Inside America's fastest-growing supermarket: How a German store famous for its mysterious middle aisle and near-identical dupes of big brands became a retail behemoth

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• Aldi is the third largest grocer in the US and continuing to expand rapidly
• Unlike Walmart or Kroger, it stocks a limited assortment of affordable staples
• German rival Lidl has had less success penetrating the American grocery market

German supermarket chain Aldi is expanding across the US at breakneck speeds thanks to a unique business model that Americans are lapping up.

Some 2,400 of its small stores, packed with a limited assortment of well-curated but mostly private label goods, are now dotted across the country, and it plans to open another 800 in the next four years.

The retailer was recently named the fastest-growing grocer in the US for the fifth year in a row by real estate firm JLL, and in terms of store count it's the third largest.

'No one else is putting up 100 stores a year in the grocery space,' said Michael Infranco, assistant vice president at RetailStat.

'That's impressive. And they've been doing that for a number of years now.'

Although the retailer has been in the US since 1976, only recently did it begin scooping up a larger share of the market.

Driving its popularity has been inflation, which forced consumers to seek out substitutes for increasingly expensive branded goods like Heinz Ketchup, Kellogg's Frosted Flakes and soft drinks like Coca-Cola.

Aldi instead offers much cheaper imitation products or 'dupes' - which it has been selling for many years in Europe.

The chain is also experienced when it comes to rapid expansion.

In the last decade, it has more than quadrupled its market share in the UK to 10 percent, according to data from Kantar.

Demand for dupes has skyrocketed in North America too. The volume of private label goods sold by US grocers has risen some 34 percent since 2019.

'Aldi definitely benefited from a US market that is receptive to private label goods,' said Infranco.

For example, Aldi's private label ketchup comes in similar-looking packaging to the Heinz product - but is about half the price.

A 38-ounce bottle of its Burman's brand ketchup might cost around $1.35, while the same size bottle of Heinz at Kroger is typically more than $3.

An Aldi in Milwaukee, Wisconsin, sells Clancy's brand chips which look a lot like Pringles for just $1.89, while the original product costs $2.85 at the same store.

Aldi also sells staples like eggs, milk, sugar, flour and pasta, and has a devout following. One fan is Lydia Beiler, author of the blog Thrifty Frugal Mom.

She even created a meal plan based on essentials from Aldi: 'Seven dinners for under $50 for a family of five.'

Also fueling its rise has been its 'aisle of shame,' a central aisle in the middle of its stores lined with fairly random items like kitchen gadgets, toys and home décor.

Aldi stores are smaller than those of most grocery chains, averaging around 10,000 square feet. They also only stock around 12,000 different products, which are put out in their delivery boxes to reduce the need for staff.

'It's utilitarian,' said Infranco. 'You don't have 12 versions of an Oreo cookie with different stuffing, you have one type of cookie, and that saves shelf space and money that would go on distribution and inventory.'

The approach sets it apart from other famous retail giants that offer a more complete supermarket experience.

'In their space, I think they're the king of the hill but they're not taking downWalmartor Kroger any time soon,' said Infranco.'In general, people who shop at an Aldi or Lidl do the rest of their grocery shopping elsewhere.'

Aldi's lesser-known German rival, Lidl, however, has been slightly less successful. Last year, it closed 10 underperforming stores and laid off around 200 employees.

Having only entered the US in 2017, in just seven years it has cycled through five CEOs as it seeks to find its feet in a notoriously tough market.

'Aldi has the benefit of first mover advantage. It established itself in the US long before Lidl and that has given it an edge, especially in terms of brand recognition,' said Neil Saunders, managing director of GlobalData.

'Aldi has also been savvy in terms of expansion. It has selected neighborhoods where there are blue-collar Americans who will be interested in its proposition,' he added.

A recent report from analytics firm Placer.ai found that Aldi caters more to lower-income households. Lidl stores also tend to be larger in terms of square footage and inventory.

Aldi's planned expansion will be accelerated by its acquisition last year of Winn-Dixie and Harvey's Supermarket, which together operate more than 600 stores across the Southeast.

Some 50 of those will be converted to Aldi locations in the second half of the year and open in 2025. Many will also remain under their existing franchises, Aldi said.

According to Infranco, what it does with those Winn-Dixie and Harvey's Supermarket locations will be telling of its next steps as they are bigger than existing stores.

'They definitely have a plan that we don't know about yet,' said Infranco.

'But I'm a little concerned that they may want to be a traditional grocer too. When companies stray away from what they do really well, they don't always tend to do so well.'