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2 German grocery chains are preparing to take over the US — and Kroger should be terrified

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Customers flock to the opening of a new Lidl store.Business Insider/Hayley Peterson

German grocery chains Aldi and Lidl are gearing up for a major US expansion with lower prices than Kroger or Walmart.

Kroger’s prices on private label items are roughly 31% higher than those of Aldi or Lidl, according to channel checks done in Virginia and North Carolina by Gordon Haskett Research Advisors. The analysts called the gap “surprisingly high” — a dangerous sign for Kroger.

Walmart’s prices were about 5.3% higher than the German “hard discount” grocery chains.

Aldi has roughly 1,600 stores in the US, while Lidl has 25 locations.

Earlier this year, Aldi announced it is aiming to become the third-biggest grocer in the US by 2022 through a $3.4 billion expansion to 2,500 stores. Lidl is planning on opening 150 US stores by 2018.

Both Lidl and Aldi are known for their rock-bottom prices, which threaten established supermarkets competing for budget shoppers. The two chains rapidly expanded in the UK over the last several years, forcing other grocers to slash prices.

New Aldi
Displaying products in their shipping cartons makes restocking easy and keeps prices down.Business Insider/Hayley Peterson

Aldi and Lidl’s sales are skyrocketing in the UK, with Aldi’s sales increasing 17.2% and Lidl growing 18.9% in the most recent quarter, according to Kantar Worldpanel data. For comparison, sales at Tesco — the UK’s biggest grocer — grew 3% in the same period.

Both German grocers keep prices low by limiting inventory to a selection of private-label items. Kroger and Walmart, on the other hand, carry a wide range of brands and variations on similar products.

Aldi and Lidl also emphasize efficiency over aesthetics to keep prices down. One cost-cutting technique is to display items in their shipping cartons to make restocking quick and easy. Lidl also requires shoppers to bring their own shopping bags and bag their own groceries.

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