How a Major Grocery Store Chain Can Dramatically Lower the Cost of Food

Summary

Odd Lots Podcast Summary

Episode: "How a Major Grocery Store Chain Can Dramatically Lower the Cost of Food"
Date: July 3, 2026
Hosts: Joe Weisenthal and Tracy Alloway
Guest: Scott Patton, Chief Commercial Officer, Aldi US

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Episode Overview

This Odd Lots episode dives into the economics, logistics, and operational strategy behind Aldi—a major grocery chain famed for keeping prices low—amidst the launch of a new 25,000 sq ft Times Square location. Joe Weisenthal and Tracy Alloway chat with Aldi US's Chief Commercial Officer, Scott Patton, exploring how Aldi disrupts conventional grocery retailing through radical streamlining, private labeling, and relentless efficiency, providing insights into how this enables passing substantial savings on to consumers even in expensive urban centers.

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Key Discussion Points & Insights

1. The American Grocery Landscape & NYC Realities

• Joe and Tracy relate their own grocery shopping experiences, noting monotonous choices, high prices, and the lack of affordable, high-quality stores in Manhattan compared to places like Texas (H-E-B) or Japan.
• Tracy notes the shock value of Manhattan pricing:
  • "I grabbed like a cup of soup... basically 12 freaking dollars." (03:27) — Tracy Alloway

2. Why Times Square? Aldi’s Urban Expansion

• Aldi opens its second Manhattan store in a brand new mixed-use building near Times Square, an unusual location for a budget-oriented grocer.
• Scott Patton explains rationale:
  • Huge tourist and commuter traffic, plus ecommerce potential.
  • Visibility AND profitability: "That would be a very expensive billboard if we weren't going to sell a lot of groceries." (08:48)

3. Supply Chain: From Field to Manhattan Shelf

• Unlike traditional “buy local market” approaches, Aldi contracts directly with growers years in advance, specifying varieties to be grown for their stores, ensuring quality and supply predictability.
• The urban delivery challenge: Smaller trucks, night deliveries, multiple drivers — "It's a logistical symphony to get it done." (11:02)

4. Efficiency, Fewer SKUs & Standardization—The Aldi Model

• Aldi carries ~2,000 SKUs per store, compared to typical grocers’ tens of thousands (e.g., just 2 ketchups vs. 30–40 elsewhere).
  • "Do you really need 40 choices for ketchup or is two... enough?" (19:28)
• Most products are private label; iconic national brands are included only when data or “Grandma’s recipe” loyalty justifies it.
  • "Sometimes grandma has handed down the recipe and she calls for a specific brand in her recipe..." (16:39)
• SKU reduction translates into dramatic labor and cost savings. Restocking is simplified (products arrive in display cases, not unit-by-unit), and shelf turnover is rapid.
• Consolidation extends to package design—multiple barcodes on every Aldi item allow for ultra-fast scanning (and saved labor).
  • "We can literally restock all of our olive oil in probably 2% of the time that it takes to stock another store." (22:56)

5. Digital Price Labels & Pricing Policy

• All stores use digital shelf labels, changed weekly—not dynamic pricing.
  • "We do not do dynamic pricing. We would never do dynamic pricing." (24:05)
• Prices are identical in New York and Connecticut. Aldi claims: “a pleasant surprise for those in Manhattan when they walk in and see... chicken breast for $2.19 a pound.” (24:26)
• Hundreds of labor hours saved companywide from no longer changing paper tags.

6. Aldi Finds/Ile of Shame: Retail as Treasure Hunt

• Weekly rotation of ~100 “special buys” (non-grocery/seasonal/general goods) creates excitement, viral Facebook followings (the “Aisle of Shame”).
  • “I'm so ashamed I didn't stay on budget.” (25:48)

7. Responding to Social Media & Food Trends

• Viral recipes can cause surges in specific ingredient sales (e.g., feta cheese, sourdough) and Aldi’s private-label control enables unusually fast supply response.
  • "We go directly to the manufacturer... it can be as quick as a couple of months." (30:47)

8. Barcodes: The Hidden Engine of Speed

• Aldi was late to scanning because employees were once faster than scanners (all had to memorize prices!):
  • "Up until 1998, all of our employees memorized all of the prices..." (32:31)
• Now, packages feature many invisible barcodes for fast checkout; most competitors (selling brands) can’t or won’t replicate on their products.

9. Self-Checkout vs. Staffed Lanes: Purposeful Choices

• Aldi’s checkout is highly optimized; self-checkout’s marginal speed gains for their system are small. For Times Square, they committed to staffed registers but designed the space to allow for future changes.

10. Product Design, Branding, and the Evolution of Private Label

• Aldi is rebranding its plethora of internal label names down to about 23 for clarity, putting "Aldi" on the front—balance between variety and uniformity is crucial.
  • "Right now we had over 90 different, we'll call them Aldi brands... So we're switching from 90 brands down to about 23..." (46:17)
• Patton contrasts old-school “generic” with Aldi’s modern private label:
  • "Generic... was actually poor quality... not a good quality. And it was labeled appropriately because it looked terrible." (48:22)

11. Grocery Macro Environment & Consumer Behavior

• Food inflation and high beef prices are nudging consumers toward cheaper alternatives (chicken, turkey, beans) and more store-brand purchasing.
• Social media/GLP-1 drugs/protein/fiber trends are directly impacting sales:
  • "We're rolling out a protein sparkling water. Anything with protein right now is accelerating." (44:13)
  • "Bean sales... we're seeing a resurgence in some of these categories..." (44:43)

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Notable Quotes & Memorable Moments

• On the average Manhattan grocery store:

  • “High end and expensive and low end and expensive.” (03:44) — Joe Weisenthal

• On SKU management:

  • “Do you really need 40 choices for ketchups or is two...enough?” (19:28) — Scott Patton

• On logistics:

  • “It's a logistical...symphony to get it done.” (11:02) — Scott Patton

• On responding to “Aisle of Shame”:

  • “It was shame in a good way... we do have a Facebook group started by our fans and it's called the Isle of Shame.” (25:48) — Scott Patton

• On private label branding transformation:

  • “So we're switching from 90 brands down to about 23 now... We're going to put Aldi on the front of the package because Aldi is a great brand.” (46:17) — Scott Patton

• On price memorization (“the old days”):

  • “I hope you've memorized all the prices by now... No, no, no one told me about that... up until 1998, all employees memorized all of the prices and entered them by hand...” (32:25) — Scott Patton

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Timestamps for Key Segments

• Grocery Experiences & NYC Context: 01:51–05:31
• Why Times Square for Aldi? 06:52–08:48
• Produce Logistics & Distribution: 09:38–11:29
• Efficiency (SKUs, Private Label): 12:59–16:40 and expanded 19:28–23:43
• Barcode & Checkout Innovation: 31:24–36:24
• Aldi Finds/Aisle of Shame: 25:20–28:17
• Private Label Branding Shift: 46:08–48:19
• Impact of Inflation & Food Trends: 41:41–45:53

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Conclusion & Lasting Impressions

The episode demonstrates how Aldi’s super-lean, data-driven system—private labeling, ruthless SKU selection, direct sourcing, unique store operations, and focus on labor-saving tech—lets them offer significant price advantages, even in costly, congested urban locations like Times Square. Aldi’s business model is portrayed as a disruptor in a traditional industry, showing that strategic simplicity can unlock real savings, especially as economic and social forces reshape what customers want and how groceries get to the shelf.

