Aldi Uses Private Labels and Lean Stores to Cut Grocery Prices

Aldi is expanding its presence in the United States by offering lower grocery prices through private-label products, streamlined operations and a limited selection of goods. The German discount retailer plans to operate more than 3,000 US locations by the end of 2028, according to Bloomberg, positioning itself to become the country's largest grocery chain after Walmart. Aldi generated approximately $29 billion in US sales in 2024, exceeding Trader Joe's sales, according to the source report.

Its pricing strategy has also prompted established competitors, including Wegmans and Kroger, to announce price reductions as grocery costs continue to pressure American households. Food reporter Deena Shanker found through months of price comparisons that Aldi's prices generally matched Walmart's or came in slightly lower. Research published in late 2023 on Lidl, another German discount grocer with a similar business model, found that competing grocery chains reduced their markups by approximately 7% in areas where Lidl opened stores.

Aldi's low-price strategy relies heavily on products sold under its own brands. More than 80% of its products are private-label goods, allowing the company to avoid paying the markups associated with national brands while keeping prices competitive.

Examples include Benton's Chocolate Sandwich Cookies with Vanilla Filling and Savoritz Golden Round crackers, which resemble familiar branded snacks. By selling its own versions, Aldi controls more of the product's pricing structure rather than purchasing established brands and adding its own retail markup. The company also limits the number of products available in its stores. When the Albrecht brothers took over their family's grocery store in 1946, limited funds and inventory shaped a business model built around essential goods and fewer choices.

Instead of stocking numerous brands, sizes and variations of the same product, Aldi concentrates on a narrower assortment. This approach supports bulk purchasing, reduces storage requirements and limits the risk of spoilage from products that remain unsold for extended periods. The trade-off is convenience. Customers may need to visit another supermarket to find specialty ingredients or less common products that Aldi does not carry, but the retailer's smaller assortment helps keep operating costs down.

Aldi also reduces expenses through basic store operations. Employees frequently place merchandise on shelves in the cardboard boxes used for transportation, reducing the labor needed to unpack and arrange individual products. Stores also forgo background music, avoiding equipment and music licensing expenses.

However, efficiency alone does not explain Aldi's pricing advantage. Other large retailers also reduce costs through operational improvements and purchasing power. Costco, for example, has used packaging redesigns to increase shipping efficiency and reduce transportation requirements.

Aldi's growth has benefited from periods when consumers become more sensitive to household expenses. The Great Recession helped establish its appeal, while more recent food inflation has increased pressure on grocery budgets.

The retailer has also broadened its appeal beyond shoppers seeking the cheapest available essentials. Its rotating middle-aisle merchandise includes toys, German spätzle and seasonal advent calendars containing 24 cheeses, creating an unpredictable selection of specialty goods.

In the United States, Aldi has expanded its assortment selectively to include higher-end options, such as premium wine and Honeycrisp apples. The company combines these products with its discount-focused core selection while maintaining the limited-assortment model that underpins its pricing strategy.