The Major Way Inflation Is Impacting Aldi's Bottom Line

Consumer prices have risen steadily since May 2020, per Statista. At that time the Consumer Price Index, a well-regarded measure of inflation calculated by the U.S. Bureau of Labor Statistics retroactively on a monthly basis, had increased just 0.1% from the prior year.

The latest CPI, for August 2022 (published in September), indicates consumer prices are up 8.3% from the prior year (via BLS). We'd like to say that's shocking, but in reality, it's relatively tame compared with how much the cost of groceries, alone, has risen over the same period. To wit, August's "food at home" index increased 13.5% compared with one year prior. That's the biggest increase in 43 years, per Supermarket News. 

With new data suggesting that food inflation is here to stay, at least for the foreseeable future, consumers have had to make changes in grocery shopping habits. For example, dollar stores are enjoying a heyday, thanks to an influx of new customers, including those with higher incomes, looking for bargains (per The New York Times).

Nevertheless, increased costs have eaten into profits, per Seeking Alpha. This is even true at big box stores like Walmart, which report higher sales but lower profits, per Retail Dive. However, some grocers seem to be suffering less than others. In fact, Aldi US is enjoying a healthy boost to its bottom line of late.

Aldi's business model was built for times like these

Last year, one million households in the U.S. started shopping at Aldi, according to a recent press release issued by Aldi US. Along with that, Aldi US has experienced what it terms "double-digit sales growth," even in the midst of challenging economic conditions (e.g., higher prices leading without commensurate higher wages, per Center for American Progress). According to the press release, what Aldi is doing right is nothing it hasn't been doing all along, which is to say, prioritizing lower prices over aesthetics. 

Specifically, by keeping its focus on offering what it considers to be high-quality groceries, as opposed to spending time and money on aesthetic considerations like stacking its apples into a "fancy pyramid" over in the produce aisle and having a butcher present to cut meats to order over in the meat aisle, Aldi US is set up to keep prices down relative to other grocery retailers. Aldi also keeps its prices lower by limiting the number of products that comprise its inventory.

However, Aldi may wish to keep an eye on its competitor, Market Basket, which usurped Aldi's position as top grocer for inflationary times, per Dunnhumby's 2022 index.