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

In June, grocery giant Aldi opened a store just off of Times Square in Manhattan. It's the company's first location in Midtown and, according to their US Chief Commercial Officer Scott Patton, Aldi has to orchestrate a "logistical symphony" to get groceries into the middle of one of the busiest places in America. For instance, they use shorter trucks to navigate the tight corners of New York City streets. On this episode, we speak with Patton about what it took to open this specific Aldi and why they chose a busy tourist location like Times Square. He also explains how the company — famous for its low prices — is able to sell even wagyu ground beef at a consumer-friendly price point, how the mostly private-label grocer thinks through which name brands to incorporate into their stock, Aldi's cult-favorite "Aisle of Shame," a short history of barcode innovation, and how GLP-1s are changing consumer habits. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox, plus unlimited access to the site and app. Sign up at bloomberg.com/subscriptions/oddlots https://www.bloomberg.com/subscriptions/oddlots?in_source=oddlotspodcast See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee, so search Barclays Brief wherever you get your podcasts.

• 0:26Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 1:07Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 1:51Speaker 01

  Bloomberg Audio Studios. Podcasts, radio, news.

• 2:06Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:11Tracy Alloway?

  And I'm Tracy Alloway.

• 2:12Joe Weisenthal?

  Tracy, can I tell you something? I don't know if I've brought it up on the 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.

• 2:26Tracy Alloway?

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

• 2:29Joe 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 it's an interesting experience and I like food.

• 2:47Tracy 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. So...

• 2:57Joe Weisenthal?

  What years are you talking about? Like when you were in Japan?

• 2:59Tracy 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?

• 3:19Joe Weisenthal?

  The elephant thing. So you can get how at least they spark joy.

• 3:22Tracy Alloway?

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

• 3:27Joe Weisenthal?

  Yeah.

• 3:27Tracy Alloway?

  Because now I'm sort of...

• 3:28Joe Weisenthal?

  Oh, you get yourself for sure.

• 3:30Tracy 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.

• 3:44Joe Weisenthal?

  Which one's that?

• 3:45Tracy Alloway?

  That one's a Morton Williams.

• 3:47Joe Weisenthal?

  Okay. Yeah.

• 3:48Tracy Alloway?

  And that one, I'm trying to be diplomatic.

• 3:54Tracy Alloway?

  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.

• 4:05Joe Weisenthal?

  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 are like high end and expensive.

• 4:17Tracy Alloway?

  Yeah.

• 4:18Joe Weisenthal?

  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.

• 4:30Tracy 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.

• 4:38Joe Weisenthal?

  Oh, really?

• 4:39Tracy Alloway?

  Cause I just wanted to show him, look at this grocery store. It's crazy.

• 4:42Joe 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 opportunities still, I would say for the better Manhattan and just the better grocery store experience still.

• 5:02Tracy Alloway?

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

• 5:08Joe Weisenthal?

  That you want to shop at.

• 5:09Tracy Alloway?

  Whole Foods. Well, we have Trader Joe's, maybe that's the closest, but we have a lot of Whole Foods, a lot of Wegmans. I'm not even going to mention, what's the, uh, the one with the G?

• 5:18Joe Weisenthal?

  Oh, yeah.

• 5:19Tracy Alloway?

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

• 5:26Joe Weisenthal?

  Well, in Texas, we have HEB, 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.

• 5:51Tracy 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.

• 6:04Joe Weisenthal?

  Especially for that area.

• 6:05Tracy Alloway?

  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.

• 6:21Joe 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 then.

• 6:28Tracy Alloway?

  Well, we should just say, we already went on a tour of the new location.

• 6:32Joe Weisenthal?

  Yeah, we're a little biased because also they, 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?

• 6:42Tracy Alloway?

  But on the plus side, we have personally witnessed

• 6:44Joe Weisenthal?

  Yes.

• 6:45Tracy Alloway?

  ground wagyu beef for $5.99. It does exist.

• 6:48Joe Weisenthal?

  But I haven't tried it yet. 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's 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.

• 7:13Speaker 03

  Thanks for having me and so glad you could make it out to the store yesterday. It was a really awesome experience to walk through, really Times Square, Aldi off, right off of Times Square. Amazing.

• 7:21Joe Weisenthal?

  Let's just talk about what is, uh, what does the chief commercial officer do? Tell us about like, what's your actual job and your career at Aldi?

• 7:28Speaker 03

  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, 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 get them onto the shelf.

• 7:45Tracy 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.

