Will Arizona start to see lower grocery prices in 2018? If so, you might be able to credit the Aldi lower price effect, if it takes hold here in the Phoenix market like it did in California.
The large German discount grocery retailer Aldi launched nearly 50 stores in California in 2017, and the ripple effect was astounding. Aldi’s lower prices across grocery categories led to a 3% overall price drop in other California’s stores’ prices for basic grocery goods. The same might hold true for Arizona, where Aldi plans to open close to a rumored 30 or more stores, according to a recent article in PHX Business Journal.
It’s all part of the $3.4 billion capital expansion by the German discount food retailer, first announced last summer, to expand into the US market, and have some 2,500 stores over the next five years.
Already, Aldi is a key player in the U.S. grocery store category , with some 1,600 stores under its operations. The chain plans to add some 400 new stores by the end of this year, and these are the ones that could operate in Arizona. According to industry news source Supermarket News, Arizona is light on discount grocery stores. There are some 30 Food City discount stores throughout the Phoenix area, and a number of WinCo discount warehouse grocery stores in our region. Those two store chains still fall below the market leaders Fry’s (26% share of the market), Wal-Mart (20%) and Safeway (10%).
Unlike Frys, Walmart and Safeway (along with Basha’s, AJ’s and Whole Foods), Aldi’s stores are smaller, stocking primarily less than 2,000 goods, most of which are must-have staples for the kitchen, including dairy items, breads and meats. That’s different from the much larger selections offered by competitors. For instance, the larger Fry’s and Safeway stores offer on average about 50,000 products, with a large spread of branded items. Aldi keeps prices low by selling exclusive Aldi brands and providing no-frills service.
Whether or not that Arizona market chooses prices over services and selection remains to be seen. We may know more by the end of 2018 and beyond.