The story of the Aldi brand is a long and fascinating one. Two brothers, Karl, and Theo Albrecht, inherited their mother’s small grocery store in Essen, Germany, in 1946.
After WWII rationing ended, the brothers saw an opportunity to provide affordable food to the German people struggling to make ends meet. They did this by offering a limited selection of high-quality, low-cost items.
This strategy was so successful that the brothers soon opened up more stores, and by 1960, they had over 300 locations. In 1961, they split the company into two separate entities: Aldi Nord (north) and Aldi Sud (south). Until today, the two companies are legally and financially independent, but they operate under the Aldi banner.
The Aldi brand has more than 12,000 stores in over 20 countries. In the US, it operates as Aldi Sud with 2,147 stores and Trader Joe’s (Aldi Nord) with about 557 stores.
In September 2022, a BBC report revealed that Aldi was the fourth biggest UK supermarket with a 9.3% market share. In the US, the retail chain is on its way to becoming one of the top three grocery stores.
According to Statista, Aldi is the most popular discount supermarket in German, with 61.3% as of 2021. The two (Aldi Nord and Aldi Sud) are privately owned, so the details of the financials and other business operations are not public. But given its global reach and scale, we can safely say that Aldi is a powerful force in the grocery industry.
Understanding competitive forces is key to making informed investments and strategic business decisions. This Aldi competitors analysis will closely examine some of the company’s main rivals and explore how these firms fare in today’s retail grocery landscape.
Bottom Line Up Front
Aldi is a leader in the discount grocery store space. While its offering is more limited than traditional grocery stores, Aldi’s focus on quality and low prices allows it to compete effectively against these larger firms. The company’s most formidable competitor is Lidl, a German discount grocery chain with a similar operating model.
List of Aldi Competitors
Aldi’s Business Strategy and Revenue Model
Aldi Nord and Aldi Sud have contractual agreements that make it easy for analysts to compare the two companies. For example, both operate under the same business model and pricing strategy. This strategy is simple yet effective: offer a limited selection of high-quality, low-cost items.
The company follows a “no frills” approach to keep prices low. For instance, stores are typically located in strip malls or converted warehouses. They also have few employees and simple displays.
Regarding product selection, Aldi typically carries about 1,400 SKUs (stock-keeping units) compared to a typical grocery store that stocks over 40,000 items.
The company sources many of its products from private-label brands to cut costs. Private-label products are often cheaper than name-brand alternatives because retailers have more negotiating power with suppliers. For example, they can order larger quantities or commit to longer-term contracts.
Aldi also keeps prices low by charging customers for shopping bags and requiring a deposit for carts. These “checkout fees” help the company offset business costs (e.g., rent, utilities, and employee wages).
Another way Aldi saves money is through its design and layout. For example, the stores are typically small (about 10,000 square feet) and do not have expansive window displays or other unnecessary features.
All these cost-saving strategies allow Aldi to keep prices low and pass on the savings to customers. In turn, this attracts price-conscious shoppers who are looking for good value. It’s no surprise that Aldi’s target market is “value-conscious shoppers.”
Conclusively, about 90% of Aldi’s revenues come from private-label products. That is a very high percentage compared to other retailers, who get only 20-30% of their revenues from private-label products. It’s also keen on service cost optimization, another key revenue driver.
Aldi Competitors Analysis
Aldi competes in the food and grocery retail industry. According to a study by Grand View Research, this industry was worth an estimated $11.324 trillion in 2021. The study forecasts the market to grow by a CAGR of 3% from 2022 to 2030. Market growth means more opportunities for companies in the industry, but it also means more competition.
Aldi’s main competitors are other grocery retailers, such as Lidl, Walmart, Kroger, Tesco, Target, and Whole Foods. These firms operate in a similar space and offer similar products and services. However, each company has its unique strengths and weaknesses. Let’s take a closer look at some of Aldi’s main competitors.
Lidl is a discount supermarket chain founded in 1930 in Germany. The company is one of the largest grocery retailers in Europe, with over 11,000 stores spread across 32 countries. Lidl is the most formidable Aldi competitor in Europe. In fact, the two companies have been locked in a fierce battle for market share in recent years.
