution in the U.S. by reinventing what we call the "new corner grocery store."

Read the story, "Owners around town revitalize small-scale retail," written by Bruce Edwards here.

It's not easy competing with the big chains for independents regardless if they operate huge supermarkets or small-format food stores. However, the fact is small-format independent food and grocery stores are in a growth mode rather than in decline in the U.S.

The ingredients for success for independents, as well as chains, are the same in the main regardless of store size. Those ingredients include creating a niche and them communicating it in all a retailer does, providing excellent customer service, operating clean stores regardless of the format, and a handful of other essentials.

Small-format grocery stores do offer a couple interesting particulars for retailers however.

First, because of the smaller size, the overhead--monthly rent, energy costs, labor--are less. For independents this means fewer barriers to entry, as it costs millions to open a new supermarket of say 40,000 square feet or more.

Second, it is easier to focus on a particular niche or niches in a small-format food and grocery store. By sheer virtue of its smaller-size, a retailer is focusing on a narrower niche--neighborhood residents, gourmets, natural and organic foodies, for example--which all things being equal should allow for easier focus in merchandising, marketing and operations.

Lastly, small-format stores allow for a strategy that doesn't have to force a retailer to directly compete against the big chains. For example, a corner grocery store can focus on being a fill-in, secondary and even tertiary, store for neighborhood residents. Additionally, by creating a natural-organic and specialty niche, the small-format store can brand itself as the place to shop for affordable "quality" foods for example.

Again, creating a niche, executing and communicating it aren't any easier with a small-format grocery store. But by virtue of the smaller physical size it can allow a retailer to do so more economically and in a tighter fashion.

It's our analysis that chains like those mentioned earlier are opening small-format stores in large part because they figured this fact out. Of course, it is something many independents have know all along in the U.S.--which accounts for the fabulous success of the independent food and grocery retailing segment overall in America.

We're observing the beginnings of the emergence of the "new corner grocery store" in the U.S. This time around though it's being conducted as much by big chains as it is by independents.

Therefore, independents in this current food retailing revolution will have to be even more competitive than they have been in past campaigns and battles. Of course, that is something independents as a segment have shown they can do time and again in the United States.

Food Retailing, Society & Economics Memo: UK E-Commerce Salvage Grocer 'Approved Food' Sees Sales Boom As Shoppers Favor Saving Cash Over Code Dates

Food & Grocery Retailing in the Global Recession

The United Kingdom's (UK) "Approved Food & Drink" is an online, e-commerce grocery store and home delivery service with a unique twist. That unique twist is that unlike the e-commerce shopping and delivery operations of leading UK food retailers such as Tesco, Wal-Mart-owned Asda or the online-only grocery and delivery service Ocado, at which consumers order the same types of food and grocery products featured in supermarkets and then receive home delivery, "Approved Food & Drink" specializes strictly in closeout items and non-perishable food, grocery and beverage products that are either near or recently past the products' "best buy" code dates.

The online salvage grocer offers food and grocery products ranging from major global brands like Nestle, Heinz, Coca-Cola and Pepsi, to natural, organic, specialty and gourmet products, including iconic British specialty brands like Walkers, Marmite, Bovril and most others. "Approved Food," as it is called for short, offers the items at about 20% -to- 60% less than non-salvage items offered in UK supermarkets.

"Approved Food & Drink" is similar to what are commonly referred to in the United States as salvage grocers or close-out supermarkets -- accept it is an online operation, as well as the sister to a brick-and-mortar operation. These U.S. salvage grocers are brick-and-mortar retailers, such as the California-based Grocery Outlet chain and others like it, along with numerous independents located throughout the county, that specialize in selling "short-coded" goods, as well as manufacturer's overstocks and products with slightly blemished or mislabeled packaging. They sometimes are referred to as "Scratch & Dent" grocers.

The code-busting online salvage grocery store sells overstocks and blemished food and grocery products as well. But is specializes in the "short coded" and even past-"best buy" code date products.