• 7:54Speaker 03

  Yeah, so Midtown Manhattan, that's our second location in Manhattan. You're right, it's not intuitive.

• 7:58Joe Weisenthal?

  Where's the first one?

• 7:59Speaker 03

  First one is up in Harlem.

• 7:59Joe Weisenthal?

  Okay.

• 8:00Speaker 03

  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.

• 8:16Joe Weisenthal?

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

• 8:18Speaker 03

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

• 8:23Joe 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 amenity.

• 8:29Speaker 03

  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.

• 8:35Tracy Alloway?

  Yeah, a lot of cities in Asia, as you know now, have mixed-use buildings.

• 8:41Joe Weisenthal?

  Yeah, I love that. I think it's great.

• 8:42Tracy Alloway?

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

• 8:49Joe Weisenthal?

  I'd be totally down.

• 8:50Tracy 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?

• 9:08Speaker 03

  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 this 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.

• 9:20Joe 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, they're 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?

• 9:59Speaker 03

  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, in Chile. And it really starts probably three to four years in advance and 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

• 10:44Speaker 03

  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.

• 10:53Tracy 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?

• 11:11Speaker 03

  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 in the midtown. We have to have a bit of a shorter truck. We actually have to have two drivers.

• 11:23Joe Weisenthal?

  Did you say a bit of a shorter truck?

• 11:24Speaker 03

  It's a bit of a shorter truck because they can't hit the turning radiuses. So for instance, at the 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.

• 11:50Joe 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, 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.

• 12:19Speaker 03

  Yeah. And with everything we do, and we're really focused on efficiency. You mentioned sushi bars and barbecue pit before. Yeah. So we don't have those.

• 12:26Joe Weisenthal?

  Yeah, I know.

• 12:26Speaker 03

  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, on properties. That's just a fact, but it goes into the equation.

• 12:48Tracy 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 the chance to run through groceries. I'm going to speed it up two times, Joe. 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?

• 13:20Speaker 03

  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.

• 13:36Tracy Alloway?

  This is like a box where you can see the items. Yeah.

• 13:39Speaker 03

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

• 13:50Tracy Alloway?

  Joe, did you ever watch Superstore?

• 13:52Joe Weisenthal?

  No, what was it?

• 13:53Tracy Alloway?

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

• 14:00Joe Weisenthal?

  Oh, I probably enjoyed it.

• 14:00Tracy 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.

• 14:10Joe Weisenthal?

  Huh.

• 14:10Tracy Alloway?

  And talk while doing it.

• 14:11Joe Weisenthal?

  Was it good? Like, should I watch it?

• 14:12Tracy Alloway?

  It's actually a really, it's sort of like The Office, but for giant retail.

• 14:16Joe Weisenthal?

  Who wrote the novel about working at Target that we should have?

• 14:19Tracy Alloway?

  Oh.

• 14:19Joe Weisenthal?

  Remember someone recently in the last few years wrote, it'll come back to me. We should have.

• 14:24Tracy Alloway?

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

• 14:26Joe 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 shelf is Sweet Baby Ray's barbecue sauce.

• 14:42Tracy Alloway?

  My favorite.

• 14:43Joe Weisenthal?

  And so what you're saying is you will work with Sweet Baby Ray's. They're not going to like have like a custom Aldi Sweet Baby Ray's 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.

• 15:02Speaker 03

  Yeah, yeah, we are mostly private label, but we do have some brands like Sweet Baby Ray's. And we have 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.

• 15:27Joe Weisenthal?

  Yeah.

• 15:27Tracy 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 craft.

• 15:38Joe Weisenthal?

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

• 15:42Speaker 03

  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 Hellmann's. If you go down south, it's going to be Duke's.

• 15:50Tracy Alloway?

  The great American divide.

• 15:51Joe Weisenthal?

  So do you have Duke's in the southern grocery stores that not, okay.

• 15:55Speaker 03

  Yeah.

• 15:56Joe Weisenthal?

  Got it.

• 15:56Speaker 03

  Yeah. So we'll have a few of that, but these iconic brands, think about Coke.

• 15:59Joe Weisenthal?

  Yeah.

• 15:59Speaker 03

  You're going to find Coke in our store. You're going to find Sweet Baby Ray's. 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, fit into our system and hit the efficiencies and restocking that we need for busy stores like in Manhattan.

• 16:15Joe Weisenthal?

  Sorry, not to just keep pressing on this like Hellmann's versus Heinz's, but I think of like Heinz's tomato sauce, the 57 whatever is like being I would have thought of it as iconic, yeah. 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?