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Memorable Closing Exchange:
"We talked about how... you can go to a place... and see 45 different versions of Kit-Kats... But then also it's like, okay, here is a company that has made a choice to just go in completely the opposite direction.” (51:56) — Joe Weisenthal

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For grocery, business model, and inflation nerds, the episode is a detailed look at how design, logistics, and branding can dramatically lower costs for shoppers, even in America’s toughest markets.

Transcript

[Tracy Alloway]

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[Joe Weisenthal]

Bloomberg Audio Studios Podcasts Radio News. Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

[Tracy Alloway]

And I'm Tracy Alloway.

[Joe Weisenthal]

Tracy, can I tell you something? I don't know if I've brought it up on the Pole podcast before, but I love grocery stores. I love like visiting different kinds of grocery stores. I love produce aisles. I like seeing new ones. If I'm like in a rush or whatever. It's not so pleasant. But I really like grocery stores.

[Tracy Alloway]

How often do you do the weekly grocery shopping? Joe?

[Joe Weisenthal]

Well, so we usually buy online, but I go to Key Foods, which is in my neighborhood, probably once or twice a week for things and actually even those quick runs I actually enjoy. Obviously unboxing is not fun and there are aspects of it that are fun but like as an interesting experience and I like food.

[Tracy Alloway]

I will say I'm starting to become cynical about the American grocery experience, which is terrible because I didn't go to American grocery stores for a really long time.

[Joe Weisenthal]

So what years are you talking about? Like when you were in Japan?

[Tracy Alloway]

So I was, I grew up in Japan. I remember going to grocery stores when I came back to Chicago in middle school and just being absolutely wowed by the variation that was there. You know, like literally a kid in a candy store running down the cereal aisle going, oh, my God, I've never seen any of these things before. Doing the whole. What's the famous.

[Joe Weisenthal]

The Elton thing. So you could get how. At least they spark joy.

[Tracy Alloway]

Of course. Okay, of course. But now I think I take them as an accepted.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

Because now.

[Joe Weisenthal]

I'm sorry. Oh, you get yourself for sure.

[Tracy Alloway]

I shop a lot at Walmart in Connecticut, which is sometimes a soul. Soul sucking experience. I shop a lot at the grocery store that we're about to discuss. I shop a lot at the nearest grocery store in Manhattan.

[Joe Weisenthal]

Which one's that?

[Tracy Alloway]

That one's a Morton Williams.

[Joe Weisenthal]

Okay, yeah, yeah.

[Tracy Alloway]

And that one. I'm trying to be diplomatic. It's just depressing the price. I ran in there once and I grabbed like a cup of soup, like freshly made soup, because I was having dinner. A girl dinner. Basically 12 freaking dollars.

[Joe Weisenthal]

I know the Manhattan specific grocery experience, I would say uneven, to put it best. There are some decent ones, but there is a lot of places that. That are like high end and expensive and low end and expensive. You know what I'm saying? Like, you go to these places and they're like, they're sort of shabby and they're dirty and stuff like that. You're like, well, at least I'm getting a deal. And then it's like, actually, no, it's just a worse experience. And also it's expensive.

[Tracy Alloway]

This reminds me also when. When my husband first came over from the States to join me here in New York, the first place I took him to was the Whole Foods on Columbus Circle. Because I just wanted to show him, look at this grocery store. It's crazy.

[Joe Weisenthal]

You know, there's a new Wegmans at Astor Place, which is where I get off. And I really expected that to become part of my routine because I get. That's where I get on the subway. I like it, it's cool. And they have a lot of stuff, but it hasn't become part of my routine. So, like, there's opportunity still, I would say, for the better Manhattan and just the better grocery store experience still.

[Tracy Alloway]

It is very true that Manhattan has a shortage of, let's say lower priced grocery.

[Joe Weisenthal]

Lower priced grocery stores.

[Tracy Alloway]

Right.

[Joe Weisenthal]

That you want to shop at.

[Tracy Alloway]

We have a lot of Whole Foods. Well, we have Trader Joe's maybe the closest, but we have a lot of Whole Foods. A of wegmans I'm not even going to mention what's the, the one with

[Joe Weisenthal]

the G. Oh yeah, Gris.

[Tracy Alloway]

There we go. Gris, Morton, Williams, places like that. But we don't really have, you know, we definitely don't have a Walmart.

[Joe Weisenthal]

Well, in Texas we have hb, which everybody loves. It's like one of the most beloved brands I think in the region. They're like super and they're huge and they're clean and they have good prices and incredible variety. And a sushi bar and a barbecue pit in the store. Anyway, there's a new grocery store opening up. We're recording this June 18th. Tomorrow, as of the time, we're recording this. But tomorrow, like right in Times Square, Right adjacent to Times Square, there's a brand new Aldi, which is I guess where you shop sometimes when you're in Connecticut.

[Tracy Alloway]

Yeah, so this is very unusual in my mind because you wouldn't expect a giant grocery store to open just off Times Square. I think the new location is something like 25,000 square feet, which is just absolutely huge, especially for that area. I can't even imagine actually finding the space for something like that. And then secondly, you wouldn't necessarily expect, I don't want to say a discount grocery store, but you know, like a lower priced grocery store that competes squarely with the Walmarts, the costcos of the world.

[Joe Weisenthal]

Totally. And they are, I think, substantially cheaper. You know, I searched this. They claim that they're cheap, but also the third party.

[Tracy Alloway]

Well, we should just say we already went on a tour.

[Joe Weisenthal]

Yeah, we're a little biased because also they gave us a tour. So this is the disclosure. They gave us a tour and they had all these like little snacks out for us and stuff like that. So I'm already predisposed, you know, but

[Tracy Alloway]

on the plus side, we have personally witnessed, yes, ground wagyu beef for 5.99. It does exist, but I haven't tried it yet.

[Joe Weisenthal]

Anyway, let's get to the conversation. Let's talk about opening a grocery store. Let's talk about like, how do you actually wring prices out of the system? Because that is the story and that is what's exciting for us. We're going to be speaking with Aldi US Chief Commercial Officer Scott Patton. Scott, welcome to the podcast. We saw you yesterday inside the new Aldi and now you're here on the podcast. So thank you so much for joining us.

[Scott Patton]

Thanks for having me. And so glad you could make it out to the store yesterday. It was really awesome experience to Walk through, really, Times Square. All the right off the Times Square. Amazing.

[Joe Weisenthal]

Let's just talk about what is, what does the Chief Commercial Officer do? Tell us about, like what's your actual job and your career at Aldi?

[Scott Patton]

So I actually started with Aldi over 30 years ago. I've been through all the various operations from running stores to running a warehouse. And I joined the buying department about 11 years ago. So I'm responsible for all of the products in the stores and that's what I do. We work with the teams who develop the products and. And get them onto the shelf.

[Tracy Alloway]

So tell us about the new location. Because as we were discussing Times Square, not necessarily an intuitive place to start a giant grocery store.

[Scott Patton]

Yeah. So midtown Manhattan. That's our second location in Manhattan. You're right. It's not intuitive.

[Joe Weisenthal]

Where's the first one?

[Scott Patton]

First one is up in Harlem.

[Joe Weisenthal]

Okay.

[Scott Patton]

Yeah. So we have 14 in the Chicago. I'm sorry, 14 in the New York area, one in Harlem, Midtown now, and another opening in Harlem next year. And two blocks off of Times Square. You're right. It's a very unique location for us. But a lot of traffic, we have a lot of tourists, we have a lot of commuters. There's going to be a lot of E commerce. And it's just a great location.

