Alternative chains boost expansion.


From Aldi to Whole Foods Market, nontraditional food retailers in recent weeks have unveiled new growth plans that ramp up their rates of new-store expansion and bring them into new markets.

While alternative-format growth has outpaced that of traditional supermarket retailers for several years, the latest growth plans from these operators represent a new level of development.

Batavia, Ill.-based Aldi, for example, the limited-assortment operator that has been one of the fastest-growing food retailers in the U.S., said it would now open stores at an even faster pace, with plans for 650 new stores in the next five years. Its plans also call for the establishment of a Southern California warehouse and headquarters to be located in Moreno Valley, Calif. — marking the chain’s first presence west of Kansas.

Whole Foods Market, meanwhile, has increased its store-count goal to 1,200 — up from the 1,000 units it has been projecting for several years — according to one Wall Street analyst.

Kelly Bania, a New York-based analyst with BMO Capital Markets, said in a report that Whole Foods executives told her they now see the company’s growth potential in the U.S. as 1,200 locations.

This is a key positive for Whole Foods,” Bania wrote, “and suggests the company remains very optimistic about its ability to continue expanding, supported in part by recent success in new markets such as Detroit, where sales are trending twice that of projections.”

Ironically, Bania’s report came out just as some industry observers had been speculating that Whole Foods was running out of room to expand, thanks to a mention in its most recent earnings report of cannibalization impacting some stores’ sales.

Karen Short, a New York-based analyst with Deutsche Bank, said she believes the cannibalization — related in part to the recent conversion of Johnny’s Foodmaster stores in the Boston area — is a short-term phenomenon, and that, in fact, Whole Foods is “significantly underpenetrated nationally.” She conducted a detailed cannibalization and market-saturation analysis, based on the number of Whole Foods locations per person per state, and concluded that the chain has plenty of room to add stores in every state in which it operates.

In addition to the reports of Whole Foods’ expansion potential, other natural and organic and specialty chains also have unveiled plans to enter into new markets, including the fast-growing Sprouts Farmers Market, Natural Grocers by Vitamin Cottage, Lucky’s Market and Fresh Thyme Farmer’s Market.

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