Story Originally Appeared in the Los Angeles Times
Discount supermarket chain Aldi USA is headed for Southern California, but unlike most of its competitors, it's skipping Los Angeles and aiming for the Inland Empire.
The company, which runs more than 1,200 stores in 32 states from the Midwest to the East Coast, is planning a $55-million Moreno Valley complex that will serve as its regional headquarters and distribution center, according to city documents. The operation is expected to create several hundred jobs.
The site probably will serve as Aldi's launchpad for its "expansion into California and the Southwest," according to a report this month from John C. Terell, Moreno Valley's interim community and economic development director.
In a statement Monday, Aldi confirmed that it is "in the initial stages of discussions to potentially locate a warehouse" in the city. Aldi, which is based in a Chicago suburb, revealed no other details about its plans.
Riverside County is appealing to the grocer, analysts said, because it has a greater concentration of the chain's target: low-income consumers.
"This is their market — they're looking for people who are strapped," BB&T Capital Markets analyst Andrew P. Wolf said. "The rents they're going to pay out there are going to be quite affordable."
Trader Joe's locations — which are run by another subsidiary of Aldi USA's umbrella company, Aldi International — are few and far between in Riverside County.
The financial considerations figure to be even more favorable given incentives included in a deal Aldi hammered out with Moreno Valley officials, according to a memorandum of understanding signed last week by Paul Piorkowski, regional vice president of Aldi International's California branch, and Tom Owings, the city's mayor.
The arrangement calls for an expedited amendment to the existing plan for the Westridge Commerce Center plot, along with an ombudsman assigned to Aldi to help guide the company through the development process. Review fees charged by the city would be capped at $5,000, according to the document.
Officials also expect Aldi to qualify for a yet-to-be-launched program offering large industrial clients a 20% discount off current utility rates, according to the memorandum.
The company's facilities will total 935,000 square feet and will include at least 200,000 square feet of refrigeration and a 24-hour warehouse situated between Eucalyptus Avenue and the 60 Freeway, according to officials.
Aldi is looking to invest at least $55 million in the project, which would create 200 new jobs, according to the memorandum. Terell said in his report that Aldi would also create several hundred additional jobs while running its delivery and contract operations.
Riverside County's unemployment rate is at 9.2%, compared with the 8.1% level statewide.
The chain's plans, which were first reported by Riverside newspaper the Press-Enterprise, probably will be reviewed by the City Council and the Planning Department, according to the memorandum.
"The company is anticipated to provide substantial economic benefits to the city and community through tax revenues and local expenditures by employees and corporate contracts," Terell wrote in his report. "As a regional headquarters, the company would also provide the city greater exposure far beyond the city limits."
Aldi, which said in its statement that it "is further developing its plans to expand to Southern California," has added an average of 80 new stores annually over the last few years.
Moreno Valley has many demographic advantages for Aldi, Wolf said.
More than 18% of the city's population lives below the poverty line. Residents make a median household income of $56,768 annually, according to Census Bureau data. Statewide, 14.4% of residents live in poverty. Californian households earn a median of $61,632 each year.
In the eastern half of the country, Aldi is known as a chain with a limited assortment of deeply discounted products, many of them private-label offerings. The company has said it cuts overhead costs by operating smaller stores, using natural lighting and encouraging customers to bring their own shopping bags.
"They try to be the lowest price in the market," Wolf said. "If you took a Trader Joe's and made it more for Wal-Mart customers, that's what Aldi is, like a dollar store for food."
Trader Joe's is run by Aldi Nord, a subsidiary of Aldi International. Aldi USA, which is operated by Aldi Sud, has been bandied about as a potential buyer for the Fresh & Easy grocery chain.British giant Tesco said in April that it planned to sell Fresh & Easy.
But Aldi USA shelves are light on organic and natural goods compared with Trader Joe's, which has no locations in Moreno Valley. Whole Foods Market Inc. also doesn't operate in the city.
Demand for health-conscious foods is more intense in the Los Angeles area, where providers such as Trader Joe's abound and the supermarket industry is notoriously competitive. For now, Aldi seems to be steering clear of the region.
"They're not going to have an appetite to butt heads right away with Trader Joe's," Wolf said. "They generally don't put their stores near each other. In terms of demographic, they're going after different customers."
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