The Germans Are Coming... And Their Groceries Will Cost Up To 50% Less Than Wal-Mart

Tyler Durden's picture

Back in February we reported that as America's deflationary wave spread through the grocery store supply chain, the scramble for America's bottom dollar was on, and it prompted America's largest low-cost retailer Wal-Mart to not only cut prices, but to squeeze suppliers in a stealthy war for market share and maximizing profits, a scramble for market share which is oddly reminiscent of the OPEC 2014 price fiasco and is certain to unleash a deflationary shock across wide portions of the US economy.

As Reuters reported at the time, Wal-Mart had been running a "price-comparison" test in at least 1,200 U.S. stores and squeezing packaged goods suppliers in a bid to close a pricing gap with German-based discount grocery chain Aldi and domestic rivals like Kroger. Citing vendor sources, Reuters said that Wal-Mart launched the price test across 11 Midwest and Southeastern states such as Iowa, Illinois and Florida, focusing on price competition in the grocery business that accounts for 56% of the company's revenue.

Notably, while Wal-Mart was considering cutting prices to match its competition, the near-monopoly retailer was also seeking offseting cost cuts from its own vendors, in what could lead to a deflationary shock that would ripple across the entire US grocery store supply-chain, with dropping prices leading to margin collapse inside the entire industry, and eventually a default domino effect. 

And, as we also reported, as part of the relentless competition among the largest grocers Wal-Mart would have no choice but to proceed with even more aggressive price cuts in the future. The reason for this is that Germany-based discount grocer Aldi had emerged as one of the relatively new rivals quickly gaining market share in the hotly competitive US grocery sector, which already boasts Kroger, Albertsons Cos Inc and Publix Super Markets as stiff competitors on price.

A second Germany-based discount grocer, Lidl, was planning to enter the U.S. market this year, which together with German Aldi would pose a serious threat to Wal-Mart's U.S. grocery business.

Now, thanks to a follow up by Reuters, we can safely assume that the upcoming grocer price war is about to turn nuclear because the abovementioned German discount grocery chain Lidl, which is opening its first U.S. stores this summer and is eager to capture US market share at all costs, said its products would be up to 50% cheaper than competitors... which are already caught up in a margin-crushing price war.

"This is the right time for us to enter the United States," Brendan Proctor, chief executive officer for Lidl U.S., told Reuters at a media event in New York late on Tuesday. "We are confident in our model. We adapt quickly, so it's not about whether a market works for us but really about what we will do to make it work."

And as first order of business, what Lidl will do is generate huge losses by massively undercutting prices in hopes of capturing market share from established names like Walmart, Kroger and Albertsons. Think Uber but for grocery stores. 

There is already a case study of what happenes next, should the two German invaders prove successful. Lidl, which runs 10,000 stores in 27 countries, and German rival Aldi Inc have already upended Britain's grocery retail market, hurting incumbents like Tesco Plc and Wal-Mart Stores Inc's ASDA supermarket chain.

Looking ahead, Lidl said it would open its first 20 U.S. stores in North Carolina, South Carolina and Virginia, starting on June 15. Eighty more will follow in the United States within the first year, which Procter said would create 5,000 jobs. Analysts cited by Reuters estimate the company will have more than 330 U.S. stores by 2020.

The stores will be 20,000 square feet in size and have only six aisles. The retailer's in-house brands will account for 90 percent of the products.

And while the latest German invasion may lead to dramatic changes within the hierarchy of established US grocers, one thing is certain: the US consumer is about to be the biggest winner yet again, as prices for (subsidized) groceries are about to plunge across the nation.

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flaunt's picture

Oy vey shut it down!

Boris Alatovkrap's picture

Hope you are like saurkraut and weinerschnitzel… und eine große menge!

CuttingEdge's picture

Not sure how this will pan out for the US consumer. I'm going back thirteen years to a Walmart in Florida, where as I recall, half the food section was taken over by refrigerated aisles of ready meals. Shopping at Lidl will require the ability to cook produce, rather than just the skill to operate a microwave oven.

Manthong's picture

The missus discovered Aldi’s about a year and a half ago and they get about 70% of our grocery business now.

Costco and Sam’s gets most of the rest.

Wal-Mart has a grocery/pharmacy only that we use as well.

BTW, it is my understanding that Aldi owns Trader Joe’s.

 

Hopeless for Change's picture

Aldi and Trader Joe's are owned by brothers who are no longer partners, from my understanding.  Aldi has a long way to go before my missus will submit.  Until then we will continue to pay another mortgage for our grocery bill every month.

