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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RedBaron616's picture

"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."

Apparently this is an old article or at least has outdated material in it. Lidl has already built several locations in Virginia and one is almost completed near me. I have read that the U.S. Lidl stores are bigger than their German counterparts. ALDI just also opened up down the road, within 1/5 of a mile from Kroger. In another nearby location, ALDI actually built directly across from Walmart. How's that for in-your-face? So in the Richmond area, grocery competition is fierce. Within a couple of miles, there are: Walmart, ALDI, Kroger, Lidl (soon to open), and Food Lion. Someone is definitely going to hurt. My bet that it won't be ALDI, because they fought Walmart to a standstill in Germany.

Making Merica Great Again's picture

Wot? Germans?

 

Run to the fckn Hills!

Vageling's picture

Funny guy. Ask the French how that worked out for them.

Making Merica Great Again's picture

I would ask the Jews instead.

Luke 21's picture

Aldi is already in America through Trader Joe's.

Nesbiteme's picture

 

Let's stop pretending that USA Americans have access to the “world's best food supply”....because what USA Americans eat is one thin step of marketing, food coloring and flavoring away from subsisting on a diet of Plumpy'Nut. Take Whole Foods for example, WFM's high margin products aren't USA born, raised and harvested organic free range beef nor organically grown carrots, kale or broccoli nor locally sourced winter squash. First most USA Americans, if they had the money to buy such things wouldn't know what to do with them. Cook them? Put them on their heads? I don't know. It's complicated. But WFM makes the highest margins on and what they push (not inconsequently) are what we call high margin “near food substitutes”. Near Food Substitutes (NFSs) are things like “Powdered Chia Saw Grass Vanilla Energy Drink”, “Sea Amoeba Extract Smoothy Booster”, “ Almond Water Potato Starch Power Boost”. NFSs come in containers are a clever combination of waste ingredients blended with trace amounts of Chinese sourced nutritional supplements thus cost fractions of a penny to make and are sold at unbelievable margins. The only down side for WFM is that it takes some consumer “training” to build the market for this...that is where we are headed and WFM will get us there because USA Americans are just that stupid and poor. 

oldguyonBMXbike's picture

I work for an organic co-op in PA and WFM is one of our customers.  Your statement about Whole Foods is completely wrong.  I know exactly where they get their squash...  

Nesbiteme's picture

Is is Mexico? Signs that read "Locally Grown Winter Squash..." cost $.02 and ...

oldguyonBMXbike's picture

All I am saying is I lift a lot of boxes of all kinds of squash later in the season and some of it goes to WFM.

Kendle C's picture

The only thing Al Bundy ever won on the show "Married With Children" was a pallet load of Weiner-Tots which were like mini hotdogs in a blanket. He read the ingredients after eating 6 cases and it said, "Weiner-Tots are not food, sold only as a novelty item." A few days later, when they opened a new box, they found the Weiner-Tots had just turned to dust.

Miss Informed's picture

I'm sure the Bundys ate them anyway mixed with "toaster leavings".

Twaddlefree's picture

Got something against Whole Foods, obviously. They offer what their customers want. Much of what they sell is not organic, but it doesn't SAY it's organic, either. The only "USA American" characteristic I consistently see among consumers is their own ignorance about prices...or maybe everyone is so financially well off they don't care if they pay double the price at Whole Foods for the exact same food they can purchase at Kroger.

Got something against "USA Americans," too, I see.

What I really see is total envy. You have a problem with a grocer not selling what you consider "pure" enough to meet some standard you've set based on weird food ideology. And, because it's in America, you hate Americans, too.

Nesbiteme's picture

I've spent a lot of time working around these issues. I'm sure it hurts you to be exposed to the reality  of what we in this country consider food and the marketing effort that goes into convincing Americans what is food and what food is. In short that Lucky Charms is an appropriate food to give to children in the morning as part of a “balanced breakfast.”

