Watch out Wal-Mart, Aldi is ready to storm the US

by Beth Pinsker Jan 13th 2009 3:00PM

Up until very recently, Wal-Mart had looked unbeatable. Nobody could touch it: Not the recession, not competitors, not its own employees and their various lawsuits. But now it seems the veneer is cracking,and the Wall Street Journal (subscription required), for one, is piling on with the speculation that Aldi may topple the giant retailer.

10 Top Store Brands

The German-based Aldi is making a new push into the U.S. market. The store is almost exclusively filled with its own brands, and has prices that are lower than Wal-Mart's.

Martin Ruetschi, Keystone / AP

Trader Joe's, which is owned by Aldo, has house brand items that regularly win awards and notice, from its Two-Buck Chuck wine, to items like chicken noodle soup low fat canned or refrigerated. Consumer Reports picked its granola as one of the top supermarket products last year, along with its canned peaches.

Cassandra Shie, AOL

Wal-Mart's profits had been going up and up during this economic crisis until recently, and one key ingredient to that success has been relying on house brands like this glass cleaner, but also for organic foods, paper goods, toiletries and household staples.

Cassandra Shie, AOL

7-Eleven's new private-label snacks include items like beef jerky, trail mix and gummi worms that will be available for hungry snackers who want a treat for their wallets as well as their stomachs.

7-Eleven, Inc. / AP

The new 7-Eleven line joins a host of upscale private label store brands that are giving a new life to generics, which used to signal "low quality" to consumers. Shoppers at stores like Whole Foods regularly choose the store's house brands, especially its 365 Organic line, over name-brand products.

Jeff Haynes, AFP / Getty Images

Supermarkets have long been the haven of private label brands, but rather than just sticking to things like paper towels and rice, markets like Publix are offering upscale items as well.

Luis M. Alvarez, AP

But supermarkets also still stick to the basics, like paper towels. Here, a shopper passes by Kroger brand paper towels inside the a Kroger Food & Drug store.

David Kohl, AP

Wegman's and many other supermarkets and drug stores rely on generics for over-the-counter drug sales. There's also a price war going on for generic prescriptions, with Wal-Mart, Target and CVS -- to name just three outlets -- offering 90-day supplies for $10 or under.

Cassandra Shie, AOL

Target also relies heavily on its house brands to appeal to cost-conscious consumers. Here, Target's house brand cereal shares shelf space with countless other cereals in the Super Target store in the east Denver suburb of Glendale, Colo.

David Zalubowski, AP

Costco has long had success with its Kirkland Signature brand, which offers everything from paper goods to meat at a much lower price than brand names.

Tim Boyle, Getty Images

The main basis of this bold prediction is that Aldi, a German-based discount supermarket that has outlets in 18 countries, mostly in Europe, beat back Wal-Mart in Germany so badly that Wal-Mart abandoned its plans there two years ago because shoppers found their goods too expensive.

What could possibly make a store less expensive than Wal-Mart?

The Aldi formula is to sell store brands almost exclusively. Shoppers in Europe have flocked to these markets -- In Germany, 90% of shoppers make their way to Aldi -- which have been traditionally low on frills. In the U.S., the Journal says, "prices are between 15% and 20% less than Wal-Mart and 30% to 40% cheaper than regional chains."

American shoppers are getting used to the idea that store brands can be good stuff and are flocking to even the most basic private labels because of price differences. Aldi is the master of store brands. The Journal buries this detail near the bottom, but Aldi owns Trader Joe's, and those store brands regularly win awards.

The German chain has about 1,000 outlets in the U.S., but plans to expand fast. Trader Joe's is already taking over the New York area. The Journal says that Dallas-Fort Worth is the first target area of expansion, with 25 new stores set to open. But you may be able to find an Aldi near you, even if you haven't heard much about it before.

	Are Generics Worth It? We've taste-tested top products and their generic equivalents to tell you which ones are worth trying and which ones you should skip.