• 16:42Speaker 03

  We have two ketchup SKUs.

• 16:43Joe Weisenthal?

  Wow. And how many would a typical, I don't know, a typical grocery store?

• 16:46Speaker 03

  Between 30 and 40.

• 16:47Joe Weisenthal?

  That's incredible. 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 Hellmann's? At least in this location?

• 17:00Speaker 03

  Yeah, there's two. There's, I would call the data point would be private label penetration. We look at private label, how accepting are 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 Hellmann's and Duke's, that's, we're not going to settle that today for sure. But it 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.

• 17:50Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what matters and what to watch next, about the time it takes to grab a coffee. So search Barclays Brief wherever you get your podcasts.

• 18:16Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume, so writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 18:58Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 19:39Tracy 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?

• 20:08Joe Weisenthal?

  Oh, it does sound good.

• 20:09Tracy Alloway?

  Yeah, tempting.

• 20:11Speaker 03

  Tempting. 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 have 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.

• 20:51Speaker 03

  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're gonna have organic, you're gonna have Sicilian, you're gonna have pure, and you're gonna 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?

• 21:26Joe 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, K-Food, what do you think the conventional wisdom is in grocery about why it's important to have 60 different olive oil SKUs?

• 21:43Speaker 03

  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?

• 21:54Joe Weisenthal?

  Oh, yeah.

• 21:55Speaker 03

  And sometimes the more you pay, the more shelf space you get. So at Aldi, you know, with our private label, we have two ketchups. 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.

• 22:08Tracy 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?

• 22:20Speaker 03

  You mentioned the TV show earlier about the people, and I grew up in a grocery store. So I was, I didn't grow up in it. So I worked there in high school, and I was paid probably $3.25 an 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 2,000 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.

• 22:59Joe Weisenthal?

  What does turning the labels mean? So let's like 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 there's got, that's probably somewhere. So it's a thousand bottles. And let's say that store sells 500 brands of extra virgin and at 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.

• 23:39Speaker 03

  So when the truck comes in at a traditional grocery store, let's say you have 50 different SKUs. If 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. You 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

• 24:24Speaker 03

  compared to four.

• 24:25Tracy Alloway?

  Your price labels are digital, right?

• 24:28Speaker 03

  We are.

• 24:28Tracy Alloway?

  Most, if not all of your stores now?

• 24:30Speaker 03

  All of our stores are digital.

• 24:31Tracy Alloway?

  All 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?

• 24:48Speaker 03

  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 market.

• 25:02Tracy Alloway?

  Even the New York store would have the same prices?

• 25:03Speaker 03

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

• 25:07Tracy Alloway?

  It's hard for me personally to believe.

• 25:09Speaker 03

  Pleasant surprise for those in Manhattan.

• 25:10Joe Weisenthal?

  Yeah.

• 25:11Speaker 03

  When they walk in and they say, you know, chicken breasts for $2.19 a pound.

• 25:14Tracy Alloway?

  Yeah.

• 25:14Speaker 03

  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 breasts down to $2.19. But the opportunity is there to abuse that system, but we will not do that.

• 25:41Tracy 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 basis.

• 25:51Speaker 03

  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.

• 25:59Tracy Alloway?

  Right.

• 25:59Speaker 03

  Take the old signs down. That's a lot of labor to do those things, but we don't have to do that anymore.

• 26:03Joe Weisenthal?

  This was something I did not know about prior to yesterday's field trip. So the Aldi finds section, I guess apparently your fans have dubbed that the Isle of Shame.

• 26:12Speaker 03

  They had.

• 26:13Joe Weisenthal?

  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 four million person Facebook group dedicated to this specific aisle. Where did this come from, this aisle, the so-called Isle of Shame?

• 26:31Speaker 03

  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

• 26:42Tracy Alloway?

  A lot of seasonal stuff.

• 26:43Speaker 03

  Yeah, seasonal. Right now, 4th 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, we don't, they don't have a lot of the competitors that we have here, a lot of the big box stores.

• 26:57Joe Weisenthal?

  Right.

• 26:57Speaker 03

  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 and 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.

• 27:40Speaker 03

  So back to your comment on the Isle 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.

• 28:21Speaker 03

  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 of Aldi.

• 28:55Tracy Alloway?

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

• 29:00Speaker 03

  So it was shame in a good way. So I think as a brand, we've said, okay, let's 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.

• 29:37Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 30:19Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 31:00Tracy Alloway?

  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 Alison 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?

