Aldi spending $30M to revamp 22 area grocery stores

Aldi stores in the Indianapolis area are getting a major upgrade as part of a nationwide effort by the German chain to add more high-end products and shed its image as a discount grocer.

The company plans to invest $1.6 billion to renovate 1,300 stores across the country by 2020, including spending $30 million to modernize 22 locations in central Indiana in hopes of capturing more market share.

In turn, Aldi wants to open 400 stores nationwide within the next three years and up to five more in the Indianapolis area to better compete in the cutthroat grocery industry.

Founded in 1913, Aldi historically has been known for its no-frills approach to grocery shopping, mostly selling non-perishable items under its own brands direct from the pallet. As part of the revamp, those brands are becoming more upscale, as Aldi expands its meat and wine offerings while jumping into the organic and gluten-free markets.

“The simple shopping has been maintained,” said Adam Kastl, Aldi’s director of real estate for Indiana and Kentucky. “But what we’re able to offer today, with our wines, fresh bread and cheeses, folks who haven’t been to us in a while will be pleasantly surprised.”

Aldi is taking its non-perishable store brands more upscale, expanding its meat and wine offerings and jumping into the organic and gluten-free markets. (IBJ photo/Eric Learned)

Shoppers still will recognize a few of the chain’s unique features: Customers must provide their own grocery bags and come with a quarter in hand to secure a shopping cart. They get their 25 cents back when returning the cart—a practice Aldi says helps keep prices low because the stores don’t spend time retrieving carts from parking lots.

But the upgraded stores look much different than the Aldi stores of just a few years back. The Greenwood outpost at 300 S. State Road 135, for instance, has been revamped despite being constructed only three years ago.

It and another Aldi, at 5235 N. Keystone Ave. south of Kahn’s Fine Wine & Spirits, reopened on May 25 after closing for five weeks during the remodels. They are among the nine stores Aldi so far has finished modernizing in central Indiana.

Grocery experts say the investment Aldi is making is money well spent, particularly in the face of growing competition. One of its biggest European rivals, Lidl, a discount grocer that’s also based in Germany, established a U.S. headquarters in Arlington, Virginia, and plans to open 100 stores on the East Coast by the end of the year.

“They eventually will expand throughout the U.S.,” said Mark Perlstein, a retail broker at CBRE. “Aldi is positioning itself to stay ahead of the game.”

Aldi is expanding by 1,100 square feet its 16,000-square-foot stores, removing the drop ceilings in its older locations, and installing more energy-efficient LED lighting to give them more of an open feel.

Gone are the pallets, replaced by more shelving and new product lines.

Kastl, 35, arrived at Aldi 14 years ago fresh from Indiana University. Then, Aldi carried two varieties of wine. Now, it boasts an array of bottles, including its own Broken Clouds Pinot Noir. Priced at $12.99, it was voted Product of the Year in the wine category in the latest Consumer Survey of Product Innovation.

Aldi also has doubled (from 44 square feet) the amount of space it devotes to fresh produce; begun carrying fresh fish to complement its beef, steak and chicken offerings; and added more shelves in its frozen food section by installing taller, sleeker doors.

Shoppers like Laura Kappel of Greenwood are beginning to take notice.

“There’s more variety,” she said. “My son is on a gluten-free diet; that’s what brought us here in the first place.”

Aldi also has added protein bars and powders under its Elevation brand. It’s also expanded its Little Journey toddler line, Heart to Tail pet food brand, and Simply Nature organic and all-natural line.

“Consumers are demanding more of that fresh product and less canned goods,” Kastl said.

The strategy, he said, is to move from a “complementary” to a “full-service” grocer, which seems to be working, said David Livingston, a veteran grocery analyst who runs DJL Research in suburban Milwaukee.

“They’ve always catered to low-income shoppers, with items like peanut butter and, now for high-end shoppers, cashew butter,” he said. “The focus has always been on price, but the last few years they’ve been moving to quality as well.”

Aldi’s share in a typical market runs 3 percent to 5 percent, Livingston said, much smaller than heavyweights such as Kroger, Meijer and Walmart. But if Aldi doesn’t lose market share to new competitors, the upgrades will be worth the investment, he said.

The improvements seem to have piqued the interest of consumers who have traditionally avoided Aldi. At the Greenwood store, a man approached Kastl inquiring about a shopping cart, unaware that he must insert a quarter to dislodge one from the line.

After assisting the man, Kastl asked if he was new to Aldi, to which he responded in the affirmative.

Kastl undoubtedly was pleased.•