If Aldi is movin' on up, is it also leaving some behind?
When Whole Foods promises a new store in impoverished Englewood and Aldi thrives in posh Lincoln Park, things may seem a little upside down in the Chicago supermarket world.
But grocery store profiles can shift over time, and perhaps none more so than Aldi, the German-owned chain that launched here in 1976 as a no-frills, low end, budget grocer.
In recent years, the store has begun stocking more upscale (even organic) offerings. In the process, it's expanded its customer base, raising concerns among some that the chain has abandoned its original low-income supporters. Retail food consultant Jon Hauptman of Willard Bishop, has analyzed this trend (which I recently observed myself).
“When you go to Aldi today you are very likely to see high performance cars and expensive automobiles and shoppers from a wide variety of demographics,” he said. “They’ve made it socially acceptable to shop at Aldi, and even a fun, interesting experience. And they’re now locating their stores in more upscale areas than they did before with many of their stores being built from the ground up, something they never used to do. They used to just rent distressed space in existing strip malls. Today they’re building new stores and the stores they’re building are brighter and more appealing than they were a decade ago.”
Indeed, Aldi promises to open about 650 more of these new stores over the next five years. The move will find them expanding into the American South and West, and nearly double the number of stores they currently operate. But as part of the new strategy the Batavia-based U.S. headquarters is also closing some stores.
Denise Moore is a councilwoman in Peoria’s 1st District, where area residents, last month, protested the closing of a two decade-old Aldi in their neighborhood called the South End.
“Quite honestly, they felt like they were being abandoned, that after 25 years of operating in the first district on that location Aldi up and left almost with no notice,” she said.
Aldi responded by explaining that it was opening a “larger, new store” in East Peoria.
It added: “The new store replaced two locations in the area; both stores had been in operation for more than 20 years and were too small to offer customers the full line of Aldi products. We take the closing of any Aldi store very seriously. In this case, we made a business decision to build a store that offers an expanded variety of fresh foods to more customers in the area. We understand the concerns raised by some of our Peoria customers and appreciate their support over the past 25 years. “
Moore says that she and the residents were told by Aldi that it was part of a strategy to open more stores near Wal-Marts. But she started to wonder if there was more to the strategy when she learned of another upcoming Aldi closure near a housing project in Pekin, Illinois. At the same time, she says, the chain is opening a store in a more affluent part of town.
“[Aldi] is moving further north into Pekin leaving that community as a food desert as well,” she said.
Aldi counters that the location it's closing in Pekin still has a Kroger store nearby.
Strangely enough, only a few years ago a Chicago community successfully resisted the building of a new Aldi in West Town because the store was seen as too low brow. Instead, a Pete’s Fresh Market is scheduled to open there this spring.
Still, grocery store industry watcher, Hauptman, says that he sees Aldi’s recent moves as more of an expansion than an abandonment of old customers.
“I don’t think Aldi has given up on the lower income areas at all,” he said. “They’ve just expanded to ….serve a wider range of neighborhoods than they have in the past.”
But if Aldi does vacate some poorer neighborhoods in the Midwest, is there a chain waiting to take its place?
“If there is another format out there that is looking to serve a similar role it would be dollar stores,” Hauptman said. “They have traditionally built themselves in lower or lower-middle income neighborhoods. And…over the past 10 years they have begun to sell more consumables – food. If you go back 10 years consumables accounted for one third of their sales and non-consumables represented two-thirds. Today that has more than flip-flopped. “
Hauptman further notes that a few other chains including Sav-A-Lot and PriceRite have taken a cue from Aldi’s “value oriented” model and are targeting similar consumers. At the same time, however, the Midwest is also seeing growth in the higher-end, full service category of stores that include Mariano’s and Whole Foods.
“You can’t be in the unsustainable middle ground anymore,” he said. “That is exactly the reason Dominick’s suffered so much. They didn’t stand for anything special. They did a lot of things pretty well, but they weren’t known for anything exceptional. Aldi is known for exceptional value and Mariano’s and Whole Foods are known for exceptional quality. So they are establishing themselves in unique areas.”