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?
For us, it's strictly productivity, and since we control the product and the packaging, we can put 20 barcodes if we wanted to. But if I'm like a Häagen-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.
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 rewards on the back of that.
Is that what you call it?
It's called romance copy.
I have often felt feelings of romance as I read the back of ice cream packages. Do you ever like those things? It'll be like Bob and Joe's corn chips. And it's like, the story would be like, Bob was working at Goldman Sachs and realized, why am I devoting my life to M&A when I could be devoted to baking? I'm not a fan. I always think that I do not need romance copy.
You need to know the origin story of your potato chips, Joe.
Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal and I'm Tracy Alloway. 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. Like, I just love visiting different kinds of grocery stores. I love produce aisles. I like seeing new ones. I just really like them. You know, if I'm in a rush or whatever, it's not so pleasant, but I really like grocery stores.
How often do you do the weekly grocery shopping, Joe?
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 those quick runs I actually enjoy. I don't really, you know, obviously unboxing is not fun, and there are aspects of it that aren't fun, but as an interesting experience, and I like food, I like eating, I like them.
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 what years are you talking about? Like when you were in Japan?
So 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.
Yeah, yeah, that was there. And, 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, the Yeltsin thing, so you could get how at least they spark joy, of course.
Okay. Of course. But, you know, now I think I take them as an accepted.
Yeah, because now I'm sure you get yours. So for sure. Sure. I shop a lot at Walmart.
Yeah. In Connecticut, which is sometimes a 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.
That one, Morton Williams.
Okay, yeah, I'm trying to be diplomatic. Haha. It's just depressing, the prices. 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.
I know. The Manhattan, look, the Manhattan-specific grocery experience is, I would say, uneven, to put it best. There are some decent ones, but there's a lot of places that are like high-end and expensive.
Yeah, and low-end and expensive. You don't ever say like, you go to these places and 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 there's like, actually, no, it's just the worst experience. And also it's expensive. This reminds me also 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.
I just wanted to show him like it wasn't through stores. It's crazy.
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 that's where I get on the subway. And it hasn't. Like, 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, it is very true that Manhattan has a shortage of, let's say, lower-priced stores.
Right? Well, we have Whole Foods. Well, we have Trader Joe's. Yeah, true. The closest. But we have a lot of Whole Foods, a lot of Wegmans. I'm not even going to mention what's the one with the G. Oh, Gristedes. Gristedes, Morton Williams. Yeah, this is like that, but we don't really have, like, you know, we don't have a Walmart. In Texas we have H-E-B, which everybody loves. That'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, incredible variety and a sushi bar and a barbecue pit.
Anyway, there's a new grocery store opening up. We're recording this June 18th, and tomorrow, as of the time of 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.
So this is very unusual in my mind, because you wouldn't expect a giant grocery store to open just off Times Square.
Yeah, I think the new location is something like 25,000 square feet, which is just absolutely huge, especially for that. 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 yeah, like a lower-priced grocery store that competes squarely with the Walmarts, the Costcos of the world.
Totally. And I, you know, and they are, I think they are substantially cheaper by like, I, you know, I searched this, they claim that they're cheap, but also they're third-party. And well, we say we already won the tour, we got a new location. So we're a little biased because also they gave us a tour, so there's just no disclosure. They gave us a tour and they had all these like little snacks for us and stuff like that. So I'm already predisposed to, you know. But on the plus side, we have personally witnessed, yes, the ground Wagyu beef for $5.99. It does exist, 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 how do you actually wring prices out of a 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 we're here on the podcast. So thank you so much for joining us.
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, all the offices.
Yeah, right on Times Square. Amazing. Let's just talk about what does the chief commercial officer do, or tell us about what's your actual job and your career at Aldi.
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 get them onto the shelf.
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.
Yeah. So Midtown Manhattan, that's our second location in Manhattan. You're right, it's not intuitive. It was the first one. First one was up in Harlem.
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 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. Here's a cool space.
What was there before it?
You know, it's a brand new building. It's a brand new building with residential on top. And we've taken the ground floor.
Do you think that's an appeal? Like, I think I would like to live above, you know, a grocery store. It seems like a nice amenity.
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.
Yeah. A lot of cities in Asia. Yeah. So, you know, now have a mixed-use building. Yeah, I love that. I think it's, I even have daycares on the bottom of the grocery store. Dry cleaner, like, you take care of your entire life within one compound and be totally down.
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?
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.
Can you talk to us about, like, we've done an episode, we've done a few produce episodes. We recently did an episode on tomatoes with one of the senior VPs at Builder. That was an 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. Talk to us about what is the supply chain between. For example, when we entered the store, we were like in the produce aisle and we tried some grapes and some blueberries that are very nice. What do you, walk us through, like, what is the supply chain from, like, where that grape comes from to where the distribution center is to the store and that journey.
And that's a prime example of how we buy a bit differently. So we have over 2,600 locations. So what that means 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 special.
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, you know, I assume truckloads of groceries every day. And where are they coming from?
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, and we have to have a bit of a shorter truck. We actually have to have two drivers.
You say a bit of a shorter truck.
It's a bit of a shorter truck because they can't hit the turning radius. 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, and 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.
Well, 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 sense, just even the trucking component and the fact that it's, you know, you go out to the suburbs and they don't have to have like a guy saying like, and the people, it's like, oh, is there a car? There is like a kid on a scooter or something like that. Talk to us a little bit more about figuring that component out. And the two drivers, like how that sort of, you know, the math of what that contributes or saves in terms of grocery.
Yeah. And with everything we do, and we're really focused on efficiency. You know, you mentioned sushi bars and barbecue pits before, you know, so we don't have those. But when we're going to put a truck, you know, we're going to put 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 property. That's just a fact. But it goes into the equation.
Okay. You've got trucks delivering the groceries overnight. You have a huge space. I should just emphasize, we saw it. You ran through the aisles because we never got to run through groceries. I'm going to speed it up two times to make it look like it'll look really good.
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?
Great question. And we have awesome employees at the store first and foremost, but 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, a box.
It's like a tray. You can see the items.
Yeah, it's a tray. So our staff can restock, you know, case after case after case. And I'd 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.
Joe, did you ever watch Superstore?
No. What was it? I never heard about the show until recently.
It's basically a thinly veiled sitcom of workers who work at Walmart. Oh, I probably don't explicitly say Walmart, but it's obviously Walmart. And I swear to God, 90% of their time is stocking shelves. You know, like unit by unit. That's basically all they do. And talk.
What was it good? Like, should I watch it?
It's actually a really, it's sort of like The Office but for giant retail.
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 sort of clarify one thing. So one of the brands that we noticed that is on your shelf was like Sweet Baby Ray's barbecue sauce.
And so what you're saying is you will work with Sweet Baby Ray's. They're not going to have like a custom all of these Sweet Baby Ray's or change the flavor. But talk to us about the degree to which a brand provider will modify the sort of delivery package so that it's ideal for your logistical setup.
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 slot. And we can get two to three flavors out of that. So as we work with the brands as well.