[Joe Weisenthal]

It's a cool space. What was there before, you know, it's

[Scott Patton]

a brand new building. It's a brand new building with residential on top and we've taken the ground floor.

[Joe Weisenthal]

Do you think that's an appeal? Like, I think I would like to live above a grocery store. It seems like a nice, like amenity.

[Scott Patton]

It's great. I mean, there's going to be residential above us and unbelievable apartments. And to have that convenience for the people who live there, it's going to be great.

[Tracy Alloway]

Yeah. A lot of cities in Asia.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

As you know, now have mixed use building.

[Joe Weisenthal]

Yeah, I love that. I think it's like some of them

[Tracy Alloway]

even have daycares on the bottom and then the grocery store dry cleaner, like you take care of your entire life within one compound.

[Joe Weisenthal]

I'd be totally down.

[Tracy Alloway]

Yeah. So the Times Square location, I get that there's a lot of foot traffic, but how much of it is just creating a showcase for the Aldi brand in an area where, you know there's going to be a lot of visitors, a lot of tourists, versus how much of it is the expectation that this is going to be a really busy location that's actually making profit.

[Scott Patton]

There's no doubt that having that Visibility is going to be great for the brand. But to be fair, we intend to be very profitable at the store. We're going to have a ton of customers that would be a very expensive billboard if we weren't going to sell a lot of groceries.

[Joe Weisenthal]

We've done an episode. We've done a few, like, produce episodes. We recently did an episode on tomatoes with one of the senior VPs at Beldor. That was amazing conversation. We did a conversation a few years ago about the Hunts Point delivery distribution center in New York and maybe why it's not the optimal sort of node for delivery. What is the supply chain between? For example, when we entered the store, we were, like, in the produce aisle and tried some grape, some blueberries that are very nice. Why don't you walk us through what is the supply chain from, like, where that grape comes from to where the distribution center is to the store and that journey.

[Scott Patton]

And that's a prime example of how we buy a bit differently. So we have over 2,600 locations. So what does that mean is we can't just buy from the local market. We start with the grower. I have the opportunity in my role to visit the growers. So we've been to the grape growers in California, in Mexico and Chile, and it really starts probably three to four years in advance. In partnering with these growers, we go to the fields, we try their varieties. They're all sampled out, and we decide as a company, which varieties do we want them to grow for us From There, they start growing. We have the contracts, and they grow specific plots dedicated to our business. So of course we have the harvest. It goes straight from the grower into our distribution facilities and then to our stores, often the next day. So it's a complicated supply chain, but the key to success is going all the way back to the origin. So whether you're growing grapes or berries or apples, those relationships with the farmers and the growers, that's actually what makes it. That's what makes it special.

[Tracy Alloway]

But in terms of the actual distribution into New York, because we've had conversations with not just grocery grocers, but people who are trying to build things in New York, and they talk about how hard it actually is to get bulky things into the city. How are you trucking in? I assume truckloads of groceries every day. And where are they coming from?

[Scott Patton]

So we come from South Windsor up in Connecticut. We have a truck that comes over. We come at night because of the congestion. And you're right, it's very difficult to Get a truck, especially into midtown, we have to have a bit of a shorter truck. We actually have to have two drivers.

[Joe Weisenthal]

You say a bit of a shorter truck.

[Scott Patton]

It's a bit of a shorter truck because they can't hit the turning radiuses. So for instance, at this store, when the truck comes in to deliver, it's a shorter truck. There's two drivers, one to kind of guide and watch the parking and make sure we can cut the radius back in another one to unload the groceries. So it's a two team just to deliver groceries. And this store is going to get three to four truckloads a day. So it's a lot of effort, it's a lot of manpower, and it's a logistical. Really kind of a symphony to get it done.

[Joe Weisenthal]

Let's just talk more about that, because when I think, okay, why do we pay a lot for groceries in New York City? Intuitively, that makes a lot of just even the trucking component and the fact that it's. You go out to the suburbs and they don't have to have like a guy saying, and the beep, is there a car? There is a kid on a scooter or something like that there. Talk to us a little bit more, figuring that component out and the two drivers and like how that sort of, you know, the math of what that contributes or saves in terms of groceries.

[Scott Patton]

Yeah. And with everything we do, and we're really focused on efficiency. You mentioned sushi bars and barbecue pigs before. So we don't have those. But when we're going to put a truck, you know, we're going to two guys onto a truck, two drivers onto a truck, three to four times a day. That goes into the calculus. Of course, we look at the rent we're going to pay. It's more expensive in Manhattan, no doubt about it. But then we look at the sales. It's just a math equation. We make sure that, yes, there's going to be extra costs on delivery, there's going to be extra cost on properties. That's just a fact. But it goes into the equation.

[Tracy Alloway]

So, okay, you've got trucks delivering the groceries overnight. You have a huge space. I should just emphasize, we saw it, we ran through the aisles because we never get to run through groceries. I'm going to speed it up two times for you. It'll look really good. Yeah, that's right. You're expecting a lot of people in that location. How are you going to be restocking the shelves? Because it's a big space, but there are A lot of people in New York, I imagine things will literally be flying off the shelves to some degree. What does that restocking process look like in a crowded city?

[Scott Patton]

Great question. And we have awesome employees at the store. First and foremost, some unique things about how we restock our stores is all of our product comes in a display case. So again, we go back to those supply partners and we say, okay, how can we restock the organic greens? How can we restock the spinach? They put it into a display ready case. We take that case.

[Tracy Alloway]

It's a box where you can see the items.

[Scott Patton]

Yeah, it's a tray. So our staff can restock case after case after case and not have to stack it unit by unit by unit. So we're gonna restock that produce three to four times a day, but we can do it really, really fast.

[Tracy Alloway]

Jo, did you ever watch Superstore?

[Joe Weisenthal]

No, what was it?

[Tracy Alloway]

I never heard about the show until recently. It's basically a thinly veiled sitcom of workers who work at Walmart.

[Joe Weisenthal]

Oh, I probably enjoy.

[Tracy Alloway]

They don't explicitly say Walmart, but it's obviously Walmart and I swear to God, 90% of their time is stocking shelves like unit by unit. That's basically all they do. And talk while you're.

[Joe Weisenthal]

Is it good? Like, should I watch it?

[Tracy Alloway]

It's actually a really. It's sort of like the Office but for giant retailers.

[Joe Weisenthal]

Who wrote the novel about working at Target that we should have. Oh, remember someone recently in the last few years wrote a. It'll come back to me. We should have that.

[Tracy Alloway]

You should watch that one. It's wholesome viewing.

[Joe Weisenthal]

Wait, let's talk about. We're going to get to. I know a big part of your thing is that a substantial number of SKUs are private label. But before we get to the private label and how that business works, I just want to like sort of clarify one thing. So one of the brands that we noticed that is on your shelves, Sweet Baby Ray's Barbecue Sauce, My favorite. And so what you're saying is you will work with Sweet Baby Rays. They're not going to like have like a custom Aldi Sweet Baby Rays or change the flavor, but the talk to us about the degree to which a, a brand provider will modify the sort of delivery package so that it's like ideal for your logistical setup.