 

I could make a billion dollars tomorrow, by simply picking up corrugated cardboard from the streets of New York City (for free in fact I would be paid to pick it up), pulping it, mixing it with “all natural” flavor extracts and infusing that pulp with chewable vitamins, caffeine extract and marketing it under a “Carbon Fiber Boost” label. If I mixed cheap powdered protein supplement into my “Carbon Fiber Boost” it would become “ Protein Carbon Fiber Boost Supplement.” And by the way if I invested a mere $140,000 I could find exactly the ingredients verbiage that would make this completely legal. Now why don't I do this? I should. It's like “Naked Came the Stranger” but for food. Your response sounds very sad, it used the wording of the sad insulted victim, my words have upset you they have insulted you and yoru people. I criticize a culture that makes the idiocy I just described to you not only plausible but a real executable business plan. That is where you should be “sad and upset and offended” by the reality my words represent to you and your culture not the words themselves, because that shows you are unable to understand the merits of my argument or for that matter anything pertaining to it.

grunk's picture

Will ALDI employees block the aisle when they're stocking?

Will they run you down as they bring their empty u-boats back to get more stuff to stock?

THAT'S Walmart.

Twaddlefree's picture

And every other large grocery store. You'll never see that at Aldi. There will never be any employee in the aisles at all. Nor will you see a cashier when you're ready to check out and read the sign that says just to wait until someone shows up.

In other words, you can buy what you see, find it yourself, wait as long as they want you to wait to pay for it....THAT's Aldi.

 

 

(They do have good prices and good stuff...but VERY limited...and Aldi will NEVER replace the selection at WalMart.)

oldguyonBMXbike's picture

That means everyone's Food Stamps will go twice as far!!!  LMFAO!

Secret Weapon's picture

Gents, I am closely following the changes in the solar cycle and weather changes that are forecast to place us within another mini ice age within the next three years.  If this takes place, the crop losses will be devestating and food prices will soar.  Here is a link to one of the web sites that covers this topic.  Hope you enjoy this "food" for thought.  SW

https://www.youtube.com/channel/UC-5dIHmtQzHIdNCs7-bEdCA

northern vigor's picture

Most people have no idea how close the world is to starvation at any given time. The world usually has 60 days worth of food banked. 

After watching video of SJW protesting cattle farts, and 400 pound coons fight over TV sets...I look forward to a big reset.

Btw...they are predicting freezing rain tonight, here. 

 

Miss Informed's picture

Looking forward to it. It is hot in Georgia in May already. Having a local glacier would help.

ToSoft4Truth's picture

Water down the milk a little more.  Make the chicken breast 45% organic protein instead of 50%. 

oldguyonBMXbike's picture

There is an Aldi store down the street, been shopping there for some time.  $5.99/lb for 100% organic, grass-fed beef.

Hammer of Light's picture

We've an Aldi close by. Went there, NEVER went back to Wallyworld. Aldi has a huge amount of NON-GMO foods as well as GMO's are banned in a large sector of the EU now as well as Germany. The dairy products are bomb-diggity and there is a huge assortment of very high quality foods. There is NO competition in quality over the US GMO poisoned Kellogg's, Nabisco and all the rest of these Poisonous Pepsi company products.

I've not touched most of the US products in years now and as long as there is an Aldi, I'm Never going back to this forced Monsanto poisonous crap. Monsanto and the US food manufacturer's can go fuck a big fat homosexual government dick. Aldi's food is super high quality and the prices aren't even close to the joke of Walmarts rip you up the asshole low prices mantra bullspit!

If all of you want to eat healthier, stop shopping at the third world nation store Walmart and get the real goodies at Aldi. Huge amounts of organic sourced NON poisoned GMO glyphosate foods or you can keep buying American and wind up sick and bankrupted from these diseased companies forcing all this Monsanto and ultra pesticide shit on all of us. DEATH to those companies period.

A big fat hairy FUCK YOU to that sickening diseased GMO poison factory of Nestle as well. Stop poisoning yourselves and grow a brain. Eat healthy like we do and you will never see a doctor unless you got a for real problem liek a blown appendix or something to that level.

Fresh OJ NOT from concentrate daily at Aldi is 4 bucks a gallon. Their specialty coffee's? WHo the frak needs a Starbucks when it's that good?

