European discount grocer Aldi on Thursday detailed plans to grow
in the U.S., saying it would invest billions of dollars and create
thousands of jobs.
Aldi confirmed it would open its first stores in Southern
California in March of next year and would open about 25 stores by
July. The German company plans to employ 1,100 people across its
stores and at its regional headquarters and warehouse in Moreno
Valley, Calif.
The retailer, which described its U.S. expansion plans as
"aggressive," said it would put more than $3 billion behind a
previously announced five-year plan to open 650 new stores across
the U.S. By the end of 2018, Aldi expects to operate nearly 2,000
stores, or about 44% of rival Wal-Mart Stores Inc.'s current U.S.
store count. The German company already operates nearly 1,400
stores across 32 states.
"At Aldi, we firmly believe that amazing quality can be
affordable, and we are excited to bring our small-format,
convenient grocery-shopping experience to Southern California,"
said Jason Hart, chief executive of Aldi US.
The grocer plans to create more than 10,000 new jobs at its
stores, warehouses and division offices across the country. Aldi is
the world's seventh-largest food retailer by sales, according to
consulting firm Planet Retail.
Aldi said it would pay starting wages of $13 an hour for store
associates, with an opportunity to earn up to $21 an hour.
Attention to minimum wages has ramped up in the U.S., with new
initiatives in Seattle and Los Angeles, at Wal-Mart and other
companies, and some congressional moves on the federal minimum.
California's hourly minimum wage is currently $9, rising to $10
next year.
Aldi and rival Lidl, owned by Schwarz Group GmbH, have been
making waves in the U.K. as they take market share from the
country's biggest grocers. The pair have raised their combined U.K.
market share to 9.3% from 6.4% in 2013.
They keep a lid on prices by buying narrow ranges of
private-label products in bulk, giving them immense bargaining
power with suppliers.
Aldi's expansion comes as Lidl is also working on its own plans
to enter the U.S. market. Lidl previously has said it would open
its first stores in the U.S. by 2018.
By opening stores in Southern California, Aldi is attempting to
succeed where other European grocers have tried and failed. The
U.K.'s largest retailer, Tesco PLC, pulled out of the U.S. in 2013
after spending five unprofitable years and £ 1 billion ($1.56
billion) on an ill-timed American gambit. Tesco unveiled its Fresh
& Easy chain in 2007, setting up stores in California, Arizona
and Nevada. It sought to lure American shoppers with medium-size
stores focused on fresh food, but its offering failed to take
off.
For Aldi, though, California could work well, as supermarkets in
the state tend to be expensive while California has an older,
low-income population that find the retailer's simple, midsize
stores easy to navigate, said Bryan Gildenberg, head of research
for Kantar Retail.
Aldi has been successful in the U.S. so far, despite being a
relatively small player, and has a runway for growth, Mr.
Gildenberg said. Wal-Mart aside, the country doesn't have a large
national discount-grocery player, with the U.S.'s dollar stores
focused more on nonfood items.
"Conventional U.S. supermarkets have tried to run more
discount-oriented formats but struggle to get the economics to
work," Mr. Gildenberg said. Traditional grocery stores that sell
mostly branded, rather than private-label, food products in small
spaces find their margins squeezed.
Aldi's announcement comes after Whole Foods Market Inc. on
Thursday laid out further details about a new chain of lower-price
grocery stores that is part of its plan to accelerate sales growth.
Whole Foods is aiming to appeal to younger customers with the
chain, to be named "365" after one of its own brands.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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