[Scott Patton]

Yeah, yeah. We are mostly private label but we do have some brands like Sweet Baby Rays and we them, they will take that case and they'll do a display ready case just for us. So unique to Aldi. And they'll even go a step beyond the display ready case. They'll put two or three flavors into that case. So for us, again, it's one shelf spot, it's one pallet in our warehouses, it's one, one slot and we can get two to three flavors out of that. So we work with the brands as well, but really within our system.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

How do you decide which brands to actually have in store versus when to go private label? Because as you say, like there are a lot of recognizable things. Sweet Baby Ray's, Kraft.

[Joe Weisenthal]

We saw Hellman's Mayonnaise, but we didn't see Heinz ketchup. So talk about that.

[Scott Patton]

Yeah, there's going to be some what we would call iconic brands and we know customers love some of their brands. Now in this market, it's going to be Hellman's. If you go down south, it's going to be Duke's.

[Tracy Alloway]

The Great American Divide Overhead. Mayonnaise.

[Joe Weisenthal]

In the Southern, we do have stores that not. Okay, yeah, got them.

[Scott Patton]

Yeah. So we'll have a few of that. But these iconic brands, think about Coke. Yeah, you're going to find Coke in our store. You're going to find Sweet Baby Rays. They are one of the market leaders in barbecue sauce. You're going to have the Aldi versions of barbecue sauce as well. But we're fine to carry some of those iconic brands as long as they can fit into our system and hit the efficiencies and restocking that we need for busy stores like in Manhattan.

[Joe Weisenthal]

Sorry not to just keep pressing on this like Hellman's versus Heinz's, but I think of like Heinz tomato sauce, the 57, whatever is like being.

[Tracy Alloway]

I would have thought of it.

[Joe Weisenthal]

Yes.

[Tracy Alloway]

I would have too.

[Joe Weisenthal]

Like, I would not have guessed that people are so chill with not having that. What? I assume it comes down to the data, but when you're looking at, okay, when do we need to have an iconic brand versus a non iconic brand as our limited ketchup offering? First of all, how many ketchup skus do you have?

[Scott Patton]

We had two ketchup SKUs.

[Joe Weisenthal]

Wow. And how many would a typical. I don't know if a typical grocery

[Scott Patton]

store between 30 and 40.

[Joe Weisenthal]

That's. That's remarkable. I mean that right there is like a sort of remarkable stat. So then what is the data that says, okay, it's okay to like not have a Heinz's, but it would be like a sort of mistake or strategic error to not have a helmet.

[Scott Patton]

Yeah.

[Joe Weisenthal]

At least at this location.

[Scott Patton]

Yeah, there's two, there's I would call the data point would be private label penetration. We look at private label how accepting our customers of private label in that space in that category and for instance, we know in Mayonnaise there are some very dedicated fans and the debate between Hellman's and Dukes, that's, that's, we're not going to settle that today for sure. But also comes down to what I call Grandma's Recipe. Sometimes grandma has handed down the recipe and she calls for a specific brand in her recipe and we know those items and we can see that from the data. We can see it on social media and those are the items that we want to carry in our store. And sometimes Grandma's recipe is the reason.

[Tracy Alloway]

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[Scott Patton]

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[Joe Weisenthal]

Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager.

[Tracy Alloway]

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[Joe Weisenthal]

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[Scott Patton]

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[Tracy Alloway]

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[Joe Weisenthal]

Listen to Bloomberg Bloomberg Daybreak each morning

[Scott Patton]

on Apple, Spotify, or anywhere you listen.

[Tracy Alloway]

So more broadly, Aldi's is. I'm not sure famous is the right word, but one of the differentiators of the grocery store is that you have fewer SKUs, right? You just have fewer products there or you're more mindful about the products that you're actually putting on the shelves. What have you learned from that process that surprised you at all versus Say if I go into a Walmart and I've got 60 different types of ketchup staring me in the face, including the new dill flavored pickle one, which does sound good. Yeah, tempting, tempting.

[Scott Patton]

We have 2,000 SKUs in the store, probably 4,000 varieties. Now let's take the ketchup example. So we just talked about the typical store is going to have 30 to 40 varieties and as you asked, we have two. I would simply ask the customer, do you really need 40 choices for ketchups or is two. We have organic, we are conventional. Is two enough? We have the right size. Do you need upside down squeeze, Right side up squeeze. Small glass, big glass? And what we actually we did some, I will call it, I'll call it a study, but I'll call it some interesting walks with customers through our competitors. And sometimes you would stand in front of let's say an olive oil selection. Ketchup is 30 to 40 olive oil could be 50 or 60 different selections depending on where you're shopping. And what we found was afterwards the customers felt less confident in their purchase. So we have four different varieties of olive oil. Four is a pretty good selection for our store. You can have organic, you're going to have Sicilian, you're going to have pure and you have extra virgin. Good selection. If you're a consumer faced with 60 different choices of olive oil, how do you know which one to buy? So they were less confident in their choice when they were trying to choose from 60. When you have four, they felt pretty good about their selection. Unscientific for sure. But to watch the reaction on the customer's face when you walk them in front of it, they were really puzzled with which one do I buy?

[Joe Weisenthal]

This is probably an unfair question on all sides around. What do you think conventional wisdom is in the grocery store business? If I were talking to the chief commercial officer, whatever. QFood, what do you think the conventional wisdom is in grocery about why it's important to have 60 different olive oil SKUs?

[Scott Patton]

It's about selection. The belief is that customers want these different options and to be fair, customers do want some of those options. And it can come down to shelf space, which suppliers are paying you to be on their shelf. And sometimes the more you pay, the more shelf space you get. So at all with our private label we have two catch ups. There's no shelf space, there's no slotting fees and that's a big difference. So yes, there can be selection, but we need to move those articles through the store very Very quickly.

[Tracy Alloway]

Well, talk about this further. So, again, like a hallmark of aldi's is fewer SKUs. How does that actually feed into, I guess, more efficient processes for the grocery store and then lower prices for shoppers?

[Scott Patton]

You mentioned the. The TV show earlier about the people. And I grew up in a grocery store, so I was. I didn't grow up. And so I worked there in high school, and I was paid probably 325an hour to come in at night and turn the labels and stock everything forward. And me and eight of my buddies would do that for about six hours. And you think about that cost. How expensive is that to do that in a grocery store? And I was in a small local grocery store. Think about a big competitor who's paying all those folks to do that. Now our products come in, you're in the case, you only have 2000 SKUs to put on the shelf. We're not having our folks come in and turn the labels and front everything at night. In fact, they sell out so quickly we don't need to. So that's just one example of all that cost that goes into turning those labels and pulling everything forward. We don't have that.

[Joe Weisenthal]

What does turning the labels mean? So let's walk through some math. Let's say. I don't know, let's say a store sells a thousand bottles of olive oil a day. I don't know what the number, but that's probably somewhere. So it's a thousand bottles. And let's say that store sells 500 brands of extra virgin and 500 brands of organic, and then bottles. And then there's another store that sells a thousand bottles of olive oil a day, but it's like 50 Sicilian, 50 organic, 50 extra virgin, 50 whatever. 50 whatever. Walk us through the math of why a thousand bottles with the two SKUs is going to be significantly more efficient and cheaper from a store perspective than a thousand bottles with more SKUs.

[Scott Patton]

So when the truck comes in at a traditional grocery store, let's say you have 50 different SKUs. You have to restock them all. That's 50 different cases you have to open. You have to find the 50 different cases. You have to match it up to the spot on the shelf, restock it, make sure you have the right one, get the labels all turned the right way, get the bottles all square, don't want to drop any. So you have 50 different options. So one person is sitting there with a cart with 50 different cases, trying to match them to the right spot on the shelf. Come to the Aldi store, we have two. I'm sorry, olive oil, we have four. You can very clearly see this one goes right here. So we can literally restock all of our olive oil in probably 2% of the time that it takes to stock another store. So just think about the math on trying to put that puzzle together of 50 different varieties compared to four.

