Dis­coun­ters re­vamp­ing gro­cery store shop­ping

The Washington Times Daily - - NATION - BY CANDICE CHOI

NEW YORK | At a Tar­get in Up­per Man­hat­tan, shop­pers can pick from 19 types of ketchup, in­clud­ing well-known names like Heinz and Hunt’s.

At the Aldi next door, the three op­tions range from 99 cents to $1.79. All are the chain’s own brands, which doesn’t seem to bother shop­pers at­tracted by the low prices.

“If you look at the in­gre­di­ents, it’s the same thing. A lot of peo­ple don’t re­al­ize that,” said An­abel Rosado, a bank su­per­vi­sor who was brows­ing the snack aisle.

Aldi and its Euro­pean ri­val Lidl, which opens its first U.S. store this week, are hop­ing to change the way peo­ple shop with their smaller, no-frills stores filled mostly with house brands that tend to cost less.

Whole Foods, which has fought its “Whole Pay­check” rep­u­ta­tion, also is mov­ing into the dis­count sec­tor with an off­shoot chain named af­ter its 365 brand.

The push could fur­ther pres­sure gro­cery gi­ants like Wal­mart and Kroger, which also are con­tend­ing with the growth po­ten­tial of on­line gro­cers and al­ready have been rein­ing in op­er­a­tional costs so they can keep their prices com­pet­i­tive.

Tar­get also is try­ing to be­come bet­ter known for low prices as it works to boost its strug­gling gro­cery busi­ness.

“We are cer­tainly aware, pay­ing a lot of at­ten­tion, have a lot of re­spect, but we like our strat­egy,” Steve Sch­mitt, Wal­mart’s vice pres­i­dent of in­vestor re­la­tions, said in May about the growth of the Euro­pean chains.

Aldi, which has 1,650 U.S. lo­ca­tions, has been re­mod­el­ing stores to have a brighter feel and plans to ex­pand to 2,500 stores in the next five years.

The ex­pan­sion plans were an­nounced as an­other Ger­man dis­count gro­cer, Lidl, pre­pares to open its first nine U.S. stores on Thurs­day with plans to have 100 within a year.

Al­ready, the dis­coun­ters have suc­cess­fully taken mar­ket share in the U.K. gro­cery in­dus­try, ac­cord­ing to Euromon­i­tor In­ter­na­tional. There are four 365 by Whole Foods lo­ca­tions and 20 more in de­vel­op­ment.

The prod­ucts in an Aldi store of­ten come in pack­ag­ing rem­i­nis­cent of more pop­u­lar brands. The chain’s Mil­lville Raisin Bran is in a pur­ple box sim­i­lar to the ver­sions made by Kel­logg and Post. Its Ben­ton’s cook­ies are in blue pack­ages that re­sem­ble those of Chips Ahoy.

Stock­ing shelves with store brands is a big part of how dis­coun­ters keep costs down. Lidl also says it will have a mix of pri­vate-la­bel brand names, which will account for 90 per­cent of the prod­ucts in its stores.

Whole Foods of­fers its 365 la­bel across a va­ri­ety of cat­e­gories, more akin to the ap­proach at Trader Joe’s, which has been steadily ex­pand­ing its store count in United States.

The grow­ing pop­u­lar­ity of store brands across the gro­cery in­dus­try is ex­pected to help dis­coun­ters. The trend is partly be­cause su­per­mar­kets have stepped up their own pri­vate­la­bel of­fer­ings in re­cent years to con­trol costs.

Late last year, Kroger said its store brands reached 29 per­cent of items sold. Diana Shee­han, di­rec­tor of re­tail in­sights at con­sult­ing firm Kan­tar Re­tail, said more peo­ple turned to store brands dur­ing the re­ces­sion.

“They have got­ten com­fort­able and started to em­brace higher-qual­ity pri­vate-la­bel prod­ucts,” Ms. Shee­han said.

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