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Aldi Invests $3.4 Billion In U.S. Expansion, Heats Up Grocery Price Wars

Aldi Invests $3.4 Billion In U.S. Expansion, Heats Up Grocery Price Wars

Just three days before Lidl is scheduled to open its first 10 U.S. grocery stores, German rival Aldi unveiled gargantuan plans to add 900 stores to its U.S. fleet. In total, Aldi will invest $3.4 billion to expand its U.S. store footprint to 2,500 by 2022.

Aldi was already in the midst of an aggressive growth strategy prior to the announcement, spending $1.6 billion to remodel 1,300 stores by 2020. With these additional locations, Aldi will be the third largest grocery chain by store count in the U.S.

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The move could be taken as a direct response to Lidl’s U.S. entrance, with Aldi U.S. CEO Jason Hart saying its products will be priced up to 50% cheaper than its competitors (Lidl has already made the same declaration). But more than that, it reflects the new era of grocery sales as a whole, which is now dominated by a price war among the sector’s biggest players.

Prices of supermarket items declined 1.3% in 2016, marking the first annual decline since 1967, according to the Agriculture Department's Economic Research Service.

Walmart is testing lower prices in 11 U.S. states and pushing vendors to undercut rivals by slashing prices 15%, with retailers such as Costco and Kroger also taking part in price cuts.

With Aldi further entrenching itself in the U.S., grocers large and small will have a tougher time squeezing out profit margins, especially as food prices continue to deflate. Food prices have dropped for 17 straight months, according to the department.

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