Thursday, June 15, 2017
German grocery chain Aldi Inc. plans to invest $3.4 billion to expand its U.S. base to 2,500 stores by 2022, raising the stakes for rivals caught in a price war.
Aldi operates 1,600 U.S. stores and earlier this year said it would add another 400 by the end of 2018, as well as spend $1.6 billion to remodel 1,300 of them, according to a Reuters report.
The investment, which raises Aldi’s capital expenditure to at least $5 billion so far this year, comes at a time of intense competition and disruption in the industry.
German rival Lidl will open the first of its 100 U.S. stores on June 15. In May, Lidl said it would price products up to 50 per cent lower than rivals, Reuters reports.
Wal-Mart Stores Inc., the largest U.S. grocer, is testing lower prices in 11 U.S. states and pushing vendors to undercut rivals by 15 per cent. The company is expected to spend about $6 billion to regain its title as the low-price leader, analysts said.
The furious pace of expansion by Aldi and Lidl is likely to further disrupt the U.S. grocery market, which has seen 18 bankruptcies since 2014. The two chains are also upending established U.K. grocers like Tesco and Wal-Mart’s U.K. arm, ASDA.
In May, Aldi chief executive Jason Hart told Reuters the chain intended to have prices at least 21 per cent lower than rivals and would focus on adding in-house brands to win over price-sensitive customers.
The latest store expansion will create 25,000 U.S. jobs and make Aldi the third-largest grocery chain operator in the country behind Wal-Mart and Kroger Co.