Friday, July 15, 2016

Aldi is fixing is biggest weakness -- and that should terrify Whole Foods

The grocery chain is expanding organic food brands, removing some artificial ingredients from its products, and adding more gluten-free items in hopes of attracting more health-conscious shoppers.

Aldi became one of the world’s biggest food retailers by offering insanely low prices.

The chain’s prices on fresh produce and packaged goods are roughly 30% lower than Walmart’s, according to a recent price check.

The company’s foray into organic and gluten-free foods signals a new direction for Aldi and an emerging threat to Whole Foods’ lower cost chain, 365 by Whole Foods Market, which is launching this year.

Whole Foods is opening the chain to better compete with the increasingly crowded market for low-cost organic goods.

Aldi has removed certified synthetic colours, partially hydrogenated oils, and added MSG from all of its private-label products, which make up 90% of what Aldi sells, the company told Business Insider.

The chain is additionally expanding its SimplyNature line, which is free of more than 125 artificial ingredients, and its gluten-free liveGfree brand.

Aldi’s milk is already free of artificial growth hormones, but its now stripping yogurt, sour cream, cottage cheese, and other dairy products of growth hormones as well.

In addition to broadening its organic offerings, Aldi has started to offer “fancier” foods, like artisanal cheeses, smoked salmon, quinoa, and coconut oil.

The steps will enable Aldi to better compete with not only Whole Foods, but also Kroger, which has been rapidly expanding its organic line, called Simple Truth, and Walmart’s Neighbourhood Markets.

Aldi and its rival discounter Lidl have upended the grocery market in the UK, forcing the nation’s largest supermarkets to dramatically cut prices and lay off workers to stay competitive.

The CEO of Asda, the UK’s second-largest grocery chain, has called the new competitive environment created by Aldi and Lidl “the worst storm in retail history.”

“When we set the plan, I don’t think anyone anticipated the market being in meltdown,” Asda CEO Andy Clarke said in August after the Walmart-owned company reported its worst-ever quarterly sales drop.

Aldi also invests far less in customer service and merchandising than traditional grocers.

Most of the store’s products are displayed in their shipping cartons to make restocking quick and easy. That means fewer workers are needed on the sales floor.

Aldi also requires customers to bring their own shopping bags, bag their own groceries, and pay a deposit to use a cart. Customers get their deposit back when they return the cart, so Aldi doesn’t have to pay employees to round up carts.

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