• 31:36Speaker 03

  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 suppliers 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 got to 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.

• 32:13Tracy 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?

• 32:24Speaker 03

  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.

• 33:01Joe Weisenthal?

  One of the things, and I had never, I had never gone into an Aldi before. And I'm not sure I would not, 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 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 much that can 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.

• 33:45Speaker 03

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

• 33:50Joe Weisenthal?

  Okay.

• 33:50Speaker 03

  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.

• 34:02Tracy Alloway?

  Oh my god.

• 34:03Speaker 03

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

• 34:06Joe Weisenthal?

  Memorized all the prices.

• 34:08Speaker 03

  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 ten 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. Peek up with our ten key. So we did two things. One, we started working with of scanning manufacturers. And the bi-level 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.

• 34:43Joe Weisenthal?

  Yeah.

• 34:43Speaker 03

  And cashiers, so bi-level scanners were essentially created out of our input saying, look, we need to do this faster.

• 34:50Joe Weisenthal?

  Bi-level, so that means there's the horizontal service and then the vertical thing and they're both have a chance of picking up the barcode.

• 34:56Speaker 03

  Exactly. Exactly. So that was one of the innovations that we were pioneering with our 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.

• 35:15Tracy Alloway?

  Or we've been at self-checkout and been struggling ourselves. Yeah.

• 35:19Speaker 03

  Yeah. So we came up with the idea and we're just going to add multiple barcodes. So we, we measure everything we scan, right? So all of our associates, they're measured on items per minute and we can, 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.

• 35:58Tracy 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. Do you think that had an impact on the monetary policy transmission mechanism? Do you think price increases didn't filter down into?

• 36:19Joe Weisenthal?

  Cause it would have just been too, it would have been too burdensome on the company to make their employees like do another memorization.

• 36:27Tracy Alloway?

  Someone needs to do a paper.

• 36:28Joe Weisenthal?

  Yeah, yeah, we should.

• 36:29Tracy Alloway?

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

• 36:41Speaker 03

  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.

• 37:07Tracy 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 barcodes.

• 37:17Speaker 03

  I think so. I mean, if you're a brand, you want to talk about the products and we 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.

• 37:33Tracy Alloway?

  Is that what you call it?

• 37:34Joe Weisenthal?

  Is that the term of art?

• 37:35Speaker 03

  It's called romance copy.

• 37:36Tracy Alloway?

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

• 37:40Joe Weisenthal?

  Do 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 realized, why am I devoting my life to M and A? When I could be devoting it to like design, bake. I always, I'm not a fan. I always think that's, I do not need romance copy.

• 37:58Tracy Alloway?

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

• 38:01Speaker 03

  You need more barcodes.

• 38:02Joe 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 it's, 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.

• 38:44Speaker 03

  Yeah, I think it's a, 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 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? And what's the best layout?

• 39:20Joe Weisenthal?

  What's corral?

• 39:20Speaker 03

  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?

• 39:36Joe Weisenthal?

  Yeah.

• 39:36Speaker 03

  Those are the questions that, you know, I think all the retailers are facing right now.

• 39:39Joe Weisenthal?

  I actually think, Tracy, the way the Wegmans does it in Astor Place, with the 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, that actually seems to work reasonably well compared to some of the other versions I've seen.

• 39:55Tracy 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 is 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?

• 40:25Speaker 03

  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 car 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 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

• 41:10Speaker 03

  be waiting even longer, even in a self-checkout.

• 41:11Tracy 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.

• 41:18Speaker 03

  No, no.

• 41:18Tracy Alloway?

  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. Maybe I'll get back into it.

• 41:29Joe 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 there? We talked about this yesterday, and I just let you go back to that, you go to the farmer's, 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?

• 41:52Speaker 03

  Yeah, so the grape market is fascinating, because for the average consumer, which we are all average consumers, right? You have green grapes, 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 on 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.

• 42:36Speaker 03

  I love the blackberries, and they don't know the details behind it.

• 42:39Tracy Alloway?

  Those blackberries were huge, the ones we sampled yesterday.

• 42:41Joe Weisenthal?

  They were big, and they didn't have that sort of tart that sometimes make you pucker.

• 42:44Speaker 03

  Yeah, 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 100 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, that's, all those types of things go into the decisions of our produce team. It's actually pretty sophisticated, and it's fine that 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.

• 43:18Tracy 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?

• 43:53Speaker 03

  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.

• 44:38Speaker 03

  But we have seen some switch in between maybe a higher protein, expensive protein like beef. And a lower, lower cost like chicken.

