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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smacker's picture

"Beautiful Country, nice people"

Well, yes. So long as you ignore the vast amounts of pollution, huge amounts of street crime (see my other comment elsewhere about being faced by armed robbers two weeks ago), 3rd world infrastructre, a nation of petty thieves and of course the political corruption.

 

"Demand farmer's markets"

These do exist to an extent. It's very easy to buy tropical fruits and veg on the streets but the quality is often dubious.

JoeSchmuckatelli's picture

Farmer's markets are a human right.

Nunyadambizness's picture

That's what the globalists want for all of us--debt slaves forever....

Dead Indiana Sky's picture

Yes, please kill the store that killed small town business.  Hate that shit hole.

JoeSchmuckatelli's picture

Ah, small town businesses, nostalgia for high markup, poor selection, and short hours. Those were the days.

Miss Informed's picture

Aldi is too weird. You have to pay a quarter if you want to use a shopping cart. They won't give you a bag for your groceries. They are cheap though. If you are looking for a lot of cheap food to feed a pet coyote check it out.

JailBanksters's picture

I think the coins and shopping carts is a brilliant Idea, the car parks NOT littered with shopping trollies.

It's $2 bucks in my area, for a quarter who gives a rats, it's not worth the walk for 25 cents.

So what will they do when it goes CASH LESS ?

 

IridiumRebel's picture

You get the quarter back too. Went to aldi yesterday. Filled the cart for 50 bucks. They're hiring too. 12.75 an hour starting. Four people were filling out apps.

I'll go to Aldi. I'll take cheap German shit over cheap Chinese shit any day.

Karl Marxist's picture

Aldi's has no reason for existing here. One is across the mainstreet from WalMart StupidCenter. Prices at Aldi for meat products are absolutely no bargain except when all of the 5 grovery stores within a few miles of each other or less here in Grocery Store Heaven get similar products in like bulk chicken, then all chicken prices/lb. are "on sale." Checkouts with the exception of Publics are long, long, long. Road design to Aldi is even stranger. The one store that regularly beats Win Dixie, Publix, WalMart and Aldi is Save-a-lot. They're off brands for the most part, very good quality and everything except dairy and some meats cut these others prices significantly. Fuck Aldi and WalMart. They're price comparison thingies are as bad as when Walmart did that against Publix and not Save-a-lot, Publix being the most expensive of all. Best service -- hightest price for everything and they ain't all that pleasurable to shop within.

JailBanksters's picture

The Germans are coming, seriously !

Who runs Amercia !!!

johnnycanuck's picture

A gallon of milk for $1.00 to $2.30 compared to approx equivalent 2 x2 litres of Coca Cola for $3.00???

Holeefook sez sometingwong! 

Global Douche's picture

One of the first things I noticed while in Germany is the fact that beer is cheaper than Coca Cola, but the plastic bottles they come in are recycled religiously. 

Karl Marxist's picture

WalMart - Giant buildings with all the character of a state prison but that sells China's crap at a premium. Whoopie. Gawd blezz Amerika.

JoeSchmuckatelli's picture

And yet, millions choose to shop there...

Swamp Yankee's picture

From my cold, dead hands!   #bacon

Cordeezy's picture

I think Amazon will take Wal-mart out along with the Germans in due time.

 

www.escapeamazon.com

 

TheAnswerIs42's picture

We have one Aldi's in town. I went there twice, walked around and was amazed at the lack of quality, it was like shopping in a third world market.

Dim and shoddy was my first impression, a lot like Walmart.

Nobody shops there. The parking lot is always empty.

There are two other supermarkets and a food coop in town, they are always busy.

aliens is here's picture

Aldi's stuff is shit and filled with Somalis.

Dg4884's picture

I was traveling a couple weeks ago and went into an Aldi.  What a dump.  That place looked like its demographic was the $15K/yr income earner.

JoeSchmuckatelli's picture

How dare they sell food inexpensively to the down market. 

Honus's picture

I remember as a teenaged Kroger bagger in the late 1960's, and being somewhat statistically oriented, that a full-sized paper grocery bag of groceries averaged $5.00 (give or take some change), very consistently, for a cart. So six big bags full of groceries would be about $30.00.

