Aldi’s Move Into the Organic Grocery Space Will Win Millennial Love

Posted by: Greg Vodicka

Five years ago, if you walked into a grocery store looking for the top-of-the-line organic product you were directed to a small section that carried the all-natural products.

Today, that is no longer the case.

Millennial passion for better-for-you products has created a new environment where top brands are focusing on the idea of healthy not wealthy. As millennials have become more invested in organic, GMO-free food products, stores have had to adapt their product offerings in order to remain competitive with health giants like Trader Joe’s and Whole Foods. However, the struggle arises when stores have to charge a premium for these healthier products in order to keep up. Or do they?

Aldi, a low cost grocery store chain, recently stepped into the organic-food space and proved that specialty retailers no longer have exclusivity on offering better-for-you foods. Aldi might not be the first name that comes to mind when you think market influence, however, the brand is becoming one of the world’s biggest food retailers by offering, on average, a 30 percent lower price than even Walmart.

Our research continuously shows that millennials are budget friendly shoppers and often look at price before quality when making a purchase (download our free American Millennials report HERE). However, that does not negate the major health trends that are picking up steam.

As Aldi steps into the healthy food space, it’s hard not to recognize how mainstream the better-for-you market has become. While organic foods were once considered a premium, modern consumers demand a product offering for the healthy, not wealthy – undoubtedly a trend fueled by millennial consumers and their pragmatism in the grocery isle.

As a result of increased access to brands, millennials are less likely to be overwhelmed with an abundance of choices. That being said, these active prosumers value efficiency, reflected in the online retail trend. Beyond just brick and mortar, grocery brands need to compete with the convenience plays of digital marketplaces like Amazon Prime Pantry. While brick and mortar one-stop-shops once epitomized efficiency and convenience, modern consumers are recognizing that they might not need everything in one superstore.

The organic push is just one bet Aldi is placing on its future. While there are already about 1,500 stores in the US, Aldi plans to open roughly 500 more stores over the next two years as part of a $3 billion expansion.

Other retailers are seeing the signs too; Whole Foods plans to launch lower-cost chain, 365 By Whole Foods Market, within the year, and Walmart will continue to roll out openings of its Neighborhood Markets to compete with the rapidly expanding private label organic offering such as Kroger’s Simple Truth.

So, what make’s Aldi so unique?

While other grocery retailers compete on product selection, customer service, and in-store experience, Aldi focuses on keeping prices low by limiting inventory with a lean product offering. Think of Aldi as a curator of selective products rather than a mass merchant focused on offering something for everyone. In this way, Aldi creates a stronger competition against what makes the digital marketplace of Amazon Prime Pantry stand out.

Aldi’s narrowly focused efficiency model also goes beyond its product offering. Most of the store’s products are displayed in their shipping cartons to make restocking quick and easy meaning fewer workers on the floor. Aldi also invites customers to bring their own shopping bags, bag their own groceries, and pay a deposit to use a cart, redeemable once returned, so Aldi doesn’t have to pay employees to round up carts.

Sure, some of these missed luxuries might negatively impact the shopper’s experience, but it’s part of Aldi’s promise of efficiency; both in cost and experience. For shoppers looking for a low cost alternative to the health food movement, this is a step in the right direction.

As the move into organic better-for-you products becomes more permanent, it begs the question, in the next five years will Aldi organics become the norm and we will see a small section in stores that sell artificial flavoring and processed foods?

CLICK HERE for our free Secret Sauce For The Modern Brand report

About Greg Vodicka

Greg is the Strategic Growth Director at Barkley and one of the founding members of the FutureCast team. He believes that we can no longer rely simply on trends and insights to be indicative of...See Greg's full bio.

hidden