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Grocery Outlet is going public, and it's about to clash with ALDI

2 months ago by Joshua Fruhlinger in News, Trends

Grocery Outlet ($GROCERYOUTLET) and ALDI ($PRIV_ALDI) are strangely similar: they're both discount grocery stores that are on aggressive growth paths as consumers look to save on food. Their origin stories are eerily similar; they were both founded in 1946 of humble resources. Grocery Outlet was started by James Read in San Francisco. ALDI was launched by brothers Karl and Theo Albrecht in Essen, Germany.

As ALDI grew in Europe, Grocery Outlet found its path in the United States. By 1995, Grocery Outlet opened its 100th store. It now operates 320 locations on both the west and east costs. Meanwhile, ALDI's growth in Europe raged: the ALDI Nord group operates 2,500 stores. The ALDI Süd Group runs another 1,600. It expanded to North America in the past couple decades and now operates 1,873 stores in the United States alone. Overall, ALDI operates more than 10,000 stores worldwide.

Now, Grocery Outlet's and ALDI's paths are now crossing as the former files to go public and raise roughly $100 million in a move that signals the discount grocer is looking to take a bite of ALDI's success. According to Grocery Outlet's SEC filing for its IPO, it plans to expand its store base by 10% annually and ultimately grow to 4,800 stores throughout the United States. Its S-1 filing notes that it plans to add 400 stores in the west and 1,600 in the east, a clear sign it's gunning for ALDI's discount-seeking base.

Grocery Outlet's expansion path

When James Read's sons Steven and Peter took over Grocery Outlet in 1982 following his death, they went on rapid expansion tear, opening hundreds of stores and acquiring smaller chains in their path like Yes!Less in 2003 and Amelia's Grocery Outlet in 2011. It's now run by third-generation Read MacGregor and Peter Read Chairman's son-in-law Eric Lindberg. The chain now consists of more than 330 stores dotting both coasts.

Path to IPO

Grocery Outlet's SEC filing shows that the chain hopes to raise $100 million through its IPO. The company is already profitable, and 2018 sales topped $2.3 billion, up from $2.1 billion 2017. Assuming its growth is on point, and its brand continues to grow, ALDI may have its hands full in Grocery Outlet.

Grocery Outlet is a popular brand. Customers appear to like its no-nonsense approach to overstock groceries in what is a clear contrast to high-end chains like Whole Foods and Gelson's. Perhaps the most telling manifestation of Grocery Outlet's path to success is data related to foot traffic, according to "were here" data from Facebook, shows steady growth.

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Joshua Fruhlinger

Joshua has been writing about technology, lifestyle, and business for over 20 years. He's one of the original writers and editors for Engadget, and still writes a...

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