The U.S. grocery industry has reached an interesting and uncertain crossroads. In 2017, German discount grocery retailers ALDI and LIDL announced plans to open hundreds of new stores across the United States. ALDI plans to open 900 stores by 2022 and LIDL to open 100 by the end of 2019. Also in 2017, online retail giant Amazon bought Whole Foods, and has been rolling out a series of experiments in ordering, pricing, and delivery in stores across the country. And trends like meal kits, farm shares, and app-based ordering and delivery have added further wrinkles for incumbent grocers to contend with.
Why U.S. Grocery Chains Need More (and Better) Store-Brand Products
The U.S. grocery industry has reached an uncertain crossroads, facing competition from many sources, but especially German discount stores ALDI and LIDL, who are aggressively expanding across the United States. Whether U.S. retailers will maintain their market share hinges on how they use private-label products (also called white-label goods or store brands) to fight back. In France, grocers were able to repel ALDI and LIDL by offering private-label goods that were both affordable and high quality, but in the UK, retailers chose to offer super-budget private-label items. They might have been cheap, but they were very low-quality, and consumers punished them. The U.S. doesn’t have a lot of experience with private-label goods, so American retailers will have to come up to speed quickly if they hope to maintain their advantage.