German grocery chain Aldi to invest $3.4 bn on planned US expansion

German grocery chain Aldi Inc yesterday said it would invest $3.4 billion on its planned US expansion. The expansion would see the number of stores increase to 2,500 by 2022.

Aldi's operations extended across 1,600 US stores and earlier this year, it said it would add another 400 by the end of 2018 and spend $1.6 billion to remodel 1,300 of them.

The investment will increase Aldi's capital expenditure to at least $5 billion so far this year and comes at a time of intense competition and disruption in the industry.

Meanwhile, on 15 June German rival Lidl will open the first of its 100 US stores. Lidl had said in May that it would price products up to 50 per cent lower than those at its rivals.

Wal-Mart Stores Inc is testing lower prices in 11 US states. The world's biggest retailer planned to spend about $6 billion to regain its title as the low-price leader, analysts said.

According to commentators, Aldi and Ldil were likely to disrupt the US grocery market, which had seen 18 bankruptcies since 2014. The two chains were also challenging established UK grocers like Tesco Plc and Wal-Mart's UK arm, ASDA.

They add the expansion move by the German private-label giants could add to the pressure on conventional retailers like Wal-Mart Stores Inc and Kroger Co to cut their prices. They point out that the new competition in the low-margin industry was arriving during a deflationary spiral that had seen food prices drop for 17 straight months, the longest such streak in more than 60 years.

''There's a tremendous amount of value at stake that will shift to Lidl and Aldi,'' said Ken Knudson, a Bain & Co partner, Bloomberg reported. ''Traditional grocers can't afford to lose sales right now given how competitive it is -- it will be very disruptive.''