With high inflation persisting in the United States, German discount supermarket chain Aldi is on the rise. As grocery prices surge, analysts say Aldi's business model, which puts low prices first, aligns with the U.S. consumer environment.
According to the Washington Post (WP), Aldi, headquartered in Germany, is marking the 50th anniversary of its U.S. entry this year by opening 180 stores across 31 states, bringing its nationwide footprint to about 2,800 locations in an aggressive expansion. The company plans to invest $9 billion (about 13 trillion won) with the goal of securing a total of 3,200 stores by 2028. Real estate services firm JLL assessed that Aldi outpaced competitors in both store count and square footage expansion from 2019 to 2024.
The rapid growth is also evident in the numbers. Aldi's U.S. sales came to $54.16 billion in 2024, up 14% from a year earlier. Roughly one in three households shops at Aldi. According to foot-traffic corporations Placer.ai, Aldi's visits last year rose 8% from the previous year, with fourth-quarter growth rate at 9.7%. By contrast, competitors Kroger and Albertsons saw visit growth rates of 0.8% and 1.6%, respectively, during the same period.
Aldi's competitiveness stems from a rigorous cost-saving structure. About 90% of in-store products are PB (private brand) items, reducing intermediary distribution costs, and its small store format keeps staffing and inventory burdens low. For example, most products at Aldi are displayed by the case, and customers bag their own groceries after shopping, allowing the store to operate with fewer employees.
In addition, Aldi has adhered to a strategy of aggressively cutting prices at market entry to draw in customers and then maintaining a certain level of quality to boost repeat visits, and experts say the strategy is working in the United States. Katrien Gielens, a professor of business administration at Tilburg University, said, "When Aldi entered the United Kingdom, it also sparked a price war against local supermarkets such as Tesco," adding, "If you underestimate Aldi's capabilities, the entire market can collapse."
In fact, as household grocery burdens rise, consumers are prioritizing price over brand loyalty. According to the U.S. Bureau of Labor Statistics (BLS), since COVID-19, grocery prices have climbed about 30%, outpacing overall inflation (about 26%), and they remained stubborn in December, up 2.4% from a year earlier. Reflecting this, from January to October last year, sales of PB products rose 0.3%, while nationwide brand sales fell 0.7%.
The consulting industry views this trading down trend—consumers opting for cheaper options for items they consider less important—as a boon for Aldi. John Clear, a partner in the retail practice at management consulting firm AlixPartners, said, "Consumers are rapidly leaving traditional large grocery stores," adding, "In areas where brand value propositions are weak, the influence of warehouse-style discounters such as Aldi, Lidl, and Costco will grow even larger."
However, the limited product range makes so-called "one-stop shopping" difficult, a noted drawback. Taking this into account, Aldi is pursuing a strategy of opening stores near competitors. The phrase "the ideal location is near a Walmart parking lot" is popular inside Aldi for a reason.
Some also argue that the simple shopping experience of reducing choices can itself be a competitive edge. Clear said, "U.S. consumers are realizing they don't need as many options as they thought."