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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Fundies's picture

So in Europe Aldi is crap, and over here in Australia it is really very good. Have I got that correct ?

Blitzkrieg77's picture

It really depends where he's at in Europe, I suppose. Perhaps it's just poor management in his area. In Germany it isn't garbage per se, although I'd prefer to buy my meat from elsewhere.

DeaconPews's picture

Aldi is the worst place to get your meat.

Fundies's picture

See that's weird. Over here in Oz, it's consistently good, and priced very well. We do have good meat in Oz though, and that's where it is sourced.

Blitzkrieg77's picture

You beat me to it. In this case, the meat is only going to be as good as what the locals produce.

Blitzkrieg77's picture

Well, in all fairness, you can't blame the grocer for selling what your community produces.

nodhannum's picture

I think you are on to something.  In our university community we produce SJWs, blue pill cucks, snowflakes, and a new form of sturmabteilung.  The local genders are confusing too...so many gender IDs that it's hard to figure it out.  Maybe Aldi can straighten things out here.

NoPension's picture

It's the mentality of thinking.....no religiously believing...that an Audi moves you better than a Volkswagen.

If you are that uppity type...that thinks quality only comes with a high price....then have fun at Whole Paycheck.

By the way..I'm married to one. I know how their pea brains work.

Blitzkrieg77's picture

Spot on.

BTW... You're married to one, too? Denn haben wir den Arschkarte. Prost auf uns.

Wahooo's picture

Never have liked their veggies or hormone laden meats. Dry goods are okay.

Paul Morphy's picture

Most of Lidl and Aldi's products are foodstuffs. And those foodstuffs are excellent quality. Both companies at various times do sell hardware good (such as gardening products) and leisurewear, but on a very small scale. They concentrate on selling foodstuffs.

Nightjar's picture

yep, the non food is just a side show to draw people , short term special offers, like computers from their own medion chain etc

Nightjar's picture

Aldi and Lidl are already in USA or not? Blitz

RedBaron616's picture

ALDI is all over Virginia now and LIDL recently started here.

givadam's picture

I have lived in the UK, France and now Spain.  Lidl and Aldi are everywhere.  Good products, fierce pricing.  Scary for their competitors.  The two chains were formed separately by two brothers who fell out when they worked together. Now they have competing global chains.

http://www.differencebetween.net/business/difference-between-aldi-and-lidl/

NoPension's picture

The falling out came about because one brother wanted to sell smokes, and the other didn't. So, they mutually split the territory and created to separate but very closely aligned entities.
The history is a great read.

oldguyonBMXbike's picture

It's such a hassle...  I gotta go to one to buy my smokes and the other to get my beer and liquor.

RedBaron616's picture

That became ALDI North and ALDI South. Can't remember which one, but one is running the ALDI stores and the other runs the Trader Joe's. LIDL is independent of ALDI.

number06's picture

Sounds like Puma and Adidas .... two other German brothers who had a falling out and developed competeing brands

Megaton Jim's picture

Open in black areas and see how long it is before they are thieved out of existance!

Megaton Jim's picture

I'd rather go to Aldi's than ChinaMart anyday. If you only need a few things, and you have to walk 2 miles to get them. That is, if you can find them or if one of their underpaid, disgruntled employees doesn't tell you, "That's not my department!"

DEMIZEN's picture

true that. but now they have self scan. put my sunglasses on, crank up some heavy rock, load 6 months of toothpaste listerine supply and get the fuck out. this was my last visit anyway i subscibed listerine to amazon prime pantry delivery. no more walmart zoo for me.

Blitzkrieg77's picture

Let this sink in:

Aldi has American grocers beat on price.

Aldi has American grocers beat on personnel costs: Instead of meticulessly stocking invidual items for hours, they stock them neatly using the containers from which their goods are shipped in. 

Aldi has American grocers beat on logistics and transportation costs: They source from the local areas.

Aldi has American grocers beat on quality, as additives and other garbage commonly found in American foods are forbidden due to company policy.

Aldi is not afraid to take a hit for years to undermine the American grocers because it has a long-term goal, not an overnight quick profit hit embedded in the American mindset.

Unless American grocers start doing some of the same, the only thing that will stop this German grocery invasion is a sitting U.S. President stepping in... or maybe an assassination of Aldi employees.

Infinite QE's picture

And Aldi is getting more and more organic products. Love that place.

Blitzkrieg77's picture

Yep, and actual organic... none of the tricky ingredient labeling and obfuscation you see from American food producers. Just yesterday I bought 2.5 lbs worth of absolutely fresh blueberries sourced from one of the local farms for $7. I haven't seen a deal like that in America for decades.

nodhannum's picture

Yes but...were the blueberries "freerange" and were they psycoanalyzed beforehand to see if they "wanted" to be picked?  Oh, the horror of having a blueberrie bush see their young ones ripped from their parent bush.  I think that would trigger me.  What would Whole Paycheck say?

Blitzkrieg77's picture

You owe me a new keyboard and the replacement of the free-range blueberry smoothie I spit all over it.

Gentle-Giant's picture

Lidl is selling more and more good organice food aswell, happy about that.