Most salvage brick-and-mortar grocers in the U.S. don't sell food and grocery products that are past the "best buy" code dates, generally pulling any of the expired goods from the shelves and displays once they are past the date on the package. [We aren't aware of an online salvage grocer in the U.S. comparable to the UK's "Approved Food & Drink." If you are, let us know.]

The UK's "Approved Food" actually has an affiliation with a British version of a brick-and-mortar salvage grocer. The e-commerce grocer is the online division of Crag's Cash & Carry, a UK brick-and-mortar food and grocery wholesaler and retailer of salvage groceries and near and past-"best buy" code date expired goods. [You can learn more about Crags's Cash & Carry at its Web site here. You can learn more about "Approved Food & Drink's" philosophy at its e-commerce site here.]

Differing industry practices, differing social norms

Natural~Specialty Foods Memo (NSFM) readers not familiar with the norms and practices of food and grocery retailing in the UK might find the notion of an e-commerce grocer specializing in the selling of goods near, and particularly past the "best buy" package code dates bizarre.

However, the practice of marking down both fresh and shelf-stable packaged foods on a daily basis is a common one among UK supermarkets. Fresh foods like meats, produce and baked goods get marked down each day in UK food stores, often by as much as 50%. The same is the case with non--perishable, packaged food and grocery products. As the packaged goods items near their "best buy" code date, the grocers mark them down as a way to sell them and "salvage" some economic value on the items, as a regular practice.

In the U.S. supermarkets do some mark downs, particularly on fresh category items like meats, bakery and produce. But it's generally done on an ad-hoc and store-by-store (and even store department-by-department) basis rather than as a common industry practice, as it is in the UK. Some U.S. supermarkets also mark down shelf-stable grocery items, but generally only when a particular items is being discontinued, and often not even then.

The practice of marking down non-perishable packaged goods by U.S. supermarkets as a matter of policy is nearly non-existent. Instead, such items, as well as most all perishable products, are donated to food banks or food pantries (or thrown away) when they near their "best buy" expiration code dates rather then being marked-down. Some U.S. chains even have a company policy against stores doing any product markdowns at all.

Part of the reason the U.S. supermarket industry doesn't do markdowns on a systematic basis, as is the case in the UK, has to do with U.S. food safety laws. Retailers in the U.S. generally fear lawsuits if they sell food and grocery items that are close to or near the package expiration date.

Another reason has to do with the cost of labor. U.S. supermarket chains, many of which are unionized and pay a premium hourly wage, generally don't believe the benefit of having store employees devote time (and the company's money) to marking down products pays off in terms of the reduced profits and outright loss of profit that the sales of such products bring, particularly once the labor cost is factored in. As such, they prefer to donate the goods to food banks right from the start.

Additionally, most U.S. consumers, unlike most UK consumers, have a less liberal attitude towards buying goods near their expiration date, and an even stronger attitude against purchasing those past the expiration date. Although in the current recession that is changing as business at U.S. salvage grocers, those that sell near expired code date goods as well as the closeouts, is up considerably, as shoppers search for bargains.

So there are cultural differences between UK and U.S. consumers that account in part for the differences in the two countries regarding the practice of supermarket industry mark-downs. We think in the UK the severe food shortages the nation experienced for many years during two World Wars accounts in large part for the mark-down system in that country -- the concept that wasting food is culturally (and economically) wrong.

The U.S. also suffered some food shortages and had rationing during World War II, for example, but it wasn't as near-severe as what the UK experienced.

We think the two allied nations came out of that experience with different points of view. Two generations of UK consumers (post World War I and World War II) came out of the war experience stressing the relative importance of not wasting food, hence in part the adoption by the UK supermarket industry of the mark-down system, focused as the nation was on the severe shortages of food over a long period of time.

