By Nandita Bose
CHICAGO (Reuters) – German discount supermarket chain Lidl is set to open its first set of U.S. stores this summer, raising the stakes for American grocery chain operators who have been caught in an intense price war.
Lidl said in February it planned to open its first 20 U.S. stores in North Carolina, South Carolina and Virginia, with 80 more to follow in the United States within the first year.
Lidl’s entry comes at a time when Wal-Mart Stores Inc <WMT.N> is running price tests in 11 states, pushing vendors to undercut rivals by 15 percent. The world’s biggest retailer is expected to spend about $6 billion to regain its title as the low-price leader, analysts said.
Another rival, German discounter Aldi Inc, is aiming for prices 21 percent below its U.S. competition and is aggressively expanding its presence.
Lidl and Aldi have already upended Britain’s grocery retail market, hurting incumbents like Tesco Plc <TSCO.L> and ASDA, the British supermarket arm of Wal-Mart.
Lidl (which rhymes with “needle”) is owned by Germany’s privately held Schwarz Group. It operates more than 10,000 stores in 27 countries.
The German chain’s U.S. CEO, Brendan Proctor, will address Lidl’s U.S. expansion plans at a New York press event on Tuesday.
According to the company’s website, it is hiring workers in 38 cities in the eastern U.S. states of Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina and Virginia.
“The growth of Aldi and Lidl will require existing U.S. grocery retailers to start asking themselves how they can do things differently to control costs – from marketing and merchandising to operations and logistics,” Bill Bishop, co-founder of retail consultancy Bricks Meets Clicks, said in an interview on Friday.
Lidl is expected to post U.S. sales of roughly $1 billion in 2018, $2 billion in 2019 and $4 billion 2020, assuming it opens just under 100 stores per year, according to a recent note by retail think tank Fung Global Retail and Technology.
This would put Lidl in close range of U.S. grocery chains like Ingles market, which had revenue of $3.2 billion in 2016; Sprouts Farmers Market with $4.3 billion in sales last year and SuperValu Inc <SVU.N>, which posted sales of $4.8 billion, the report said.
Analyst estimates suggest Lidl is eyeing more than 330 U.S stores by 2020. The retailer has opened three distribution centers in Maryland, North Carolina and Virginia.
(Editing by Matthew Lewis)