Lidl’s business model is similar to Aldi’s. The company focuses on offering a limited selection of high-quality, low-cost items. Lidl also sources many of its products from private-label brands and has a “no frills” approach to store design and layout. However, Lidl does not charge customers for shopping bags or require a deposit for carts.
Lidl’s main strengths are its wide geographic reach, strong brand presence, and large product selection. The company also has an efficient supply chain and a good reputation for quality. However, Lidl faces some challenges, such as intense competition, high costs, and reliance on private-label products.
The company is part of the larger Schwarz Group, which also owns the Kaufland chain of supermarkets. In 2021, the Schwarz Group generated EUR 133.6 billion, of which EUR 100.8 billion was from Lidl.
Much of the Lidl and Aldi rivalry plays out in the German market. However, both companies have been aggressively expanding into other markets recently. For example, Lidl entered the US market in 2017 and now operates over 100 stores across nine states on the East Coast.
Competitively, Lidl is a stronger rival to Aldi in Europe than in the US. In Europe, the company has a much larger presence and is well-established. However, in the US, Lidl is still a relatively new entrant. The company will need to invest heavily to build its brand and expand its store network.
Walmart is the world’s largest retailer. Founded in 1962, the company now operates over 10,500 stores in 23 countries. Walmart is a mass merchandiser that sells a wide range of products, including food, apparel, electronics, and home goods. The company has a massive global reach and is one of the most well-known brands in the world.
Walmart’s business model is based on offering low prices and a wide selection of products. The company sources many of its items from private-label brands and has a vast global supply chain. Walmart also operates an e-commerce platform, which accounted for $67.39 of the company’s total sales in 2021.
Walmart’s main strengths are its scale, brand recognition, and supply chain. Compared to Aldi, Walmart has a much larger store network and sells a wider range of products.
The company operates not only grocery stores but also supercenters, hypermarkets, and discount stores. Walmart also has a strong e-commerce presence and is a leader in omni-channel retailing.
Walmart’s Sam’s Club chain is a direct competitor to Aldi’s Costco-like store concept. Walmart also operates a pharmacy business, which competes with Aldi’s in-store pharmacies. While it is a strong competitor, Walmart has some weaknesses, such as its reliance on brick-and-mortar stores and low-profit margins.
In 2021, Walmart generated over $559.151 billion in revenue. It trades on the New York Stock Exchange under the ticker “WMT.” As of October 25, 2022, Walmart’s market cap was $380.536 billion. It has better financials than Aldi, with the resources to expand its operations and invest in new technologies.
See also: Walmart Value Chain Analysis
Tesco is a British multinational grocery and general merchandise retailer. The company started its operations in 1919 and now operates over 4,752 stores across the UK, Ireland, Czech Republic, Hungary, Poland, Slovakia, and Thailand. Tesco is one of the largest retailers in the world and has a strong presence in Europe.
It entered the US market in 2007 but later left in 2013. Tesco’s main strengths are its wide brand portfolio, vast product range, and efficient supply chain. The company has a strong online presence and is one of the leading grocery retailers in the UK. Tesco is a well-established brand and has a strong customer base.
Tesco competes with Aldi on price, product range, and quality. It controls about 41.5% of the UK grocery market, which is significantly higher than Aldi’s market share of 9.3%.
However, in the wake of the Brexit vote and increasing inflationary pressures, most people started to cut back on their spending, which affected Tesco’s sales. Aldi had relatively lower prices and was able to attract price-sensitive customers.
Although Tesco controls the largest share of the UK grocery market, its lack of presence in the US makes it a less formidable competitor to Aldi.
Tesco trades on the London Stock Exchange under the symbol TSCO. In FY 2021, the company had more than 56 billion British pounds ($75.022 billion) in revenue. It’s also profitable and has been for quite a while. In 2021, Tesco reported $2.031 billion in net income.
Kroger is an American retail company founded in 1883. It’s the second-largest grocery retailer in the US, controlling about 10% of the market.
The company operates about 2,800 stores in 35 states under various banners, including Kroger, Harris Teeter, Ralphs, and Food 4 Less. Kroger also has a strong online presence and offers grocery delivery and pick-up services.
Kroger stands out as a competitor to Aldi due to its large size and nationwide reach. The company’s scale allows it to offer various products and services, including many that Aldi does not offer, such as online grocery shopping and delivery/pick-up.