I welcome any and all price reductions.

aka_ces's picture

interesting that an export economy based on high-priced very high-quality sophisticated complex small-production highly-specialized industrial products now making a (Deutsche) mark selling low-margin large-production processed agricultural products, retail.  Made in ... Germany (?).

Honus's picture

I've only been to two Aldi's, each in a different city in Michigan. I must say that that what stood out was the cheerful employees.

 

I remember the second time was maybe 10 years after the first time. I had forgotten about the quarter system for a cart. So I'm walking from my car to the carts and see a lady unloading her cart into her car, and ask if I can have the cart. She informed me that, no, she wants her quarter back first. Then I remembered how it works, and felt chagrined.

 

I think that system makes sense. Just be sure to bring a quarter with you.

William Dorritt's picture

Does Aldi give their employees benefits like Insurance?

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

They don't have a quarter-shaped token on a keychain?

In Canada, it's Loonie shaped.

Wait for it.

 

aliens is here's picture

The fking Krauts will be the winner. FK them. We don't need it.

William Dorritt's picture

Walmart's Business Model has 3 Pillars

  • Unlimited Slave Workers in China to make cheap goods
  • Dumping the Benefits Cost of their Workers Off on the other Tax Payers and Companies
  • Corrupt Politicians that Enable them for the above 2

If Trump limits access to Slave Workers and stops the Import of Slaves from Mexico and other countries to work in substandard conditions for substandard salaries with zero protections and benefits........

WalMart's Business Model Collapses if any of the 3 Legs are kicked out

.....Buffet took a huge loss on his bet on Slaves and sold his WalMart stock.

rejected's picture

$16.00 for 3lbs of bacon...... at Chinamart (Walmart).

Deflationary!  Americans will believe any f*cking thing. 

gobble, gobble.

MAGA!

William Dorritt's picture

7.62 x 39 is up 100% at WalMart

GoldHermit's picture

I tend to make political statements with my money.  I'm boycotting German products.

man from glad's picture

Only six aisles? They better up that if they are going to make it because the EBT crowd likes their sodie pop, chips and frozen junk food.

A is A's picture

I don't see what the big deal is. Aldi has been around for years. Their quality is pretty much rock bottom. That's partly why it's cheaper. That and the place is basically as bare bones as you can get including no bags for your goceries. In my area the Walmart is a madhouse. Aldi does okay but can be pretty quiet sometimes.

cornflakesdisease's picture

Much of their products come from the same vendors as Costco.  I find their quality pretty good.

 

If it it hurts Walmart; I'm lovin' it.

bankbob's picture

But their selection is mostly brands that you never heard of before. Great if you want Belgium corn flakes or canned tomatoes from Egypt.

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

The European Commission has announced an agreement whereby English will be the official language of the EU, rather than German, which was the other contender. Her Majesty's Government conceded that English spelling had room for improvement and has therefore accepted a five-year phasing in of "Euro-English".

In the first year, "s" will replace the soft "c". Sertainly, this will make sivil servants jump for joy. The hard "c" will be dropped in favour of the "k", Which should klear up some konfusion and allow one key less on keyboards.

There will be growing publik enthusiasm in the sekond year, when the troublesome "ph" will be replaced with "f", making words like "fotograf" 20% shorter.

In the third year, publik akseptanse of the new spelling kan be expekted to reach the stage where more komplikated changes are possible. Governments will enkourage the removal of double letters which have always ben a deterent to akurate speling. Also, al wil agre that the horible mes of the silent "e" is disgrasful.

By the fourth yer, peopl wil be reseptiv to steps such as replasing "th" with "z" and "w" with "v".

During ze fifz yer, ze unesesary "o" kan be dropd from vords kontaining "ou" and similar changes vud of kors be aplid to ozer kombinations of leters. After zis fifz yer, ve vil hav a reli sensibl riten styl. Zer vil be no mor trubls or difikultis and everivun vil find it ezi to understand ech ozer. ZE DREM VIL FINALI COM TRU!