• 44:45Joe 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 GLP-1 is clearly part of the story, I think, with the protein boom. What are some sort of like clear data points that you see where you say, okay, like the GLP-1s are changing consumer buying behavior, other than just say, yes, they want more protein?

• 45:20Speaker 03

  Yeah. So GLP-1s, 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 GLP-1s. 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 GLP-1s 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 what we're seeing is protein really go throughout the store, protein bagels.

• 45:50Joe Weisenthal?

  Oh, yeah.

• 45:51Speaker 03

  And you're talking about protein popcorn, which there's going to be a point when it comes to, 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.

• 46:08Tracy Alloway?

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

• 46:13Speaker 03

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

• 46:18Tracy Alloway?

  Really?

• 46:19Speaker 03

  Yeah, we're selling significantly more beans.

• 46:20Tracy Alloway?

  Is that a GLP-1 thing as well?

• 46:22Speaker 03

  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. 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.

• 46:53Tracy 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, or have you ever decided to do your own sort of Aldi brand for a lot of these items?

• 47:38Tracy Alloway?

  Because when we say your own label, a lot of them don't say Aldi. They say some random farm.

• 47:44Joe Weisenthal?

  Berman's or what was the bread one?

• 47:46Tracy Alloway?

  Something Acres, you know, something pastoral like that.

• 47:50Joe Weisenthal?

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

• 47:54Speaker 03

  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 say, 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, 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, Berman'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.

• 48:39Speaker 03

  Mama Cozy 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, 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.

• 49:23Speaker 03

  So the trick is to make sure that we design the labels in a way that it's not boring.

• 49:27Joe Weisenthal?

  Then actually, here's my final question. I could have asked 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 like 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. You bought the generic, you bought the generic ketchup, what?

• 49:56Speaker 03

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

• 49:59Joe Weisenthal?

  Yeah, I remember.

• 49:59Speaker 03

  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.

• 50:05Joe Weisenthal?

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

• 50:09Speaker 03

  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 branded 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.

• 50:49Speaker 03

  It's easy to buy a branded product. You call up your local CPG and 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.

• 51:31Speaker 03

  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.

• 51:42Joe Weisenthal?

  All right, Scott Patton, thank you so much for coming on Odd Lots. I really, I love talking about food. You know, the Times Square all day is not on my typical route, but I'll try to check it out soon, once it really gets a little something.

• 51:51Tracy 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.

• 51:58Joe Weisenthal?

  Yeah, let's go, we'll go there one of these afternoons.

• 52:00Speaker 03

  Yeah. All right, well, I appreciate it. Thanks for having me on.

• 52:14Joe Weisenthal?

  Tricia, I thought that was fun. I would genuinely say I learned a lot about grocery store, business operations in the last day. And between that and our trip to the Aldi store, like, I know more about the grocery world.

• 52:27Tracy Alloway?

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

• 52:45Joe 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?

• 53:00Tracy Alloway?

  Of SKUs.

• 53:00Joe Weisenthal?

  Yeah, of SKUs. And it's like, you know, we talked about, we talked about how, you know, you can go to a place like, you know, what's the, um, there are a couple of popular Asian grocery stores and see 45 different versions of Kit Kats from Green Tea to whatever, prawn Kit Kats. But then also you're just 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.

• 53:33Tracy 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.

• 53:45Joe Weisenthal?

  Oh, yeah.

• 53:46Tracy 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.

• 53:55Joe Weisenthal?

  Yeah, I know. That's like the, because the original is like menu cost, right? Can't update the menu.

• 53:59Tracy Alloway?

  Yeah.

• 54:00Joe Weisenthal?

  But it's like, was that real?

• 54:01Tracy Alloway?

  But now we all order through QR codes.

• 54:03Joe Weisenthal?

  Yeah, there's been so much change. Like those, some of those first things need to go back and revisit it. But yeah, all, all very interesting to me.

• 54:10Tracy Alloway?

  Shall we leave it there?

• 54:10Joe Weisenthal?

  Let's leave it there.

• 54:11Tracy Alloway?

  All right. This has been another episode of the Odd Lots Podcast. I'm Tracy Alocke. You can follow me at Tracy Alocke.

• 54:17Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the stalwart. Follow our producers, Carmen Rodriguez at Carmen Armand Dashel Bennett at Dashbot, Kale Brooks at Kale Brooks and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content, go to Bloomberg.com/oddlots. We have a daily newsletter on all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 54:39Tracy 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.

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