 

The headline totally reminded me of one of my favorite Simpsons scenes:  

https://www.youtube.com/watch?v=9cgrEA6eQ_g

auricle's picture

Franken food 50% off. The sheep like their poisoned GMO laced with herbicide, pesticide, fungicide. And that's when they get actual food. With all the fillers and non-food additives being substituted, I'm surprised DOW Chemical is not an actual brand of food. 

RedBaron616's picture

Don't look now, but chemical compounds from Roundup and similar herbicides, pesticides, etc. have been found even in "organic foods." In effect, these things are everywhere, in the water, and all over. So buy your organic food and believe that you are so much safer, but you really aren't. It is just an illusion.

847328_3527's picture

Camel sausage, dog kebab, goat ribs, etc....I bet it will be cheap!

However, Monday's "Infidel Special" dinner for two should be delicious!! Charcoaled Christian ---Cage Burned --- to crispy perfection!!

froze25's picture

Hey man Goat is Delicious.

MillionDollarButter's picture

Yes, but if the arabs chose sheep instead of goats, they'd have 10 times the farmland instead of desert.

OverTheHedge's picture

Having farmed organically for the last 1 years, I have come to the conclusion that the only successful organic business either gets its input for free (like free compost from city chipping &shredding programs), or they cheat. I'm not surprised that there is roundup in organic food - Italian olive oil has a tendency to not contain any olive oil, never mind if it is organic or not. Food fraud is endemic worldwide, because the governments dick about with the market so much.

Winston Churchill's picture

I prefer the Indian word : adulteration.

Its been going on longer tha prostitution.

froze25's picture

You are much safer, because if the levels were the same the organic food wouldn't grow since its not GMO. Keep buying Organic, filter your water and Phuck Monsanto (globalist traitor company) Grow what ever you can reasonably for yourself.

847328_3527's picture

That Mexican cabritto (goat) is seriously delicious when grilled properly. I agree!

Moe Howard's picture

I distill my water. You would [or not] be shocked what is left behind.

 

Distilling removes flourhides BTW. No waste water like RO.

eurobug's picture

My experience with these stores is that aldi and lidl offer Walmart prices, but German quality of products. We buy 80% of our stuff at either Lidl or Aldi. One of their main modes of operation is to offer only a relatively small selection (the average Lidl sells 2000 different products, the average Publix 50 000), but part of these rotate every week, and are also seasonal (like, no cheese fondue in summer, or "spanish week" and "thai week" etc...). After a while, you will have tasted everything they possibly sell, and can pick out only the good stuff, or the stuff you like. They do well with bio products and fresh produce as well. The only thing we do not touch is the meat they sell. Cheap yes, but very salty/spicy to hide the defects. This is in Europe though, so YMMV.

RichardParker's picture

i can tell you from personal experience that the sirloin tip roast, sirloin steaks, rib eye steaks, and beef ribs at Aldi in The US are actually pretty good and reasonably priced.  All of it was was USDA  Choice grade.  None of it was salty or spicy.  Aldi is also much cheaper than Walmart for beef.

For the past couple of years or so, Aldi has also been the cheapest place I could find for good quality asparagus and organic grapes.

My only complaint about Aldi is that a large amount of their cookies, crackers, snacks, and junk food contain palm oil shit.  I don't eat or buy much terms of snacks/junk food, but if i do I avoid palm oil like the plague.

Common_Law's picture

Don't forget fluoride. What do you think they water it with. 

There's a great documentary on the subject called Fluoride Poison on Tap (2015) on YouTube.

One of the original studies in favour of fluoridation was because the "treated" people had less cavities. They forget to mention they had less cavities because the "treated" people had less teeth at the end of the study!!!

Bunga Bunga's picture

They are no longer partners, because one of the brothers, Berthold Albrecht passed away a few years ago. Aldi and Lidl are the low end grocery outlets in Germany, but this relates to prices only, not to quality. They both offer high quality food items and cut cost by "shelving" items in wholesale boxes. I Ioved to shop there when I was in Germany, because you can find stores everywhere, even in downtown locations and you are done with grocery shopping for the week within 10 minutes, because the stores are tiny compared to US grocery stores (but you still you get everything you need). What is also great are the weekly discount offers, which includes sometimes even computers, cruise vacation deals or prefab houses.

