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United Commercial Realty

A pair of grocers have their eyes on N. Texas

Aldi aims at low costs, Wild Oats would offer another organic option

Wal-Mart and Whole Foods may need to make room for two major grocery chains eyeing Dallas-Fort Worth for expansion.

Germany-based Aldi and Wild Oats Natural Marketplace of Colorado -- both better known outside of Texas -- may be the next grocers to jump into what's considered one of the most competitive and saturated grocery markets in the nation.

Aldi, a worldwide grocery chain targeting budget-conscious shoppers, will likely go head-to-head with Wal-Mart when it enters the market with its small, low-price format.

The grocer, which recently opened an office in Denton, plans to open its first unit in North Texas in 2009, according to an unidentified employee at the company's corporate offices in Illinois.

Scott Huska, an Aldi executive based in Denton, declined to comment at this time.

Meanwhile, Boulder, Colo.-based Wild Oats Markets Inc. -- the nation's No. 3 organic foods retailer -- is also scouting D-FW for potential sites.

Sonja Tuitele, a spokeswoman for Wild Oats, said that Dallas-Fort Worth is one of several markets the chain is considering. If Wild Oats did proceed into the market, the chain could open a store as early as 2009, she said.

Tuitele says Wild Oats has plans to open a store in the Houston area in 2008, but declined to specify a location for competitive reasons.
Sacks for sale

Aldi Group, which has 7,500 stores worldwide, is a no-frills, low-price grocer with a 40-year history. In Germany, the company has a roughly 40% share of the grocery market. Its American subsidiary, Aldi USA, operates more than 800 stores in 26 states.

Like Wal-Mart, Aldi competes largely on price, albeit with a smaller store format. Many Aldi stores are between 15,000 and 17,000 square feet.

"These guys believe they can go head-to-head (with Wal-Mart) with their format -- that they can compete effectively on price, how they stock, their buying practices and how they sell their items," said John Zikos of Dallas-based Venture Commercial.

Unlike a traditional grocer that carries around 25,000 different products, an Aldi store carries about 700 items, many of which are the grocer's private label.

Aldi isn't shy about cutting corners. Instead of shelves, shoppers pick products right out of shipping boxes. And Aldi shoppers pay 5 cents for a paper sack and 10 cents for a reusable plastic bag.

In North Texas, low-price and traditional grocery stores have struggled to compete against Wal-Mart, which has a market-leading 31% share of the Dallas-Fort Worth grocery business.

Most recently, Super Saver -- a wholly-owned subsidiary of Albertsons --pulled out of the market, closing 11 unprofitable Texas units last year.

If Wild Oats does enter North Texas, it won't be insulated from the world's largest retailer Wal-Mart, which has also expanded its organic offerings to grab a piece of the growing market.

Right now, Whole Foods is arguably the strongest organic and natural foods player in D-FW with six stores and at least one unit under development.

One specialty grocer, Sprouts, has managed to successfully carve out a niche in organic foods, said Jean Smith, partner in Dallas-based United Commercial Realty, which represents the chain. Locally, Sprouts has three units and two under development.

"Sprouts and some of these other specialty stores will focus on suburban markets not dense enough to accommodate a Whole Foods," Smith said.

The Wild Oats chain has a blemished past in the Dallas market.

The chain opened a store on Mockingbird Lane back in 1998 only to shutter the unit a few years later. The chain had grown by acquisition and closed stores after hitting financial troubles.

What would make this time in Dallas different?

Tuitele said Wild Oats, which reported net income of $3.2 billion in 2005, has completed a five-year turnaround plan. It now boasts 110 units. And it's using a different growth plan.

"Now the focus is on organic growth, new store development and selecting our own real estate," she said.