We’ve previously discussed the strength of grocery stores during the pandemic. Here, we’ll dive into two European grocers – Aldi and Lidl – who have deepened their foothold in the US over the past few years.
The Grocery Sector Continues to Show Strength
In a recent survey that we conducted in March 2022 of US-based adults aged 18 to 64, data shows that compared to pre-pandemic, a majority of people in the US (52.3%) are doing more of their grocery shopping online. At the same time, the vast majority of respondents – 62.5% – also stated that they visit physical grocery stores more often or about the same as they did pre-COVID, which means online shopping is not supplanting in-person grocery trips any time soon.
There’s no shortage of choice when it comes to US grocery stores. With mainstays like Kroger, Walmart, and Whole Foods, as well as newer players like Amazon Fresh, consumers have a wealth of options to choose from – so it may seem odd that a European grocer would choose to stake their claim in the seemingly already saturated US market. Nevertheless, two different European grocers have found success serving American shoppers nationwide.
How Aldi Took Off in the US
Aldi, a grocer known for offering hard discounts on an array of foodstuffs, is headquartered in Germany. Its first store opened in 1961, and has since expanded its global presence with over 5,500 branches worldwide.
Aldi now has more than 2,000 stores across 36 states, but its presence in the US isn’t new.
In fact, its first US store opened in 1976. In 2017, the brand announced its intention to expand from 1,700 to 2,500 stores by the end of 2022. So far, the company seems to be on track and is positioned to become one of the largest US grocers by number of stores. And, the foot traffic numbers show just how quickly Aldi is growing: March 2022 saw an 8.0% increase relative to March 2021 and a 6.1% increase relative to March 2019.
Lidl Following in Aldi’s Footsteps
Although Lidl’s German roots can be traced back to the 1930s, 1973 was the year the grocer opened its first brick and mortar store. Since then, the brand has significantly expanded its operations and has firmly established itself throughout Europe and beyond. Today, Lidl operates more than 11,500 stores in a total of 31 countries.
Contrary to Aldi’s longtime US presence, Lidl only entered the US market in June 2017 and currently operates just over 150 store locations nationwide. Given that the brand is still relatively new in the US, it’s astonishing to see how visits have taken off. Visits in April through August 2021 saw more than a 120% increase in monthly visits compared to 2018. The foot traffic growth is largely due to new store openings, with the brand investing over $500 million to open 50 new stores during 2021.
Aldi and Lidl’s Value Pricing Key Component to Success
So what is it that makes these two brands stand out within the US grocery sector?
For one, their ability to offer high-quality products at significantly lower price points. A 2020 study showed that, in a head-to-head comparison, Lidl’s prices were about 45% lower than Trader Joe’s, and its competitive price-cutting efforts have been notably stronger and more enduring than those of Walmart. Both brands also focus on keeping prices low rather than having the most diverse selection of products available at their stores.
As is stated on Aldi’s website, “We can’t promise you’ll find ten choices of the same item, but we can promise you’ll find the best ones at the best price.” So, while the offerings at Aldi and Lidl may be narrower than those of other grocery chains, their prices remain hard to beat.
This may explain why cross-shopping between Aldi, Lidl and Walmart has consistently fallen over the past four years. As the graph below shows, every year, there are fewer Aldi and Lidl shoppers who also visit Walmart. The ongoing success of Aldi and Lidl is clearly increasing competition in the value-priced grocery space.
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