In contrast, the U.S. came out of the war experiences with an attitude of abundance, that the country would produce more food than it needed, which it has, and that food waste was a part of that abundance rather than something to be concerned with in an serious way. As a result, the concept of daily markdowns never caught on within the mainstream U.S. supermarket industry.

An additional reason for this cultural and industry difference we believe is the simple fact that the U.S. grows and produces so much food. It need not import any food if it chose as a matter of policy not to. On the other hand, although the UK produces a great amount of food for such a geographically small nation, it isn't able to be a self-producing nation like the U.S. is under current demand conditions.

None of this is to suggest food isn't wasted in the UK, as it is in the U.S. According to statistics publish by the British government, it's estimated that UK consumers throw away about 4.1 tons of food each year after they purchase it at the supermarket. That's lots of food waste for the population of the UK. What we are saying is that food and grocery items go through a formal, industry-wide step in the UK, the markdown process at the supermarket, that doesn't systematically occur at U.S. supermarkets and other food stores.

There is one exception to this rule though. UK-based Tesco, which operates about 111 small-format Fresh & Easy Neighborhood Market grocery and fresh foods stores in Southern California, Nevada and Arizona in the Western U.S., has brought the UK supermarket industry's "mark-down" process with it across the pond to America.

As part of the retailer's policy, Fresh & Easy store employees mark down near-expired fresh foods -- bakery, produce, meat, prepared foods -- each day, reducing the retail prices from about 20% -to- 50%, depending on how close to its expiration date the product is and how fast they want to move it. The stores regularly do the same thing with shelf-stable food and grocery products nearing their expiration dates. We haven't seen the Fresh & Easy stores selling any items that are past their "best buy" dates however.

Business appears to be booming at 'Approved Food'

The brief explanation of the markdown process and practice in the UK supermarket industry better helps explain the "Approved Foods'" business model, we think. We also think it demonstrates the model's potential to do well, particularly in bad economic times like the present.

The e-commerce, home delivery-based salvage grocery store was doing a steady but not earth shattering business until about September-October of 2008, when the financial-credit crisis and economic recession began to get severe in the UK, as it did in the U.S. and elsewhere throughout the world.

Along about that time the volume of orders to the Web site started to pick-up considerably. "Approved Food & Drink" says it's experienced an about ten-fold increase in business since September-October, 2008. And over the last few months that volume has kicked-up even higher. So much so in fact that on February 4 the online salvage grocer put a notice on the front page of its Web site in red font saying this:

Important information:

Due to the large number of orders that we continue to receive, there is a temporary backlog of about a week.

For those who plan to place an order with us we would like you to be aware of this delay for the time being.

The store is open daily for local customers who may wish to shop in person.

We ask for you to continue to be patient over this period whilst we work around the clock, literally, to ensure orders are sent out to you ASAP.

Thank you all for your support, especially Martin Lewis and all the Money Saving Experts at www.moneysavingexpert.com

Please visit Approved Foods again and feel free to register for our newsletter.

Regards
The Approved Food Team

[Click here to view the Web site front page.]

The e-commerce-based salvage grocer also has been so busy of late it has at times closed down for a day or two in order to catch up on its back orders, pulling workers from various parts of the operation to help fill the customer order backlog.

Additionally, "Approved Food" has recently put a notice on its Web site to UK-based food and grocery suppliers and supermarkets, letting them know it's looking to buy large quantities of closeout products as well as food and grocery items with short expiration "best buy" code dates.

In the UK, as in the U.S., the code dates don't mean the product has spoiled. Rather the dates mean just what they say -- that the product is "best" if purchased by that date. That's the legal definition in both countries.

Food retailing, economics and society

How people obtain their food and where they shop for it is a psychological, anthropological and social phenomenon as well as an economic one. But economics is arguably the most significant determinant of how and where most consumers get and buy the food they eat in bad economic times like the present. This is a cross-cultural and cross-societal phenomenon as well.

