The U.S. grocery market has seen a wave of consolidation over the past few years as regional grocers work to stay afloat in the ever-changing food retail market.
Deep discounters like Wal-Mart Stores, Inc. (NYSE: WMT) and high-end specialty grocers like Whole Foods Market, Inc. (NASDAQ: WFM) have reduced the market share for long running chains that used to serve regional markets.
Now, U.S. grocers are bracing for the expansion of German discount chains Aldi and Lidl, which have already blazed through the UK.
Shopping Habits Change
The UK's largest food retailer, Tesco PLC (ADR) (OTC: TSCDY), used to be the go-to shop for British households. However, the rapid expansion of Aldi and Lidl across the country has satisfied consumers' growing desire to save on groceries.
Tesco shares have fallen 19.9 percent over the past year as the store struggles to compete with low-cost rivals. The firm announced on Monday that it was selling its South Korean business in an effort to stay afloat in the UK.
Asda, Wal-Mart's UK arm, is also struggling to compete, saying that the current climate for UK grocers is "the worst storm in retail history."
Related Link: Save On Groceries Without Sacrificing Health
German Invasion
Aldi and Lidl have upset the UK marketplace, but the German firms don't intend to stop there. Aldi is planning to spend $3 billion in order to open some 600 new stores stateside over the next three years, while Lidl claims it will have expanded into the U.S. marketplace by 2018.
What Does That Mean For Supermarkets?
While Aldi and Lidl are unlikely to do much damage to specialty retailers like Whole Foods, the discount chains have the potential to upset sales at discount stores like Wal-Mart.
Not only will the German supermarkets threaten discount grocers, but much like in the UK, they have the potential to draw shoppers away from traditional supermarkets like Kroger Co (NYSE: KR) and Safeway Inc. (NYSE: SWY).
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