99% of their groceries are great quality and well priced.

delmar Jackson's picture

I am the cheapest guy in my county. I went to Aldis for the first time last week. As you said, the prices for most of what I buy were less, in some cases much less. Also, on a few items, I compared the ingredients and Aldis looked healthier. It only took me a minute or two to bag my own groceries. a carton of eggs was 69 cents and a 3-pound bag of sweet potatoes was only $1.29. an 8-ounce pack of fresh mushrooms was 79 cents. my almond milk was $2 instead of the $3 at Walmart. Germany should put Aldis in charge of keeping out immigrants and refugees.

Omen IV's picture

never heard of Aldi's  until a month ago in Bradenton FL - took a shot - confused by the cart process which i had never seen before and another shopper gave me a quarter - limited offerings and stacking like COSTCO - but the prices were great as was the quality.

good numbers on wine

my recent experience in NYC and Florida is that you can't go to one store for everything  - the specialties dictate buying sources.

food retail is being carved up by product / price - Amazon / COSTCO / ALDI's / local stores with vegetable - fruit orientation

full service - like Macy's in other categories - is going to have problems

Sky flyer's picture

OT but anyone see what just happened in the futures? Seems something snapped.

DEMIZEN's picture

i am not sure if they can stay on the top of discount game. i really dont like it, i hated the chain back in europe. I go there at the request to buy chocolate for the family load like 50pcs and  get out of the store. i miss good caviar, wish they had it i am forced to buy it from ukies they always rip me off motherfuckers.

Panic Mode's picture

Merkel has such a great business brain - Import immigrants and export their cheap labours to win the market. By the time you don't need them, just deport them out. Win, win and win.

johnjkiii's picture

We use Aldi & Lidl almost exclusively when we're in the UK (3-4 months/year). The food is great quality & prices are amazing. They are driving Sainsbury, Morrisons Tesco & Waitrose to compete and guess what? The market works?

 

stant's picture

I was at my Aldi last week and saw the manager of our waly. Now I know why

wally_12's picture

Wal-Mart employee told me they are ramping up to 400 employees per store. 25 checkout lanes and only one is open. The self-check out has 4 of 10 stations not working. When you leave, employees are sitting on bench smoking. Wal-Mart strategy is to stop stocking popular items to keep you returning to look for products. Lidi will need motorized carts to compete in my area.

RedBaron616's picture

I refuse to self-check out unless I get a discount. After all, I am doing THEIR job. So while it may be quicker sometimes, I am not doing Walmart employee's job. Pretty soon, they'll have us stocking their shelves too.

any_mouse's picture

I'd toss in a joke about soap, BUT that would indicate that I might believe the slave labor camps were designed to kill the slave laborers before they could do any labor. The V2 rockets were not putting themselves together.

Death camps are not exactly a well engineered solution to Germany's wartime labor issues.

Cui Bono? Zionists. Gifted Palestine in 1948. UN probably thought they'd go away and shut up.

when the saxon began's picture

more downvotes?  what is going on here?  zio-trolls out in mass today??

Last of the Middle Class's picture

Until Wal Mart takes control of the check out stands away from the store managers and institutes a policy of no one waiting more than 15 seconds they're toast. Nothing says "fuck you" to the consumer more than 20 check out stands, two open and both clogged (even the express lane) with welfare mommas checking out $400 baskets one item at a time. Happened to me less than a week ago. I'm not going to wait. I laid the merchandise down and just walked out and bought it online. Customer service has taken a back seat to payroll % for so long they don't even see the blind spot and Bezos & Co. reap billions in dissatisfied Wal Mart customer sales. In the end they did it to themselves and they damn sure deserve it. It's about the customer stupid! I can't count how many times I have some clueless dipshit with a wal mart tag walk by smile and ask how I'm doing today when I'm standing in line with 20 closed check stands trying to get checked out. How the fuck do you think I'm doing you dipshit! I want service to get the fuck out of your joint! Damn, those people are stupid.

hoist the bs flag's picture

 and  don't forget this: getting held up in the self check out line is just as fucking obnoxious in the old wally world. you end up standing there like a moron waiting for another moron to reset the register. fuck wal-mart.  

dobermangang's picture

When you shop at Wal-Mart, you have to go early in the morning 5:00-8:00am for those stores open 24 hrs.  There are very few shoppers in the store and most of them look normal and seem harmless.  No waiting in checkout lines either.

hoist the bs flag's picture

thanks for the advice. I avoid that place like the plague regardless now.

oldguyonBMXbike's picture

No, you are the stupid one for ever entering.

WillyGroper's picture

Patrick Wood had an interesting take on whalemart.

says amzn is gonna run'm outta biz.

they've partnered somewhat in shipping.  trials on food delivery.

searched amzn for organic fertilizers & found them on wmt w/free ship on $35.

one thing i can say for the wmt geezer worker, at least they can count back change.

be a cold day in hell b4 i'd let these (not all) young'ns pick out produce.  picking their nose is a challenge.

any_mouse's picture

Exactly who will be replacing the Walton family?

After Wal-Mart, a flood of higher prices?

Miss Informed's picture

I don't think it will catch on with everybody. At Aldi you have to pay a quarter to use a shopping cart. There is no way they will be providing free Rascal (tm) utility scooters with big front and rear baskets Ike you get at Wal-Mart. Many more refined customers will be glad to pay extra for convince..

Haitian Snackout's picture

I just play them off against each other since they all seem to follow the same script of over and underpricing items. This saves me on gym memberships as well which is why I like China Mart because they add the obstacle course to the marathon. They are probably the most notorious for gifts and gouges though so watch your 6.