[Tracy Alloway]

Your price labels are digital, right? We are most, if not all of your stores now.

[Scott Patton]

All of our stores are digital.

[Tracy Alloway]

All of the stores. Okay, how does that help with labor costs? And then also, I have to ask, there's been a lot of criticism of some of these digital labels because people think they're dynamic pricing and that as they reach for an avocado, the price is going to go up by $2 or whatever. How should we think about those?

[Scott Patton]

Yeah, so let me handle that part first. We've heard those same criticisms or concerns out there. We do not do dynamic pricing. We would never do dynamic pricing. Actually, all of our stores have the same price. We change them usually once a week or so, depending on what's going on in the produce bar.

[Tracy Alloway]

Even the New York store would have the same prices.

[Scott Patton]

Same price in New York as out in Connecticut. And I know that's going to be.

[Tracy Alloway]

It's hard for me personally.

[Scott Patton]

We'll call it a pleasant surprise for those in Manhattan when they walk in and they see, you know, chicken breast for $2.19 a pound or eggs for $1.47. So it's going to be kind of amazing. But when we talk about the electronic shelf labels, we were spending between three and four hours per store per week to change out our signs. So when we switch to the digital version, we save all of that labor. So again, 2,600 stores times four hours a week. You can do the math on that. Think about all that savings. Again, that's how we get chicken breast down to 219. But the opportunity is there to abuse that system. But we will not do that.

[Tracy Alloway]

So just to be clear, I mean, the reason you were changing out physical labels is because the price were changing, the prices were changing, but you're not changing them on a minute to minute kind of?

[Scott Patton]

No, we would usually change them once a week. You know, we have the Aldi finds area where those come in. We have 100 new items every week. I don't know if we'll talk about that, but we'd have to put all those signs out, take the old signs down. That's a lot of labor to do those things. But we don't have to do that anymore.

[Joe Weisenthal]

This was something I did not know about prior to yesterday's field trip. So the Aldi find section, I guess, apparently your fans have dubbed that the Isle of Shame. So this is where some brilliant merchandise, like a true showman, a merchandiser, has figured out something. So explain these, explain what this aisle is and why it's so iconic to so many. There's like a 4 million person Facebook group dedicated to this specific aisle. Where did this come from? This aisle, the so called Aisle of Shame.

[Scott Patton]

So it actually, to explain the concept, you know, you walk into a grocery store, you're expecting to buy groceries, your soup, your sushi, all those types of things. And we have a whole aisle that's a lot of general merchandise. So we're going to have swimming pools, we're going to have a lot of inflatables. Yeah, seasonal. Right now. Fourth of July is coming up. FIFA World Cup's in town. So we have those articles as well. The origins of that actually goes back to our origins in Europe. So if you think about European, I know if you've been to Europe, they don't have a lot of the competitors that we have here, a lot of the big box stores. So Aldi actually had a pretty big business and still has a significant business selling these types of general merchandise. It could be diy, it could be paint, it could be power tools. So we took that concept when we came to the US and it's been pretty successful. Now, how it's different in the US is it's still very unique that you're going to have all of these articles right next to your groceries. So what we do is we bring in about 100 new items every week. And they're going to be, I'll call it random, but not so random. They're actually going to be the items you need when you need them. So we're not going to carry these articles all year long. We're not going to have an inflatable pool in February. If you look at the competition, they will have that sitting on the shelf. So we bring in the inflatable pool right when you need it. So back to your comment on the Aisle of Shame, which I will say we do have a Facebook group started by our fans and it's called the Isle of Shame, or aos. And this popped up, I think, four or five years ago, and we started looking at that as a business saying, what is going on here? What is happening in this Isle of Shame? And as a retailer, you're always worried about Your brand. You're concerned about your brand and you see this growing Facebook group called the Isle of Shame and you have to ask yourself, what are we going to do about that? So it is 100% driven by our fans. And really what happens is our customers come in each week, they start posting back and forth, oh, look what I got. I got the pool, I got the chainsaw, I got whatever it is. And they're having a lot of fun with these things. And this group has grown to over 4 million users on a regular basis. So origins of Isle of Shame. Pretty interesting. People were posting onto Facebook, hey, I went to Aldi, I got my ketchup, I got my barbecue sauce, I got my olive oil and I also got these cute athletic shoes. And then they were like, I'm so ashamed I didn't stay on budget. I'm so ashamed. So they were posting these shame photos from trunks of their cars, from their kitchens. We sell a tremendous amount of candles. People were posting their family rooms with 50, 60, 70 different candles.

[Joe Weisenthal]

Of all the shame.

[Tracy Alloway]

I love a scented candle. I fully admit my basicness when it comes to scented candles.

[Scott Patton]

So it was shame in a good way. So I think as a brand we've said, okay, not fight this. It's great because people love it. So it's the Isle of Shame, it's the Aldi finds. And we love that our fans want to post about it and talk about it and we learn from this as well. So like I said, I run the buying department and we have great buyers out there. They watch this all of the time.

[Tracy Alloway]

The Bloomberg Sustainable Business Summit returns to Singapore on July 22. Our 5th annual Asia Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience and driving a multi speed energy transition across Asia's diverse markets. Join us for solutions driven discussions and networking opportunities. Thank you to our summit advisor, Bangkok Bank. Learn more at BloombergLive.com SBS-Singapore. You've been in this business for a long time. It feels like one of the things that's happened, I can't even say relatively recently, but in recent ish years is that social media has become such more such a bigger force when it comes to shopping. So you have Facebook groups like the one you just described and you can watch those and maybe get a sense of what customers are liking. You also have social media trends. So every once in a while you have a food item or an Allison Roman recipe that goes viral and suddenly everyone wants to buy new tomatoes or a particular type of cheese. How has that impacted the buying process for you?

[Scott Patton]

Certainly, we have to pay attention to those trends. And you mentioned the feta cheese and tomato recipe from a few years ago. Our feta cheese sales went through the roof, so we had to work very quickly with our supplier to get more feta. More recently, one is the sourdough trend. So sourdough baking at home, the sourdough trend. Now, sourdough is not easy. You gotta feed your starter. I would love to do it. I don't have the patience for it. But that tells us and our buying team, hey, what's going on with sourdough? So now we've launched a couple of sourdough items a couple of years ago. It's actually the top performing item in the bread set now. So we are selling over half a million loaves of sourdough every single week in our stores.

[Tracy Alloway]

So when you suddenly see feta flying off the shelves, how long does it take you to actually figure out what's going on here and what's driving the additional demand? And then how long does it take for you to respond to it?

[Scott Patton]

And that's one of the great things about being private label, because we're in control of our label, we're in control of our supply chain. We work directly with our producers. So if we were a brand, we'd have to call them and say, hey, can we get more of your brand that you're sending to every other retailer? We go directly to the manufacturer. We say, look, how can we get more line time? How can you dedicate more Aldi product? What can we do with packaging? It can be as quick as a couple of months. It can take a little bit longer, depending on the item. But being a private label, we can just pick up the phone, call directly that supplier, oftentimes it's the owner, the president of the company, and say, look, what can we do about feta? How can we expand your sourdough line? What can we do to help you? Then we partner with them.

