“We see tremendous opportunity for Aldi. We have seen this over the course of decades, where we have grown every single year since we have been in existence. We have grown in the best of economic times, and we have grown in the face of challenging economic times all throughout that entire journey. So, we think that there will be higher private label penetration in the years to come. We think that the [private label] category and segment will continue to grow,” Rinaldo told FoodNavigator-USA.
‘We just see green pasture in front of us’
German-headquartered private label grocer Aldi — which only stocks about 8% of its assortment from national brands — continues to make in-roads in the US, Rinaldo noted. Earlier this year, Aldi closed the acquisition of Southeastern Grocers — Winn-Dixie and Harvey stores — to bolster its retail presence in Florida.
As part of its expansion plans, Aldi plans to open more than 800 US stores and invest $9 billion in the next five years. Aldi will add stores in geographies where it already plays and enter new markets to meet the demand for private label products, Rinaldo explained.
Moving forward, Aldi is expanding store counts in already established geographies to meet consumer demand, while focusing on “high-growth areas” like its “surging” California business and in Arizona, Nevada and the Southeast, he noted.
“We have no stores open yet in [Las] Vegas, and we just see green pasture in front of us there. So, [expansion] is difficult — that requires a lot of supplier investment and support, and we need suppliers to grow with us, especially in the geographic areas that they have less of a presence for us. But it is a really incredible time because I cannot say there is anywhere on the map right now that we operate that we do not have opportunity to increase store density and to continue rolling out the Aldi brand,” Rinaldo elaborated.
Delivering on consumer demands for innovation, low costs, transparency
Rinaldo outlined in his keynote presentation five ways Aldi is supporting its growth, which includes focusing on quality, innovating, controlling costs, ‘not playing games’ with consumers, and keeping shoppers central to the Aldi experience.
“We need to work to eradicate all costs and all inefficiencies from our business to provide [consumers] the best value that we possibly can. ... Simultaneously, you still want to innovate, you want to improve, you want to advance what the offer is. I think that the most important thing, when I take a look at it from an Aldi standpoint — or from a private label standpoint — is we cannot rest on our laurels,” Rinaldo told FoodNavigator-USA.
Rinaldo called out industry practices of changing pack sizes or raising prices without consumers knowing – what he called “playing games” – though he acknowledged the stressors facing the food and beverage supply chain.
“There have certainly been cost pressures over the course of recent years, so this has been a difficult time for the industry to navigate — there is no doubt about that. But our belief is always being very forthright, always being very transparent, never playing those games with customers,” he elaborated.
He added, “If you can work to earn your customer’s trust, that is really valuable. And when I take a look at the success of Aldi right now, I would say the trust that we have with our customers for delivering the value, the price and the quality that they expect, and not being someone who plays games with them, that is driving our success more than any other factor.”
‘Private label has come a long way’ when it comes to innovation
Aldi will not only rely on third-party manufacturers to support its retail expansion goal, but it will also rely on them to bring innovative products to market, as private label brands become more sophisticated and compete with national brand on marketing and branding.
The US private label market lags behind other international markets, providing a runway for private label brands and retailers to grow. Private label accounts for about 19% of total groceries in the US, while private label accounts for 49% of market share in the UK and Netherlands, according to RaboResearch and PLMA data.
“The ability to innovate and the ability to drive that innovation of speed is critical. And private label has come a long way. ... For us to continue those gains, it comes down to that [innovation] needs to be more of the focus,” Rinaldo said.
He elaborated, “And one of the reasons why I am here at an event like [PLMA], talking to our supply base is to say we need to actually drive this faster and further in the course of the coming year. So to have private label continue to surge, continue to lead national brands in unit movement and sales increases, it is going to come down to our ability to innovate and drive that value at the same time.”