Treat yourselves folks, the Germans and NON GMO Euro's make really good stuff at a very modest and reasonable prices. Their meats are quite good too, but we still selectively shop at Costco (HUGE ORGANICS NOW) Publix and Save-A-Lot especially for meats. Don't shop at just one store. Split them up and shop for the best deals at each, you'll spread your money around as well as it will go one hell of a lot farther than poisoning yourselves at Walmart shopping in a third world country. We won't even go into a Walmart anymore where we live, it's like walking into an infected world it's so damn gross.

oldguyonBMXbike's picture

I agree.  The one near me doesn't have the best selection, but they have some really cheaply priced core organics like beef, eggs and orange juice.  I also bought some organic spices for super cheap.

LA_Goldbug's picture

"core organics like beef, eggs and orange juice. "

Are they for real or are they taking people for a ride ?

I truly have no idea if they can be trusted.

LA_Goldbug's picture

Mr. -1, I am trying to FIND OUT if the claim of "organic" can be trusted.

However it is obvious to me that you must have an English language comprehension problem.

third string plug's picture

Wish I could extend credit, GAAP style.  Then I could build grocery chains with no real money down and compete with other (german) players.

All markets are level for those on the inside, apparently grocery too.

OutWithLibs's picture

So my question which no one has addressed, does Aldi or Lidl come with their own cashier/stocker from Germany AKA REFUGEE???

jme540's picture

The German grocery stores Lidl and Kaufland are the only good ones in my country (Czechia). The British Tesco is bad and Peny Market is terrible.

 

Moe Howard's picture

The Kaufland in Wroclaw, Poland I visited was great. There was an Aldi closer but I bypassed them, I know Aldi from Germany and the USA. Not a place I get excited about. Oddly the Aldi was next to the Sky Tower, big toursit spot/area/shopping etc. Kaufland was next to the huge water park.

Swamp Yankee's picture

Sehr Gut!

 

Kommen Sie, bitte New Hampshire swampylands!

SuperRay's picture

Soon no pork or alcohol available from German grocers

Able Ape's picture

Lidl - where high prices go to the Stalag for re-education...

esum's picture

Hahahahahaha
With 3% gross profit margin...... right
What are they selling ... outdated mdse
I walked into and out of Whole Foods in a nanosecond laughing at the assholes paying those prices for bullshit... same for FRESH MARKET.... salted here about 18 months and closed..
There are local stores here that selll better quality fruits and veggies and prepared dishes that you cant make for less yourself plus AHOLD has a giant supermarket with spomenice stuff reasonably priced.. now that is NY burbs... i dont what markets they may be going after but are they really targeting walmartians..?? And expecting to stay in business... a joke..

oldguyonBMXbike's picture

Aldi has Wal-mart beat on location, at least for me.  Plus, I hate Wal-mart..  I only go to Aldi's for certain items, but the prices on the things I do get can't be beat.

The Blank Stare's picture

Why does the milk in the US have zero flavor?

baldknobber's picture

Because they turned milk into a commodity instead off a product and in the process turned the once noble Holstein cow into a white water pump station

William Dorritt's picture

How Milk Gets from the Cow to the Store

http://milk.procon.org/view.resource.php?resourceID=000658

9. Milk and milk products Separation of milk components

Cream

When milk is left to stand for some time, fat globules rise to the surface forming a layer of fat (or cream). This can be separated leaving behind skimmed milk as a by-product. There are different types of cream each with different fat concentrations: single (or light) cream contains 18 per cent milk fat whereas double (or heavy) cream normally contains 30 per cent milk fat. Cream is a luxury item and may be used as an accompaniment to coffee, as a filling in cakes, and an ingredient in ice cream.