[Joe Weisenthal]

One of the things, and I had never gone into an Aldi before, and I'm not sure I would have noticed it had you not pointed it out. But then once you pointed it out, it was quite obvious. So, for example, like on a bag of chips, you have really big barcodes. And either in some boxes then you notice had a barcode on every. On every surface, and some had really big barcodes. And it's like, okay, I get that. That's intuitive. It makes the swiping faster. Give us a Little history of barcode innovation and how do you actually sort of measure the optimal, I guess, ratio of adding barcodes and figuring out how to much that could contribute to faster throughput versus adding barcodes and then like you can't even see what the product is. So finding that sort of efficient frontier of barcode allocation on a package.

[Scott Patton]

And I think before we talk about barcodes and scanning, we actually have to go all the way back to before we had scanners.

[Tracy Alloway]

Okay.

[Scott Patton]

So we were actually the last retailer to roll out scanning in stores. So I started with a company in 1995. I showed up on day one and my training district manager said, I hope you've memorized all the prices by now.

[Tracy Alloway]

Oh my God.

[Scott Patton]

And I had this look on my face and I said no, no, no one told me about that.

[Joe Weisenthal]

Memorized all the prices.

[Scott Patton]

Memorized all the prices. So up until 1998, all of our employees memorized all of the prices and they would enter them by hand on an old fashioned 10 key. And so the price memorization was critical to our efficiency. We talk about efficiency and throughput now. You could say why didn't we do scanning back then? Our cashiers were, they were too fast. We couldn't find a scanning system that was fast enough to keep up with our 10 key. So we did two things. One, we started working with scanning manufacturers and the bilevel scanner, which you may or may not be familiar with, if you think back long, long time ago, there was one scanner, it was level.

[Joe Weisenthal]

Yeah.

[Scott Patton]

And cashiers come. So BI level scanners were essentially created out of our input saying look, we need to do this faster BI level.

[Joe Weisenthal]

So that means there's the horizontal surface and then the vertical service and they both have a chance at picking up the barcode. Exactly.

[Scott Patton]

So that was one of the innovations that we were pioneering with our supplier suppliers to say, look, how can we move our memorizing prices wasn't the long term fit for sure. It's very difficult by the way. But when you have these BI level scanners, it's okay. There's a chance here. And the second part was on packaging. So I think we've all been in a grocery store and you've seen the cashier struggling to kind of turn the item and.

[Tracy Alloway]

Or we've been at self checkout.

[Scott Patton]

Yeah, yeah. So we came up with the idea and we're just going to add multiple barcodes. So we measure everything we scan. Right. So all of our associates, they're measured on items per minute and we can track the items per minute. So if we're going to do a scanner update, does it pick up scanning faster? We track those items per minute. If we do packaging innovations and we get, we'll get feedback from our store staff to say, look, this item's not scanning well. So to your example, you didn't notice it in the store and actually most of our customers don't because we hide it so well. So you can take an article, any item in the store, you will find four, five or six barcodes. And until we point it out to a customer, they don't even know it exists. So hopefully people go check their pantry and go, oh my gosh, I never noticed it.

[Tracy Alloway]

Well, it is funny though, on the chips example, it almost looks like it's part of the bag design because it's like a stripe that basically goes around the whole thing. But wait, now I'm thinking back in the age of when cashiers were memorizing grocery prices. Do you think that had an impact on the monetary policy transmission mechanism? Do you think price increases didn't filter down into.

[Joe Weisenthal]

Because it would have just been consumer. It would have been too burdensome on the company to change them all the time. Like, do another memorization.

[Tracy Alloway]

Someone needs to do a paper.

[Joe Weisenthal]

Yeah, yeah, we should.

[Tracy Alloway]

Okay. Obvious question though. The barcode thing kind of blew my mind because as you said, I never noticed it before. How come other grocery stores or other brands don't do something similar?

[Scott Patton]

Because we're private label, these are our products and we use that real estate. We design the labels, we design the brands, we control the ingredients, we design the labels. So for us, we're based on efficiency. I would say some of our competitors aren't as focused on that. It does take up real estate on the package, there's no doubt about it. But the fact that nobody notices it is pretty interesting as well. So for us, it's strictly productivity. And since we control the product and the packaging, we can put 20 barcodes if we wanted to.

[Tracy Alloway]

But if I'm like a Haagen Dazs or something and I'm designing my box of ice cream sandwiches or whatever it is, I would be reluctant to give up some of that additional space to

[Scott Patton]

barcodes, I think so. I mean, if you're a brand, you want to talk about the products and you would have the romance copy and you want to tell the history of the product, I think they're more focused on that than the retailer's productivity. We're focused on the productivity so we can get the savings for the customer. But you're Absolutely right. Adding romance copy and all those great words on the back of the.

[Tracy Alloway]

Is that what you call it?

[Joe Weisenthal]

Is that the term of art?

[Scott Patton]

It's called romance copy.

[Tracy Alloway]

I have often felt feelings of romance as I read the back of ice cream packages.

[Joe Weisenthal]

You ever like those things? It'll be like Bob and Joe's corn chips. And it's like the story will be like Bob was working at Goldman Sachs and realize, why am I devoting my life to M and A when I could be devoting it to like design baking. I always, I'm not a fan. I always think that's. I do not need romance caveats.

[Tracy Alloway]

You need to know the origin story of your potato chips.

[Scott Patton]

Joe, you need more barcodes.

[Joe Weisenthal]

Yeah, yeah. Talk to us about what you see in this sort of, this current state of the art of self checkout. And the reason I. There are a couple of things I ask because. So, for example, Uniqlo, which is where I buy a lot of my clothes, I love their self checkout, but there's clothes, there's on grocery, but you dump all of the clothes into a bucket, it spits out a price, probably like RFD or whatever it's done. It's that. And then. So my local key foods, you're like doing the thing where you're twisting half the time like someone has to come by and like swipe something. Maybe something will need an age verification. It doesn't really quite seem to work yet. And so I'm curious what you're seeing at Aldi in terms of where we are with self checkout technology. I think it kind of drives people crazy.

[Scott Patton]

Yeah, I think it's, it's a mixed bag. I mean some people love it, some people don't love it. And for all the reasons that you said, you know, RFID hasn't come to grocery yet. RFID is a pretty expensive technology when you're talking about selling avocados and tomatoes. So RFID hasn't quite made it there yet. Even the best self checkout, you're going to have to have an age verification. For alcohol purchases, you're going to struggle sometimes to weigh the produce. So we have it in about a third of our stores. I think some customers love it. But in of our stores that have self checkout, we always have an employee checkout as well. And that's the option to the consumer. I think we're still learning. Retailers are figuring out what works best for them. Do you want a corral? Do you want an attendant? What's the best layout?

[Joe Weisenthal]

Let's corral.

[Scott Patton]

So you might want to move people through more of a line or do you want more of a separated area? So the layout of the self checkout can have a pretty big impact on the effectiveness how many people are monitoring it. And by the time you pay someone to stand there and monitor it, could you have just scanned their groceries for them? Those are the questions that I think all the retailers are facing right now.

[Joe Weisenthal]

I actually think, Tracy, the way the Wegmans does it in Astroplace with self checkout is not bad. Where they have one line and then like 30 different or 50 different machines and they're like you in 25, you at 28. That actually seems to work reasonably well compared to some of the other versions I've seen.

