German Grocery Chain Aldi Expanding in New England

For the past seven years, low-price German grocery chain Aldi has been an almost unnoticeable presence in Connecticut with only a few locations, reports The Hartford Courant. Now the privately owned German retailer plans to build a 500,000-square-foot distribution center in South Windsor that would supply about 70 proposed Aldi Food stores -- 50 in Connecticut, and 20 in Massachusetts and Rhode Island. When completed, the distribution center would employ about 75.

At a time when grocery chain stores seem to fall into one of two categories -- the football-field-sized warehouse or the luxurious specialty store with hardwood floors and an espresso bar -- Aldi is a throwback.

The company offers plain vanilla, no-frills, no-Muzak ambience in exchange for low prices: $3.99 for a Tyson-brand whole roasted chicken, 79 cents for a four-pack of pudding cups, and 89 cents for a loaf of L'Oven Fresh wheat bread.

Bucking the mega-size trend in size and selection, the typical Aldi store -- which measures about 18,000 square feet -- is a little larger than the traditional neighborhood grocery store.

Unlike big chain stores that carry more than 25,000 brands, Aldi stores stock fewer than 1,000, 90 percent of which are its own private-label brands. Merchandise is stacked on rolling steel pallets. Aldi sells some fresh fruits and vegetables, but they are prepackaged, as is the small selection of fresh meats. There's no pharmacy and no meat counter, and there are no splashy displays.

The store also charges a quarter to rent a shopping cart. (The practice is common in Europe.) The quarter is refunded when the cart is returned. Although it's somewhat inconvenient, it reduces the number of stray carts in the parking lot.

Shopping at Aldi's is BYOB -- bring your own bags; otherwise, it costs 10 cents apiece to purchase the store's heavy-duty plastic ones. And customers are expected to bag their own groceries.

Need to run to the store for a late-night snack? With Aldi, that's not an option.

Most of its stores are open Monday through Saturday from 9 a.m. to 8 p.m. Only recently have they opened on Sunday for a short seven-hour run, from 10 a.m. to 5 p.m.

Aldi hopes to break ground on the warehouse this spring and complete construction by the fall of 2008, said Bruce Persohn, vice president of the company's northeastern division.

Officials at the company's U.S. headquarters in Batavia, Ill., referred questions to Persohn, whose office is in South Windsor.

When and where those 70 new stores will open is a question.

"We're in the infant stages of our site selection," said Persohn, who declined to disclose details of the expansion.

However, if history is any indicator, Aldi will hold off opening stores until it has the cash on hand, said Neil Z. Stern, a senior partner with McMillan/Doolittle LLP, a Chicago-based retail consulting firm.

"They're a very different retail company," said Stern, who has been tracking Aldi for 20 years. "They own all their own stores. They don't take on any debt. Aldi builds stores only as fast as their profits allow -- they don't add any more stores than the cash allows."

The Wallingford store is in a strip mall, but Aldi also builds new stand-alone stores and leases existing space. Each store employs seven to 10 workers, Persohn said.

Haven't heard of Aldi?

In Europe, Aldi Group is one of the largest retail grocery chains. There, it sells not only groceries, but also small appliances, computers and wireless phone service, according to Hoovers.com.

With more than 7,500 stores worldwide, Aldi brings in about $35 billion in annual sales. It ventured into the U.S. market in 1976, and now has 700 stores in the Midwest and Northeast. Each year, those stores contribute about $5 billion to the company's annual sales, according to Hoover.com.

"In the U.S., their historic appeal has been to people who need to save money," Stern said. "In Germany, they appeal to everybody."

Industry analysts say Aldi may be planning to open 200 stores in the United States in the next three years.

The food market, in general, isn't growing, making competitors search for ways to target specific consumers, Stern said.

"Rather than try to take on those entrenched grocery chains, they nibble around the edges and go after the niches -- the markets a traditional grocery chain can't serve," Stern said.

While many stores are courting an upscale clientele, Aldi is targeting the downscale market, Stern said. But its customers don't think they're skimping on quality by shopping at Aldi.

Does the store's selection of frozen entrees and fish fillets look familiar? Does it invoke a deja vu-like response, as if the freezer might have been lifted from a Trader Joe's?

Good guess. Aldi Group owns Trader Joe's grocery stores, which it purchased in 1979. And according to Forbes.com, the company owns an 8 percent stake in Albertsons LLC grocery stores.

Taking a cue from Costco, Aldi Stores also stock some general merchandise items, such as crockpots, digital TVs and the occasional $16.99 children's table-and-chair set. They appear haphazardly, advertised in the in-store flier, "Next Week @ Aldi."

"They use general merchandise to create traffic in the stores," Stern said. "It's a little bit like the Costco treasure hunt stuff."

For the past seven or eight years, Aldi has plodded along with just four stores in Connecticut -- in Wallingford, Torrington, Waterbury and Bristol. Aldi's competitors include Wal-Mart Stores Inc. and Costco Warehouse Corp.

In their race to woo thrifty consumers, Aldi's strategy is more turtle than hare, although construction of the warehouse is expected to pick up the pace.

"Like Wal-Mart, they build their warehouse first, and then the stores," Stern said.


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