US Retail

Invasion of the German Discount Supermarkets

  • Why it matters

    Why it matters

    German retailers, especially discount grocery stores, are expanding in the United States and elsewhere, where sales growth far exceeds the possiblities back at home in Germany. Wal-Mart and other US retailers are determined to protect their turf.

  • Facts

    Facts

    • Within two years, discount grocery business Aldi-Süd is predicted to achieve higher sales in the United States than in Germany,
    • Aldi-Süd already has 1,600 stores in the United States and plans to increase that number to 2,500 by the end of 2022.
    • Aldi rival Lidl has just entered the US market, with plans to open about 100 supermarkets along the US East Coast within a year.
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    Audio

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83510726 Aldi AP Big
Mild-mannered facade for an aggressive expansion: An Aldi store in Salem, New Hampshire, in the US. Source: AP

Aldi-Süd, part of the Aldi Group that forms Germany’s largest discount supermarket business, made its first foray into the United States in 1976, when it bought a small chain of some two dozen stores in the American midwest. Since then, Aldi-Süd has expanded to some 1,600 U.S. stores stretching from California to New York, and earlier this month, the firm announced an aggressive plan to continue its rapid growth, announcing it will invest some $5 billion (€4.6 billion) to open an additional 900 stores in the country by 2022.

Aldi’s announcement to continue its push into the US market comes at a time when its German competitor, Lidl, is making its own entry into the US market, opening its first US stores in Virginia, North Carolina and South Carolina this month. Lidl says it will open 100 stores on the East Coast within a year, followed by another 500 stores in subsequent years.

These German companies are being drawn to the US by massive potential for growth. The US is the world’s largest grocery store market, with some $700 billion in annual sales. German discounters are projected to grow by 8 to 10 percent annually in the US through 2020, according to an analysis by the Bain consulting firm. That is five times the growth rate for traditional US retail grocery businesses. This trend is triggering worries among normally self-confident US firms such as Walmart, the world’s largest retail group, which in response to the expansion of German discounters is lowering some of its prices, promising fierce competition.

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