The Aldi acquisition: 5 takeaways for grocery

Aldi shocked the grocery store marketplace a couple weeks ago when it announced it had acquired 400 Winn-Dixie and Harveys Supermarkets stores.

In a separate deal, the pharmacies at the Winn-Dixie and Harveys Supermarkets were handed over to Walgreens and CVS.

The deal pulled the attention away from the Kroger, Albertsons merger and dropped it right in front of the Batavia, Ill.-based discount retailer’s doorstep.

However, questions are surrounding the deal. How long will it take to complete? How many stores will remain under the Winn-Dixie, Harveys Supermarkets name? Will Aldi continue to expand?

Ross Cloyd is a North America retail director for grocery within consultant group Kantar. Cloyd spoke with Supermarket News Senior Editor Bill Wilson about the impact the acquisition is expected to make and what we can expect to see as development takes shape.

Here are his 5 takeaways around the Aldi acquisition:

1. An opportunity in a new territory: “For Aldi, it’s an opportunity to really go into the Southeast and to make this acquisition, and to say Florida is our second largest state where they have stores.

“And so this puts that large footprint into that area and really grows that opportunity to connect with more shoppers. And also in some of that Southeast area besides Florida, they do have low distribution store count. So, this gives them those opportunities to really maximize this acquisition of more stores and also compete in the Southeast area, and also driving those efficiencies within their own supply chain network or deficiencies within the stores.”

Related:What’s next for Aldi?

2. A way to counter a Kroger, Albertsons merger: “I think from this opportunity, it’s one where it’s part of their growth plans. They want to grow store count, they want to connect with more shoppers. This is an opportunity really for Aldi to quickly make that transition and to accelerate that growth.

“But consolidation is a concern and what we’re seeing with retailers like Kroger or Albertsons and others like Walmart is that are getting separation from other retailers.

“So other retailers are going to be at risk of falling behind if the market goes to more consolidation.”

3. New stores will have the Aldi look: “It’s very early in those initial discussions and, ultimately, I believe Aldi would want to convert all of those stores to the Aldi format.

“But for 400 stores, to convert those over, it’s going to be expensive to do and it’s going to take time. So from that standpoint, it will take several years to have that consolidated, for that conversion to take place.

“It’s going to be a bit of a challenge as far as how those acquired stores operate. [Aldi is] not traditionally used to dealing with national brands. So there is going to be some complexity there. But ultimately, I believe Aldi would want to convert all those stores over just from the simplicity standpoint and align it to their one model.

4. The acquisition is just the tip of the iceberg: “I do see this merger, or this acquisition, facing the same kind of opposition [as the Kroger, Albertsons merger] in terms of the unions making sure it does not impact workers. Does this reduce competition, therefore higher prices for the shopper? Does it impact jobs? So there’s going to be a lot of that speculation, and really challenges from labor unions, from attorney generals, and others.

“And so they’re going to face that type of opposition similar, again, to Kroger Albertsons. But I think also the challenges from this is, it’s going to take time.

“Then you have to go through the regulatory process. They’re targeting to have it complete by what? Middle of 2024? Maybe early stages of 2024? It’s going to be much longer. And even to think about what stores to convert. There’s a lot of complexity from that standpoint that Aldi will have to consider.

“Some of these larger stores it’s a larger footprint, larger square footage that Aldi typically is not used to. So they’ll have to plan for that. What’s that look like? Do they think of different ways to come up with those different formats to make up for that additional square footage?”

5. The expansion might not be over: “If there is an opportunity for them in a marketplace where it makes sense, then I can see Aldi continuing to explore those opportunities of acquisition, or even still building stores.

“They opened up 120 stores this year, and they maybe in a right position where they’re going to look to continue to open stores and go into areas where it makes sense, where they can connect them quickly, and really drive that traffic.

“So, I see them in a position to still continue to look to grow and to look either to build stores, acquire, and even remodel existing stores.”