Separation

Separation can very simply be achieved by removing the cream with a spoon, however this is a slow process during which the cream may spoil. For this reason it is more usual to use a manual or powered centrifuge.

http://www.fao.org/Wairdocs/X5434E/x5434e0d.htm

 

 

 

 

directaction's picture

Has Trump had undisclosed contacts with the German government? 

juggalo1's picture

Stop saying "Uber for xxxx".  I get so annoyed with this.  Just say "they are taking losses now to build market share" or "they are introducing technology to allow consumers to connect directly to providers".  I don't know what aspect of Uber you are trying to reference.  "Facebook of adult websites"  What the hell does that mean?  It allows people who know me in real life to easily determine my availability for sexual activities?  Why would anyone want that?

baldknobber's picture

Replace the word Aldi with Wal-Mart in this story and comments and you will be looking at the 1970s.  You all hate Wal-Mart for what they did to "Mom and Pop" , but now are cheering for Aldi to do they same thing with the same tactics. Losing money for years to gain market share? Sounds like what a to big to fail company would do. Dig into Aldi, they are not your savior , just the new boss same as the old boss

Grandad Grumps's picture

Can they bring low cost pharmaceuticals and low cost health care?

oldguyonBMXbike's picture

Yes, it's called healthy eating and exercise.

JoeSchmuckatelli's picture

Sure, and if they can also bring a 55% income tax rate and a 17% VAT.

SmallerGovNow2's picture

Buy from local / regional grocers only.  In Texas we have HEB which is Texas based and produces their own brand of thousands of products and sourcing as many of those as they can from Texas suppliers.  I don't shop at Wal Mart unless it is an emergency...

Casey Stengel's picture

Mrs. Stengel said she'd move back to TX in a heartbeat. When I asked her why she said HEB. she loved their local veggies and prices.

dobermangang's picture

Aldi's already killed off a German Deli I occasionally visited and the grocery chain Mars Food.  I love shopping at Aldi.  Their prices on milk, butter, eggs, vegetables and canned vegetables are much cheaper than the WalMarts near me.  They also have 2 aisles in their stores for seasonal items.  Every few weeks they have new items in those rows at exceptional values. And when Aldi's has clearance sales, you can get stuff insanely cheap.  Their cheap tool line is less expensive than Harbor Freight stuff and seems to be pretty decent quality.  Their employess seem to be motivated people as well.  Not many slackers working at Aldis, unlike WalMart or Target.   

smacker's picture

Hopefully the German Aldi and Lidl supermarkets will find their way here to Brazil to give the domestic ones some competition, but I doubt it due to the anti-competition and protectionist trading laws here which are designed to keep foreigners out of virtually all markets in favor of 2nd quality domestic goods and produce.

The supermarket chain "Bom Preço" (or Híper Bom Preço) are fully owned by Walmart but are no better in terms of prices, variety of goods or quality than domestic owned companies like "Pão de Açucar" or the French owned "Carrefour". In fact in João Pessoa/PB where I am currently, I can usually buy stuff at slightly lower prices in the local supermarket than going down to Híper Bom Preço.

Overall, I am paying twice, sometimes 3 times the price for supermarket stuff here compared to what I pay in London. I can even buy Brazilian bananas cheaper in London than here where they're grown. This is based upon an exchange rate of R$3.90 = £1 which comes nowhere near to PPP (purchase power parity). For realistic PPP I need an exchange rate closer to R$8-9 = £1 if I compare a range of goods (food, clothing, domestic white goods, furniture etc).

Brazil prices for everything are a giant mega rip-off I tell yer. Brazil is probably close to being the most corporatist and protectionist country in the world and The People have become fully-blown debt slaves.

William Dorritt's picture

Beautiful Country, nice people.

Demand farmer's markets

LyLo's picture

The farmer's market down the road from me sells the exact same produce as Kroger's for twice the price.  Like, exactly from the same producers and everything.  People don't seem to realize that the big grocers already do quite a bit of business with the local farms, and that no local farm sells bananas.  So you end up with corn and tomatoes that are locally grown both places, and oranges from some big corporation in Florida in both places.  Literally the only difference is the price; I once even saw boxes in their dumpster, and they were the exact same boxes I had just bought apples from at the Kroger's across the street.

I love the hypothetical idea of a farmer's market.  But honestly, past the occasional roadside stands that are always declining in number, they just don't exist where I live regardless of how often we demand them.

Just thought I'd let you know that it's a bit more complicated of a problem than what you seem to suggest.

JoeSchmuckatelli's picture

All the charities around here in rural Northern GA rave about the local Walmart's donations to food programs. Farmer's markets, not so much.