Secrets of the German supermarkets conquering America
The power of the German discounter
While other supermarket groups around the world are struggling, the rise of the Teutonic budget chain has been unstoppable. We chart the progress of Aldi and Lidl, the largest German grocery chains that are conquering America.
Humble roots
Aldi's rags to riches story began back in 1913 when Frau Anna Albrecht opened the Karl Albrecht Spiritousen and Lebensmittel grocery store in Schonnebreck, a low-income suburb of Essen, Germany.
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The world’s first discount store
Not long after the end of World War II, Anna's sons Karl and Theo took over their mother's business and transformed it into 'the first discount store in the world'. The brothers founded Albrecht KG in 1948, opening four stores in the local area not long after.
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Thrifty family
The family as a whole were noted for their thrifty ways. Obsessed with saving money, Theo was said to recycle used pencil stubs, wear old, worn suits and eschew any form of luxury even after he had made his fortune.
Savvy business plan
The thrift-conscious brothers devised a simple yet super-successful business plan: they kept prices rock-bottom by only stocking non-perishable items, quickly removing slow-sellers from the shelves.
Enter competition
In 1930, Aldi's new rival came to the scene when a man called Josef Schwarz became a partner in Südfrüchte Großhandel Lidl & Co – a neighborhood fruit wholesaler, which he developed into a general food wholesaler.
First store opening
After successfully founding the firm as Lidl Stiftung and Co. KG, the first Lidl store opened in 1973 in Ludwigshafen, Germany (pictured). Just three people were employed to run the store, which sold 500 product lines.
The 1970’s boom
By this time, Aldi had already expanded massively and began making footsteps on American soil when it opened its first store in Iowa in 1976.
Trader Joe's acquired
In 1979, a trust headed by Aldi Nord's Theo Albrecht bought trendy discount chain Trader Joe's, which now operates 475 stores in the US.
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Household names
By the 1980s, Lidl was quickly catching up with Aldi and became a huge household name in Germany, operating what it claims was a “simple vision that inspires us all: high quality at low prices”.
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No frills
Both Aldi and Lidl built their success on a no-frills approach to shopping. All products were, and still are, sold in their original packaging. Customers simply take products from the packaging and staff refill them when they’re empty, rather than constantly re-stocking shelves.
Cutting back
Because of such a simple model, requiring minimal labor, staffing is kept to a minimum in both companies to save on cost, which subsequently allows for cheaper products in-store.
Award-winning produce
Part of Aldi and Lidl's appeal is their range of non-branded products, which have been found to taste as good as, or better than, the branded, more expensive products in bigger supermarkets. Aldi has won awards for its beef burgers, cheese and more, while Lidl has racked up prizes for its butter, bacon, coffee and smoked salmon.
A hit among critics
Wines and spirits sold by the German discounters have also proved particularly popular among critics. Aldi's London Dry Gin was recently voted among the best in the world, while Lidl walked away with 101 medals at the 2017 Los Angeles International Wine Competition.
Aftermath of the financial crisis
In the aftermath of the global financial crisis, both supermarkets have seen their sales grow year on year, while many of the bigger chains have struggled.
Fewer lines
Unlike some of the bigger chains, Aldi and Lidl stores have a much smaller range of products and fewer branded lines – Lidl now has around 1,600 lines compared with the 15,000 usually found in larger supermarkets.
Heidi Klum collaboration
In June 2017, Lidl announced it had teamed up with international fashion icon and designer Heidi Klum. Klum's new collection is set to be available exclusively at Lidl stores later in 2017.
The big bucks
Meanwhile, over a century after its birth, Aldi announced plans earlier this year to invest $3.5 billion (£2.7bn) into expanding its store base across the US to 2,500 stores by 2022. There are currently 1,600 Aldi stores across the country.
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Joining the US fight
Meanwhile, ahead of schedule, Lidl opened its first 20 stores on the east coast this year and a further 80 will be opened by the end of the year. It has already taken on 1,400 staff in the US and is promising to undercut Walmart by up to 50%.
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Causing a price war
The expansion of both Aldi and Lidl has caused a huge price war across US supermarkets. Walmart is now testing lower prices across 11 states to try and compete with the German discounters and is pushing vendors to undercut major supermarket rivals by 15%.
Low-price leaders
And Walmart isn't stopping there to try and reclaim its status. The world's biggest retailer is expected to spend about $6 billion (£4.7bn) to try and regain it's title as the low-price leader.
Continuing the price drop
But not all grocery stores have had the funds to plug into a revival. The rags to riches stories of Aldi and Lidl may have started slowly, but their huge global expansion has triggered 18 bankruptcies since 2014. In May this year, Aldi chief executive Jason Hart announced the chain still intends to have prices that are at least 21% lower than its biggest rivals.
Amazon's Fresh competition
But Aldi and Lidl aren't totally safe. While they might be leading the grocery race, fresh competition is certainly keeping them on their toes. Amazon's recent bid for Whole Foods caused a huge stir in the market and competitors lost $30 billion (£24bn) in market capitalization. Amazon's access to data means they are easily able to work out exactly what products consumers are looking for and stock their shelves accordingly.
Never losing focus
But Lidl and Aldi are still fighting back. With their feet firmly on American soil, Lidl US has claimed it is "paying attention" to the likes of Amazon. According to the Financial Times, Aldi US marketing director, Liz Ruggles says "the grocery industry has seen many changes over the years... Aldi has never lost focus".