The Real Reason Aldi's Milk Is So Cheap

Since Aldi arrived in the US as a single store in Iowa back in 1976, the store has grown, slowly and steadily, to become the third largest grocery chain in the country. Today, the company has more than 1,800 shops in 35 states across the country, and unless things change, Aldi is aiming to have 2,500 stores by the end of 2022. Shopping at Aldi is a no-frills experience, to say the least. Shopping carts are only available if you pay a quarter. Each store has just four to five grocery aisles that carry a fraction of the products you'll find in normal supermarkets. There are no shopping bags, and check-out staff send you off to do your own bagging. All these measures add up, however, allowing Aldi to both keep its overheads down and price its goods competitively for the benefit of its customers. But with many products, the price is just so low that you can't help but wonder if they're compromising on the quality, and this is especially true for Aldi's milk. Aldi offers its customers scant dairy options, which actually helps buyers make quicker, more decisive purchases. The idea is that, if you're given more choices, you're less inclined to spend money; this is a phenomenon known as choice paralysis. So Aldi's customers only get one brand of milk: the store's private label, Friendly Farms, while dairy products like yogurt and dairy alternatives are sold under the Simply Nature label. Private labels allow retailers to sell products without having to pay a middleman, which makes things cheaper for the consumer. Just because Aldi sells a private label, however, doesn't mean the milk is second-rate. In fact, the high quality of the chain's Friendly Farms milk means its stocks sell out so quickly, stores are restocked between five to seven times a week. To further save on labor costs, the milk arrives on racks so that 80 gallons are shelved and ready to be sold in just seconds. Aldi's business decisions in the dairy section mean there is little to no spoilage either, which would otherwise represent both lost investment and lost profit. Aldi has also benefited financially from changing consumer attitudes toward buying non-branded grocery labels. Once, these items were seen as inferior, simply because they were cheaper. But Megan Doyle, head of consumer research group Canstar Blue, says shoppers are trending toward generic brands over name brands, which is a boost for the bottom line of grocers like Aldi. She says: "Unless you have a strong preference for a particular named brand, chances are you will perceive the private label alternative to offer better value...Private labels have traditionally been seen as the cheap and nasty alternatives, but perceptions are changing and consumers are switching to save." It's worth pointing out that Aldi's milk isn't cheap because the company's buyers are savvy negotiators. Like all commodities, the price of milk is dictated by supply and demand, and the market price of milk has been hit badly by a falling demand for cow's milk, which has lasted several years. In 1984, milk represented 15 percent of the food and drink consumed during any meal, but by 2019, that share dropped to just 9 percent. Beyond the low market value of milk across the board, another key factor that dictates prices is the retail markup that stores add to the base price of milk. This markup helps retailers cover the cost of doing business, because it factors in rent, utilities, labor, costs, and insurance. This also explains why a gallon of milk is pricier at more exclusive groceries like Whole Foods, where the company puts more money into the shopping experience. In 2019, a price check by editors at Cheapism showed that a gallon of 2 percent milk cost $2.48 at Walmart, and $1.49 at Aldi. So, thanks to low bulk milk prices and Aldi's streamlined, no-frills shopping experience, Aldi is able to offer good milk for as much as a dollar less than competitors, all without compromising its bottom line. Watch the video to learn The Real Reason Aldi's Milk Is So Cheap! #Aldi #Milk