Itinerant's picture

Aldi and Lidl are cheap, in all ways. They have had lots of problems with "employee exploitation". The stores are ugly and unpleasant. The variety is poor. They don't move any product that will not help the bottom line (you need other stores for many goods). They often have only a single taste or (unkown) brand. They are often out of stock even on common stuff they carry. Cheap, but not pleasant.

effendi's picture

I love ALDI, I'm in Australia and they are cheaper than the other grocery retailers. Being a German owned company they have certain food purity standards that the others don't (like not having artificial colours in their food). As for range of items they meet 90% of what we need (I don't need 20 brands of corn flakes, just one decent generic) and I use the bigger retailers for the other mostly specialty 10%. It is annoying however when they only have one brand and it is sold out.

. . . _ _ _ . . .'s picture

Labeling requirements are very different in the USA than everywhere else in the world. The food quality will drop in accordance.

RichardParker's picture

True. However, The US forces food manufacturers to specify the oil source in foods; corn, canola, soybean, sunflower, palm, etc.  Many other countries allow for generic label of "vegetable oil". 

LyLo's picture

They operate similarly to Big Lot's in that they tend to carry a lot of closeout items, so yeah of course their stock changes.  A lot of the stocking issues are caused by small business owners, as the usual suppliers have been jacking their prices lately, so I'd recommend speaking to the manager to make sure they are holding firm to their "item limits" on transactions.  Getting there early also helps.  I have no idea what you are talking about as far as the "exploitation" concern, as Aldi's is literally one of the best employers in my area and one cannot find job listings for them ever as no one quits; the same employees at my store have been there for about three years, when they last had to hire a stocker.  I know all of them by name, and they know me.

It sounds like your issue is you aren't familiar with many different kinds of food.  I'd recommend taking a cooking class and eating at a wider variety of restaurants to help expand your knowledge.  No; they don't carry Lean Cuisine or Kellogg's, and they have three kinds of pop and are out of one of them.  Sorry that you drink enough pop to need to buy it often (you should reconsider that choice, btw--it's a treat, not a diet supplement), but some of us are far more interested in their price on asparagus and strawberries--both of which are often under a dollar a pound. 

Oh, and Walmart is misrepresenting a lot of these prices.  They only dropped their milk price in my area about two months ago, and it's still fifty cents more expensive per gallon than Aldi's, who's been running their milk at these prices for years.  That's great that a store 40 miles away in the middle of nowhere charges less so their "range" is lower, but where there is competition Walmart is losing hands down. 

Moe Howard's picture

Tried Aldi more than once. Quality often is below the mark I accept. It does not leave much I am willing to buy except milk and eggs.

 

Seeing a cockroach come out of a cereal box doesn't inspire confidence either.

ali-ali-al-qomfri's picture

Hey Moe, it is highly significant that you noticed said "roach" exiting the cereal box, indicating, that an insect capable of surviving hundreds of doses of radiation, chose to leave a cereal box and not stay and consume the contents. Even roaches no like.

Hobbleknee's picture

Exactly. Even Walmart is better quality than Aldi and Lidl, the dollar stores of food.

Transmedia001's picture

From 1979, Trader Joe's was owned by Alid Nord's German owner Theo Albrecht until his death in 2010, when ownership passed to his heirs. Aldi Nord entirely owns and operates Trader Joe's through an Albrecht family trust.

PTR's picture

Aldi announced a few months back a push to transition more (half? most?) of offered products to organic.

FTW.

nmewn's picture

Our young Marxist, heavily indebted anthropologist & poli-sci majors will undoubtedly begin starving immediately and demand government ban Lidl and double their EBT allowance because pre-prepared frozen food is a right dammit! ;-)

joak's picture

Have you ever been to a Lidl shop ? Furthermore, they always adapt to the local market. If customers want frozen pizzas, they will sell them. Actually I'm curious to see how it will turn out in the US, even from european standards their shops are rather small, so compared to american supermarkets... 

Jubal Early's picture

Aldi uses the same formula as Lidl across Europe.  It is uncanny how when a Lidl opens up then an Aldi appears blocks away, or even next door, within a few years.

Aldi is owned by the Aldi brothers who also own Trader Joes in the US. 

Trader Joes carries a lot of premium gourmet and organic type foods.  When Lidl says they will undercut US prices by 50% they are not saying 50% cheaper than walmart.  Just like Trader Joes, they are saying 50% less than whole foods and other expensive premium gourmet grocery stores.

The problem with Aldi/Lidl/Trader Joes is that you cannot complete all your shopping there because they only carry items which they can get cheap and still have a decent margin on.  These items are constantly changing so you can rarely be certain the these stores will carry the items you are searching for.

_ConanTheLibertarian_'s picture

- the chain was founded by brothers Karl and Theo Albrecht in 1946

In 1962, they introduced the name Aldi—short for Albrecht-Diskont

meta-trader's picture

she was a waitress in a cocktail bar now she owns a jet... http://bit.ly/2jdTzrM

CuttingEdge's picture

Have you ever been to a Lidl shop?