[Tracy Alloway]

I think. I mean, I think it's fine. Especially in New York where people are usually like grabbing a few items and then just leaving. I could see the argument for self checkout, but actually this brings me to what I wanted to ask. You opted for no self checkout at the new Times Square location. So I'm really interested in why you decided to do that. And then secondly, you mentioned corral versus line. So there was a big space in front of your checkout counters that we saw yesterday. What system is that and what's the logic behind having that particular system in New York?

[Scott Patton]

Yeah, I think when you think about self checkout, the appeal in that and a lot of our competitors is their checkout system is pretty slow. So we've already talked about, we have our multiple QR codes, we have our scanner systems, we're incredibly efficient. So we don't always need the self checkout to speed that process along. Now that space is there, we might decide in the future to try some self checkout. We want to have the real estate available to change the layout if we think we need it. So like I said, we're still trialing to figure out what works. But for us, if there's three people in front of you in line at an Aldi store, you're going to get so get through so quickly you may not even need the self checkout. And I will say, if we've watched people in self checkout, it's kind of like standing in a fast food restaurant. Which one do you pick? Who's going to be fastest? Who's going to be able to figure out the machine? That can be a bit of a frustration as well, because if you pick the wrong one, you could be waiting even longer, even in a self checkout.

[Tracy Alloway]

So the space we Saw yesterday. That's just. You go up, you decide which checkout you want to go up to. You're not waiting in a single line. No, no, that was my question. I found line management really interesting for a few years, and I kind of wanted to write a book about lines and like the strategy behind lines. So maybe I'll get back into it.

[Joe Weisenthal]

I'm sure that we could do. You know, I'm sure there's a lot of really impressive mathematics behind line and queuing theory and all that stuff. How many different types of green grapes are that? We talked about this yesterday and just let's go back to that. Okay. You go to the farms, you pick a grape. Like, how many different options are you looking at, Et cetera. Novelty. And we talked about this again with tomatoes. They always seem to be coming out with new tomatoes. Where are we at with the grape market?

[Scott Patton]

Yeah. So the grape market is fascinating because for the average consumer, which we are all average consumers, right, you have green grapes and you have red grapes. You go to the store, you want green, you like red, and you ask a customer, I like the green ones, I like the red ones. But when you get into the details, like I said, we have an awesome produce buying team. There's over 100 varieties of green grapes. So when you go to the Aldi store or the competitor next door, likely you're going to have two different varieties. Now, each of those varieties has a different flavor profile, different yield. The higher the yield, sometimes the less the flavor. So there's trade offs and all those types of things. So what we do, you know, we work with the growers. We mentioned this earlier. We figure, you know, what's the best flavor profile? We don't want the customer to have to think about it. We want them to come to our store, come to Aldi and say, I love the Aldi green grapes, or I love the blackberries. I love the blackberries. And they don't know the details behind them.

[Tracy Alloway]

The blackberries were huge and they didn't

[Joe Weisenthal]

have that sort of tart, that sometimes sourness. Yeah, yeah.

[Scott Patton]

That's another example of picking the variety. So if we were just buying off the market, you're just going down to the local produce market and saying, give me whatever blackberries you have. You're going to get what they have available. Working with the grower, you can narrow that hundred varieties of green grapes down to the one or two you want to have in your stores. What's in season, what's going to have the right flavor profile. We don't want it too sour, you don't want it too sweet, you want to have good shelf life, produce waste, all those types of things go into the decisions of our produce team. It's actually pretty sophisticated and it's fine. The customers take it for granted. We just want them to come in and say, these green grapes are great. But we've done all the work to figure that out with the farmers.

[Tracy Alloway]

I want to ask at least one what Aldi can tell us about the macro environment right now type question. So one of the stories that we've been talking about on the show and lots of other people have as well, is high produce prices, higher beef prices, certainly general inflationary pressures on the consumer. And I'm very curious if you've seen that in the spend at your own stores, if you've maybe seen smaller basket sizes or maybe you've seen people trading down from beef to chicken, that sort of thing, what are you seeing in terms of inflationary pressures on your shoppers?

[Scott Patton]

So shoppers are, I think they've been under pressure for several years now and for all the reasons we talked about before, whether it's the case design or the UPCs or going straight to the farmer, we try to keep all those cost pressures down, but we're not immune. We're not immune to commodity markets. You mentioned beef, for instance. Beef prices are at 70 year highs. So we still see our customers buying beef. However, I'll give you an example. Ground beef right now is relatively expensive by historical context. You can talk $5.99 or $6.99 a pound, even at the Aldi store for ground beef. What we've seen is some consumers opting for ground turkey or ground chicken, a nice substitute, a good quality product, still fresh, probably 30% cheaper or 40% less expensive. And that's a good option. Customers are still going to buy their protein. Protein is all the craze right now, but we have seen some switching between maybe a higher protein, expensive protein like beef and a lower, lower cost like chicken.

[Joe Weisenthal]

I guess we should ask a question about that protein. All the craze right now. So it's like the problem with all this, there's a lot of confounders, right? Because say, a lot's changed in the last 10 years on all kinds of levels. We can talk about the role of social media. We can talk about obviously Covid and inflation or just Covid and how that made sourdough bread a thing, the hobby. But GLP1 is clearly part of the story. I think with the protein boom. What are some sort of clear data points that you see where you say, okay, GLP1s are changing consumer buying behavior other than just say, yes, they want more protein.

[Scott Patton]

Yeah. So GLP1s, we worked with some of our partners probably 18 months ago, and I think it was roughly 5% of the population at that time was on GLP1s. We'd have to check that. But they also said when this goes to pill form, which is happening right now, we're going to see that adoption rate go up. So as GLP1s are coming into pill form, of course we're seeing more protein sales. What's interesting is if you talk to the meat team and the meat growers out there, they would say we're the original protein. And of course we're selling more of that, but we're seeing is protein really go throughout the store. Protein bagels.

[Joe Weisenthal]

Oh, yeah.

[Scott Patton]

Now you're talking about protein popcorn, which there's going to be a point when it comes too far. We're rolling out a protein sparkling water. So our data points would say it's actually quite tasty when you take a protein sparkling water. Anything with protein right now is accelerating. I think there'll be a pullback at some point. Yeah.

[Tracy Alloway]

The pendulum needs to swing to fiber. Americans need more fiber, not more protein.

[Scott Patton]

Yeah, fiber is coming on as well. Okay, you can have fiber. Bean sales are actually up significantly.

[Joe Weisenthal]

Really interesting.

[Scott Patton]

Yeah, we're selling significantly more beans.

[Tracy Alloway]

Is that a GLP one thing as well?

[Scott Patton]

It's a fiber. It's a fiber protein combo. Yeah. So we have a Greek chickpea that we've just rolled out, which is actually amazing. And I would say two years ago we wouldn't have carried a Greek chickpea, but now we've rolled out a Greek chickpea high in fiber. Customers are responding to it. We're rolling out a fiber water, but you're right, more protein, more fiber. And for us, it's making sure we have the products the customers want and being on trend. But bean sales. Five years ago, bean sales weren't surging, but we're seeing a resurgence in some of these categories that maybe weren't thriving in the past, but now they're starting to come back to life.

[Tracy Alloway]

That might also be inflationary pressure, because one of the greatest value meals, most filling meals you can ever make, is red beans and rice, as I like to say. Anyway, just going back to the sort of competitive advantage of Aldi. So we talked about your own label and how that makes you More efficient and all of that. We've seen a lot of other stores, I guess, grow their own label options. So Walmart, I think has, it's called Great Value or something very obvious like that. And they've been talking about the customer, like trading away from known brands into their own Great Value labels because of the inflationary pressures. Have you boosted your, have you ever decided to do your own sort of Aldi brand for a lot of these items? Because when we say your own label, a lot of them don't say Aldi. They say some random farms or.

