STEALTH RETAILER

David Merrefield

The front page of this week's SN carries a major news feature about one of the largest food retailers in the world, and also the one that perhaps is least known of any such retailers operating in the United States. This little-known retailer drives sales in this nation of more than $2 billion annually, with about 500 stores. Worldwide, the company has about 4,000 stores generating sales in excess of $18 billion.

What is it? It's the German operator Aldi. The company entered the United States with its Aldi Foods banner more than 20 years ago. Here, as elsewhere in the world, it runs bare-bones limited-assortment stores. The world of Aldi also includes significant numbers of stores in Austria, Belgium, Denmark, France, Italy, the Netherlands and the United Kingdom.

Aldi is a name that's well known in Europe, especially in Germany, but it's a name that just doesn't resonate much in this nation -- unless one should happen to open across the street, of course: "If you don't have an Aldi in your trade area, you don't think they exist," said one observer.

It's no mistake that Aldi is largely invisible in this country. Its executives work to keep it that way. They are extremely press-shy, and since the company spends next to nothing on advertising, its name doesn't get much exposure from that direction either. And, since Aldi is privately held, its executives don't spend much time talking to security analysts either. By and large, Aldi simply doesn't cause a blip on the industry's radar screen.

But any company that manages to wrest $2 billion annually from America's food shoppers is worth a little attention, whether it registers on the industry's sensibilities or not. So let's take a closer look.

The Aldi store format is minimalist. Stores are often in second- or third-use real estate and measure about 4,000 square feet in populated areas. Aldi sometimes sponsors new construction of about 8,000 square feet at edge-of-town locations that require parking lots. As for the products offered, a high percentage of the 600 or so stockkeeping units are canned goods in the form of store brands; very little in the way of perishables is offered. The stores are decidedly low tech: Cashiers are required to memorize price lookup codes for each SKU, a factor that helps keep SKU proliferation at bay.

The Aldi store style is virtually the same anywhere in the world, with the exception that some of the newer locations in the United States range up to 10,000 square feet or so. Aldi's territory in the United States is roughly the Upper Midwest, with an increasing presence in the mid-Atlantic states noticeable.

Also in the United States, Aldi is increasing its buying and distribution capacity and plans to augment its distribution centers in the Midwest and Pennsylvania by four. It has about seven now.

Aldi's devotion to creating the ultimate in low-price shopping and in store uniformity is certainly one reason why the format has been accorded good acceptance in many places. It's also interesting to observe that there are Aldi-like stores in Japan called "Big A," a name that acknowledges the debt of inspiration owed Aldi. Similarly, it's increasingly clear that the limited-assortment format is growing in this country, and is undoubtedly being driven by the Aldi format.

Next week's SN will have a news feature that focuses on one of Aldi's competitors, Save-A-Lot. So look for more about this stealth format.