For example, in both the U.S. and UK the sales of fruit and vegetable seeds and plants are up considerably over about the last six months to a year. Numerous retailers are reporting sales of the fruit and veggie seeds and seedlings at the highest levels they've ever seen. Increasing numbers of consumers are taking to home gardening as a way to grow some of their own food and thus save money.

At retail, there's a significant shift going on from consumers shopping at higher-end and mid-range supermarkets, to discount food retailers.

In the U.S., chains like discounter Wal-Mart and Aldi USA (the U.S. division of Germany-based Aldi International) are doing well, for example. In terms of growth, both chains recently announced plans to open numerous new stores this year, and are even pushing into new market regions, while numerous higher-end and mid-range supermarket chains are struggling, postponing new store openings, in some cases closing stores, and even in a couple instances beginning to layoff employees. One of those examples is the privately-held Bashas chain in Arizona. Bashas, which operates about 159 supermarkets in Arizona, laid off 300 employees, or about 3% of its total workforce, last week, saying in a company statement that it had to do so because of the economic recession and increased competition in the Arizona market.

Wal-Mart said this week in a statement it plans to open about 125-145 new stores at home in the U.S. in 2009. The global retailer just acquired a food and grocery chain in Chile, is expanding its Asda chain in the UK, and is pushing into Russia, as well as growing its joint-venture retail operations in India, among other growth plans plans.

Germany-based Aldi International announced recently it plans to open about 100 new stores this year (on top of the about 1,000 it currently operates) in the U.S., and nearly that many new stores in the UK in 2009. Aldi USA also is moving into New York and Texas this year, two brand new markets for the small-format, hard-discount grocery chain. Aldi USA entered the Florida market for the first time in late 2008, as well.

The same is the case in the UK. Hard-discounters Aldi-UK and Lidl (also a German small-format, hard-discount grocery chain) are picking up market share largely at the expense of British chains like Tesco, Waitrose, Marks & Spencer and Sainsbury's. Wal-Mart's discount-focused Asda supermarket chain also is picking up share in the UK in the recession as it cut and continues to cut prices considerably.

Further, the use of manufacturers "cents off" coupons is at about an all-time high in usage among consumers in the U.S. and the UK, which is another indicator of how shoppers are striving to save even pennies at the supermarket in these tough economic times.

In the away-from-home eating space, global fast food chain MacDonald's is having one of its best years in recent times due largely to its low-price model, and recently announced it plans to open about 1,000 new stores globally this year. Meanwhile, higher-end and even mid-range restaurants are struggling as consumers throughout the world have cut back on meals eaten away from home.

It's in this recessionary socio-economic environment in which the UK's "Approved Food & Drink" is finding its business of selling salvage groceries, including those items with near-expired and even expired "best buy" dates, apparently booming.

It's all part of a new trend we've been observing among consumers that we call the "new frugality." It's a new frugality created primarily out of need (economic) rather than out of desire or choice. But it's a reality, despite the primary motivating cause. And from a historical perspective it isn't anything new. It's just new in the era of consumption.

It's also our analysis and view that this "new frugality" could last long after the recession ends because in prolonged periods of economic struggle like this one looks to be such new behavior patterns like frugality and searching out discounts tend to take stronger hold in terms of consumer behavior.

This changing consumer behavior is currently reshaping food and grocery retailing in numerous ways. The majority of those ways have to do with retailers of all formats having to more strongly and aggressively compete against one another other for fewer food dollars and among more tight-fisted shoppers, and as a result having to lowering prices, offer stronger promotions, and cut expenses to the bone.

Meanwhile, alternative format retailers like UK e-commerce salvage grocer "Approved Food & Drink," and the numerous brick-and-mortar salvage grocers in the U.S., are taking a greater piece of that food dollar pie as consumers seek out stores (and e-commerce grocers) where they can get more for their money (perceived or real) -- even if the food and grocery products happen to have nearly-expired or expired "best buy" code dates. And this phenomenon in turn adds an additional element to the ongoing reshaping of food and grocery retailing in these recessionary times.