[Joe Weisenthal]

What was the brand?

[Tracy Alloway]

One something Acres, you know, something pastoral like that.

[Joe Weisenthal]

But it's not like Kirkland or. It's like one that you associate with a store.

[Scott Patton]

Yeah, so we, we've asked our customers, a couple of years ago, we said, how do you feel about the Aldi products? And they said, we love your products, we love your prices, we love your quality. But they don't understand our branding. So about six months ago, we made a big announcement that we need to change the way we brand. So right now we had over 90 different, we'll call them Aldi brands in the store. And you're exactly right. Berman's would be a good example. It was the Berman's barbecue sauce. So we asked our consumers, we said, do you understand what's happening here? Of course. I've worked at Aldi. I'll call it too long. When you're an insider, you don't see these things. You're like, okay, of course Burman's is. Berman's is barbecue sauce and Sweet Harvest is applesauce. Everybody knows that. And the customer said, no, we actually don't know what you're talking about. So we said, okay, what should we do? So we asked them, which brands do you know? Of course, Clancy's is our chip brand. That's actually a lot of customers knew that brand. Mama Cozzi for our frozen pizza, they knew that one. So we're switching from 90 brands down to about 23 now. That's a big departure. We're going to relabel every product in the store. That's a big, that's a big shift for the consumer. But even within that, you're exactly right. We're going to put Aldi on the front of the package because Aldi is a great brand. We've been in the states for 50 years and we recognized. I don't know why it didn't dawn on us earlier. We didn't have Aldi. The logo and the name on the front of the package, it was always on the back. So now when customers come in, they're going to know it's an Aldi product. Now, the trick is we have 90% private label in our store. So if you imagine a store with all Aldi on the front and it's 90% versus competitors are going to be 25 to 30%, it could look a little bit boring. So the trick is to make sure that we design the labels in a way that it's not boring.

[Joe Weisenthal]

That actually is my final question. I could ask a ton of grocery questions, but before it was called private label, like when I was a kid, they were called generic. And generic is basically synonymous with boring. When did the grocery industry sort of figure out that these quote in house brands that this kind of business should not be called generic and should be called private label, which does not sound as boring. And I think there was a negative connotation. He bought the generic co. You bought the generic ketchup. What?

[Scott Patton]

Yeah, in generic. If you think about the labels, if you go back, they were black and white.

[Joe Weisenthal]

Yeah.

[Scott Patton]

They were actually poor quality. It was generic. It was poor quality. It was actually not a good quality. And it was labeled appropriately because it looked terrible.

[Joe Weisenthal]

So when was the moment where it's like, let's actually make these appealing things?

[Scott Patton]

I think we had something to do with that because in 1976, we opened up with all private labels. So I think we started the private label transition. Now, it took a long time for our competitors to catch up, but this is what we've done for 50 years. So I think we started the trend. We started with great labels. We started with good quality. And then eventually you can see that that cost difference, if you're talking 30 to 40 or 50% difference for us, the consumers resonated with it. Now, if you're a competitor, do you want to sell the brand or product or do you want to sell your private label? That depends. It depends on your margins. But we are set up to develop those products. Our whole buying organization has been buying and developing products for 50 years. And I talk about buying. It's easy to buy a branded product. You call up your local CPG, you say, I want to carry these five SKUs. What's my cost? You negotiate a little bit. You have a little back and forth, which is always fun to negotiate. You get a cost, it's on your shelf and off you go. If I want to do that with a private label, we have to have an idea. We have to have a buyer who says, you Know what? I want to have a Greek inspired chickpea. We have to go find a supplier, we have to create the recipe, we have to sample it, we have to send it over. We put it in our test kitchen. We sample multiple varieties, we say, this is the variety I want, then you start negotiating the cost, and then you ship it to the store. So it's a whole different business operation developing and selling private label products as compared to, I'll call it just buying and selling brands. Much more complicated and requires expertise. And that's why I said we've been doing it so long. That's what we're built on. It's easier to just buy someone else's product, but when we're developing our own, it takes a lot of skill, a lot of market research, and a lot of category management.

[Joe Weisenthal]

All right, Scott Patton, thank you so much for coming on. Odd Lots. I love talking about food. You know, the Times Square Aldi is not on my typical route, but I'll try to check it out soon. Once it.

[Tracy Alloway]

I would, I would go there for the hot honey goat cheese that we had that we sampled yesterday. I would make a special trip.

[Joe Weisenthal]

Yeah, let's. We'll go there one of these afternoon.

[Tracy Alloway]

Yeah.

[Joe Weisenthal]

All right.

[Scott Patton]

Well, I appreciate it. Thanks for having me on,

[Joe Weisenthal]

Tracy. I thought that was fun. I. I would genuinely. They say I learned a lot about grocery store business operations in the last day. And between that and our trip to the Aldi store.

[Tracy Alloway]

Yeah.

[Joe Weisenthal]

I know more about the grocery book.

[Tracy Alloway]

No. And it was fascinating just to see. I don't want to say little, but these just a subtle variety of efficiency improvements like the packeting system, the display cases, the barcodes everywhere that in theory could be replicated by other stores. But, like, you don't actually see it.

[Joe Weisenthal]

No, it definitely seems like you have to make a choice because I would say, like, there's two things. You know, we did that episode on the proliferation of snack foods. Right. And one of the trends is we truly live in a golden age of variety. Right. Yeah. Skews.

[Tracy Alloway]

And it's like, you know, huge abundance.

[Joe Weisenthal]

We talked about how, you know, you can go to a place like, you know, what's the. There are a couple popular Asian grocery stores and see 45 different version of Kit Kats, from green tea to whatever. Prawn Kit Kats. But then also it's like, okay, here is a company that has made a choice to just go in completely the opposite direction. But then you can see it's like, all right, well, the consumer really doesn't have as much choice. But if you can get them to mostly what they need, then the price differentials seem pretty genuine and real.

[Tracy Alloway]

The other thing I was thinking is it feels to me like technology changes are such are still an understudied area of inflation dynamics. And I mean just the actual barcodes.

[Joe Weisenthal]

Oh yeah.

[Tracy Alloway]

Switching from like physical labels to barcodes and maybe now having the tags that Uniqlo has and things like that. I would love to see more research on that particular area.

[Joe Weisenthal]

Yeah, I know that's like the because the original is like menu costs, right? You can't update the menu. Yeah, but it's like was that real?

[Tracy Alloway]

But now we all order through QR codes.

[Joe Weisenthal]

Yeah, there's been so much change like, like those. Some of those first things need to go back and revisited. But yeah, all. All very interesting to me.

[Tracy Alloway]

Shall we leave it there?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

All right. This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers Carmen Rodriguez at Carmen Armand, dashiell Bennett at Dashbot, Kale Brooks Kale Brooks, and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content go to bloomberg.com we have the Daily newsletter on all of our episodes and you can chat about all of these topics 24. 7 in our Discord, Discord, GG Oddlots

[Tracy Alloway]

and if you enjoy Odd Lots, if you like it when we take field trips to grocery stores in Manhattan, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening. The Bloomberg this Weekend Podcast News, Politics and the Lighter side of Bloomberg the most coveted cosmetic enhancement in Asia right

[Joe Weisenthal]

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[Tracy Alloway]

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[Joe Weisenthal]

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