Another Wal-Mart on the Horizon?

Aldi is Europe's stealth Wal-Mart. Like the Arkansas-based giant, Aldi boasts awesome margins, huge market clout, and seemingly unstoppable growth -- including an estimated sales increase of 8% a year since 1998. It relentlessly focuses on efficiency, matching or even beating Wal-Mart Stores Inc. (WMT ) in its ability to strip out costs.

The discount chain already is having a Wal-Mart-type effect on the German economy. The main association of German retailers issued a report on Mar. 8 blaming Aldi and other "hard discounters" for running 35,000 small shops out of business last year. On the same day, Bavarian dairy farmers picketed Aldi stores, which they blame for a ruinous 15% plunge in milk prices since 2001. Aldi must take care not to let such criticism tarnish its reputation among German consumers.

What's next? Aldi now shows signs of stepping up the pace of its expansion on Wal-Mart's turf. Aldi opened its first U.S. store in Iowa in 1976 and has sales of $4.8 billion in North America, according to M+M. And Trader Joe's Co., a specialty grocer owned by a family trust that Aldi co-founder Theo Albrecht created for his sons, has become the hottest thing in U.S. retailing by extending the Aldi concept to upscale products like wine and cashew butter.

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