Kroger also has a strong private label program, with over 30,000 products under its brands, which can help to attract and retain customers.
Kroger and Aldi have comparable prices on many items, but Kroger’s prices are generally slightly higher. However, Kroger offers many discounts and promotions that Aldi does not, which can help to offset the higher prices. Overall, Kroger is a strong competitor to Aldi due to its larger size and nationwide presence.
Financially, Kroger is doing well. In 2021 the company reported sales of $132.498 billion, an increase of 4.07% from the previous year. Kroger also reported a net income of $2.58 billion, an increase of 55.82% from 2020.
Kroger is a public company traded on the New York Stock Exchange under the ticker KR. As of October 25, 2022, the company had a market capitalization of $32.047 billion.
Kroger and Aldi are both well-positioned to compete in the grocery market. Kroger is larger and has a nationwide presence, while Aldi has a more efficient operation and lower prices.
Whole Foods is an American supermarket chain specializing in natural and organic foods. The company opened its doors in 1980 and now operates more than 500 stores across the US, Canada, and the UK.
Amazon bought Whole Foods in 2017 for $13.7 billion. The acquisition helped Amazon to enter the grocery market and expand its online grocery delivery and pick-up services.
The competitive advantage that Whole Foods has over Aldi is its focus on natural and organic foods. The company offers a wide range of products free from artificial flavors, colors, and preservatives. Whole Foods also has a strong commitment to sustainability and ethical sourcing.
Despite its focus on quality, Whole Foods faces several challenges. The company has been criticized for its high prices, which have given it the nickname “Whole Paycheck.”
Whole Foods is also facing increased competition from grocery chains expanding their own natural and organic food offerings. Kroger, Walmart, and Tesco are all investing in this area to attract health-conscious consumers.
Aldi’s competitive advantage over Whole Foods is its low prices. The German supermarket chain offers a wide range of private-label products that are often cheaper than comparable items at Whole Foods. Aldi also has a strong commitment to sustainability, with a goal to achieve 100% renewable energy by 2030.
To compete with Aldi, Whole Foods needs to focus on its strengths. The company should continue to invest in its quality offerings, sustainable practices, and ethical sourcing. If prices are a concern, Whole Foods could offer more discounts and promotions to attract price-conscious consumers.
Amazon doesn’t disclose the financial performance of Whole Foods, but data from Statista shows the company is doing well for itself. In 2021 Whole Foods’ revenue was about $8 million. This figure was a significant increase from approximately $7.8 million in 2020.
Aldi SWOT Analysis
Below is a sneak peek into the strengths, weaknesses, opportunities, and threats of Aldi:
- Strong brand presence
- Efficient operations
- Loyal customers
- Efficient cost management
- Sustainable practices
- Limited product selection
- Low-profit margins
- Doesn’t factor in customer satisfaction
- Health and wellness trend
- Online grocery sales
- Increasing private-label brands
- Intense competition
- Changing consumer preferences
- Economic recession
FAQs – Aldi Competitors Analysis
Question: What is Aldi’s Competitive Advantage?
Answer: Aldi sells a few variations of each product to keep inventory low and prices down. The company focuses on private-label products, which are often cheaper than comparable items at other grocery stores. Moreover, the company has a strong brand presence and efficient operations.
Question: Who is Aldi’s Biggest Competitor?
Answer: Aldi’s biggest competitor is Lidl. The two German supermarket chains are similar regarding their product offerings and target market. Aldi’s competitive advantage over Lidl is its efficient cost management, which allows the company to offer lower prices.
Question: What is Aldi’s Main Strategy?
Answer: Aldi’s main strategy is maintaining low prices through efficient operations and a no-frills approach. The company uses a private label strategy, selling mostly its products rather than familiar national brands. As a result, Aldi has fewer SKUs (stock-keeping units or product lines) than other supermarkets.
The Aldi competitive landscape is quite consolidated, but that doesn’t mean the company doesn’t face stiff competition. Lidl, Walmart, Tesco, and Kroger are all formidable competitors in the grocery space.
Whole Foods is a more niche competitor, but one that Aldi will have to keep an eye on as it continues to expand its reach.
Aldi has successfully differentiated itself from the competition by offering a unique shopping experience and high-quality, affordable products. It will need to continue to focus on these areas as it looks to maintain its competitive advantage.
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