Russ in OR's picture

"Also, al wil agre that the horible mes of the silent "e" is disgrasful."

 

Don't you mean 'horibl'?

James TraffiCan't's picture

The key word in this piece is "deflationary" Don't care where you shop all prices will go down and then spike back up to HUGE inflation. 

Timing is everything.

Beam me up!

falak pema's picture

Now you know what Germany's trade surpluses are good for...

After EU, Conquering the markets of Usa and China !

PGR88's picture

How do you cut prices 50% in an industry with a 2% profit-margin??

silverer's picture

If this doesn't flag a major devaluation of the euro in the near future, I don't know what does!

Jethro's picture

Loss leader concept. It's like a fight where everybody stabs themselves to see who bleeds out first.

silverer's picture

OK, have the brown shirts build one within a couple of miles of my house. Thanks!

Observingmen's picture

The own-brand food in Lidl's is just Ok but they do stock brand name products as well - for example, they had Baltika 7 at £1.50 a bottle recently. That said, I tend not to shop there because they're Germans.

Twaddlefree's picture

Contradictory to say that Lidl will create thousands of new jobs as it takes market share from other grocers....uh...that means LOST jobs from the other grocers.

There is only so much market to be shared. Increase in households is mostly rental units, many of which are causing neighborhoods to transition, i.e. become slums, which doesn't bode well for the elitist stores like Wegman's and Whole Foods.

In my area, no more than three major grocers have EVER survived beyond three-five years. With WalMart and Target now selling groceries, the chances of surviving are even less. We just lost Martin's (Giant) which came in at the same time as Whole Foods and Trader Joes about eight years ago. In 2016 and 2017, we gained Wegman's, Aldi, Lidl and Publix. Kroger, Food Lion, Walmart are the mainstays. Kroger is fighting hard with a massive price reduction in its own brands, but at the same time eliminating its one-day-a-week senior discount program. All of the new stores are basically selling ONLY in-house branded food, which is produced and packaged by the large food companies who are really not losing as the major brands lose market share.

I predict that Wegman's and Lidl will be gone within two years. Whole Foods is in big trouble. Publix hasn't hit quite yet, so don't know. Aldi will survive as it has in another region of my state for many years. Food Lion is likely very afraid.

Aubiekong's picture

Aldi's can be a great grocery store to shop as long as you avoid the chinese made non grocery consumer plastic made cheap crap in the middle of the store.

libertysghost's picture

I call BS on their "basket of goods" price comparison.  I can do the math inmy head as I go through the stores and ALDI is way cheaper on the stuff I buy...and the quality is much better than most name brands IMO and I "chef'd" for over a decade and cook every day.  

 

Now meat prices?  I find the local stores and Kroger have much better sales than ALDI...Wal Mart meat is generally of poor quality and not priced competitively either.  It's bizarre watching people buy out of their meat section.  It's as if they've never shopped anywhere else before.  

 

 

Shpedly's picture

I agree. For red meat nothing beats Kroger black Angus. If I have to cook for a huge crowd then Sams is my choice. Costco meat doesn't hold a candle to Sams, even the prime. A buddy of mine raises black Angus and we split one 4 ways every year. No hormones and no antibiotics. Last 2 months it gets finished out with crushed feed corn and beer. Not quite Kobe but damn close.

P.S The Guiness got a little expensive but the steer love Budweiser just as much.

LA_Goldbug's picture

I have a question as to "organic" label. Can it be trusted and what does it mean ?

I do not shop at Aldi or Lidil and do not especially hunt for the "organic" label. But am interested in knowing what is the reality of this labeling ? Thanks :-)

StreetObserver's picture

Go to the Organic Consumers Association Website.

http://organicconsumers.org/

Look who certifies the product as organic.

Highest quality, CCOF, California Certified Organic Farmers, or Oregon Tilth.

Down the line in quality, way down, USDA Certified Organic.

Bottom quality, i.e. untrustworth, "Quality Assurance International"

NEVER buy 'organic' anything from China. Favor American grown over Mexican or South American.

Organic food is too expensive? How much do you think you will spend on your first case of pesticide and GMO caused illness? What's your deductable for chemotherapy?