CHICAGO: Aldi and Lidl, the low-cost German grocery chains which have turned the European supermarket battle upside down, have announced expansions into the competitive US market.
Both companies, known for selling low-price products from brands that people have never heard of, are looking more closely at the US. As Aldi expands its 1,600 existing stores to 2,000 with an investment of $3.4bn, its rival Lidl will open its first store on 15th June with 100 more planned.
Known for incredibly low prices – Lidl told Reuters that it would aim to price products up to 50% lower than rivals – the pair have proved to be a danger not just to the lower end of the market.
According to Kantar Worldpanel figures in the UK, the German retailers have seen significant market share growth over the last two years, as the top four supermarkets have experienced declines in share.
This pressure adds to a US supermarket arena that has already seen aggressive price cutting from Wal-Mart and Kroger, Bloomberg reported. A pattern of deflation has driven food price drops for 17 continuous months, the greatest period of straight decline in 60 years.
Management consultancy Bain & Co. has predicted 10% growth annually through 2020 for the "deep discount segment"; Bloomberg added that this is a rate five times higher than that expected by traditional stores.
"There's a tremendous amount of value at stake that will shift to Lidl and Aldi," Kent Knudson, a Bain & Co. partner, told the publisher.
Though competition is fierce between the two, Aldi, which has existed in the US since 1976, is unflustered by the deep discount competition. Last month, Jason Hart, CEO at Aldi US, welcomed the competition from Lidl.
"We've seen attempts to beat Aldi prices before, and we've always been able to go lower," he said.
Data sourced from Reuters, Bloomberg, Kantar Worldpanel, Fox Business; additional content by WARC staff