The U.S. grocery industry has reached an interesting and uncertain crossroads. In 2017, German discount grocery retailers ALDI and LIDL announced plans to open hundreds of new stores across the United States. ALDI plans to open 900 stores by 2022 and LIDL to open 100 by the end of 2019. Also in 2017, online retail giant Amazon bought Whole Foods, and has been rolling out a series of experiments in ordering, pricing, and delivery in stores across the country. And trends like meal kits, farm shares, and app-based ordering and delivery have added further wrinkles for incumbent grocers to contend with.
While these latter developments — Amazon/Whole Foods, app-based ordering, and meal kits — have gotten a lot of attention from the business press, we think that the popular business press has not given enough attention to the incursion by Aldi and Lidl into the U.S. market.
One does not have to look very far to recognize the threat posed to competitors like Walmart, Target, Costco, and Kroger by the German hard discounters. The UK grocery market shows what could happen: ALDI and LIDL have 13.1% market share in the UK today, having grown more than 50% over the last five years. All four of Britain’s biggest grocers — Tesco, Sainsbury’s, Asda and Morrisons — now collectively account for 68.5 per cent of the UK grocery market, which is down from 76.3 per cent just five years ago.
To read the rest of the story, please go to: Harvard Business Review