Every week - or rather the wife does. In Spain, this is, but we had one round the corner which we used occasionally in the UK. I only go when there is something I see in the flyer on the blokey side that  is appealing (the centre aisle dump bins change from week to week, DIY to clothes to gardening and outdoor offers ad infinitum, and some weeks there are goodies to be had (got a set of seriously solid ladders there the other month about half the going rate elsewhere, as an example).

As stated elswhere by others, it isn't our main food retailer because they have range limitations - but the fresh produce is good quality and cheap - albeit with the proviso the fruit and veg hasn't the shelf life compared with product bought at higher-end retailers. You get what you pay for, one way or another. Oh, the peanut butter is passable, and its rare (if ever) that more than half the checkouts are manned, even when busy.

 

OverTheHedge's picture

Here n Greece, tLidl are the "quality" store, although in the UK they are the go-to store for drug-tack my zombies, it would seem. The clever part would seem to be their stockpiles by of foods from all the countries they operate in, so their trucks don't return empty to the central depot, but always have something for the return trip. It makes for some odd stock, and each country has its own particular mix of products - they sell extremely good quality oil in Greece, but not in the UK, for example.

goldenrod's picture

Work-at-home-and-get-rich click bait ("she was a waaitresss in a cocktail bar and now she owns a jet").

phead's picture

I think you mix up aldi and lidl too much. Aldi tends towards good value for higher priced products, whereas lidl leans towards good value at the lower end.

>they only carry items which they can get cheap and still have a decent margin on.

Thats not what Ive found, they carry their own ranges, you either like them or you dont.  The ranges dont change much.

WillyGroper's picture

Albrecht.

3rd richest fambly in da world.

they pay district managers handsomely.

Twaddlefree's picture

There are no "Aldi" brothers. Aldi Nord is the name of the Theodor Albrecht's grocery chain of stores. Theodor died in 2010 and left everything to a family trust. Theodor's brother, Karl, owns the Aldi Sud chain of discount grocery stores. The two chains have been separate entities with separate ownership since 1960. Trader Joe's was bought by Aldi Nord (Theodor) in 1979 and is now in the family trust. The US Aldi grocery stores are owned by Aldi Sud (Karl). Therefore, Aldi grocery stores and Trader Joe's ARE separately owned.

I've shopped at Trader Joe's since it opened in my area 8 years ago. I purchase the exact same items every visit. And, the prices remain consistent until TJ's can no longer hold off on an increase. The only thing that has changed in TJ's inventory in all these years is the fresh goods that are supplied by local vendors. The vendors have changed ONCE in that time on several items. Overall, the prices on fresh produce are very high, but the deals on seasonal items just can't be beaten by ANY other store in my area, hands down. I've noticed two frozen items have disappeared, recently, likely because price increases can not be born by this market. TJ's has been an absolute steady provider of products in my area. Items are NOT "constantly changing." With businesses that have a limited product inventory, there is no choice when prices go beyond what the market will bear but to eliminate the product. Yes, there are those who will continue to buy, but not the majority of regular customers. Just as with Aldi and Lidl, in-house brands and small stores are the norm. Space can not be wasted taken up by products that don't sell in large quantities.

Aldi has been in my state for many years, just not in my local area. Lidl has not opened here, yet...scheduled for June. Prices there are definitely NOT cheaper than at Kroger or WalMart. Yes, they have a few items on sale each week that are great deals...but the savings must be weighed against the extra trip to another store for one or two items. Aldi wastes a ton of store space on cheap non-grocery stuff that belongs at WalMart...that's the biggest deterrent for me even attempting to do regular shopping at Aldi.

lovemesomeZH's picture

I went to Aldi once, NOT impressed. In fact, never went back becuase it was like a flea market. Nothing against flea markets, I actually like them, but not as a grocery store.

Arnold's picture

Your name will be "Fertilizer" in barter town.

Indiana1's picture

Aldis are highly variable depending on location.  

RedBaron616's picture

From what I have read, the American Lidl stores are about 1/3 bigger than their European stores. The one being built close to me looks to be about just slightly smaller than a Food Lion. Speaking of outside dimensions only, of course, since it isn't open yet.

TruthHunter's picture

Almost as importatnt to Aldi's success is NOT having to walk 200 yards to get some milk. Excess choices is another. No wading through 10 kinds of eggs. 

 

calal's picture

most important to aldi 's success, you cant buy a share of that company. its not publicly traded like many other german family bisnesses (stihl is the same ).that way bankster dont get their share on that company profits...