Aldi is fixing its biggest weakness, and that should terrify Whole Foods

Aldi is stepping up its game in the organic-food space.

The grocery chain is expanding organic-food brands, removing some artificial ingredients from its products, and adding more gluten-free items in hopes of attracting more health-conscious shoppers.

Aldi became one of the world’s biggest food retailers by offering comparatively very low prices. Its prices for fresh produce and packaged goods are roughly 30% lower than Walmart’s, according to a recent price check.

The company’s foray into organic and gluten-free foods signals a new direction for Aldi, and an emerging threat to Whole Foods’ lower-cost chain, 365 By Whole Foods Market, which is launching this year.

Whole Foods is opening the chain to better compete with the increasingly crowded market for low-cost organic goods.

Aldi has removed certified synthetic colors, partially hydrogenated oils, and added MSG from all its private-label products, which make up 90% of what Aldi sells, the company told Business Insider.

Business Insider/Hayley Peterson

Aldi is also expanding its selection of fresh and organic meat and produce, including its “Never Any!” brand of meats that contain no added antibiotics, hormones, animal by-products or other additives.

The chain is also expanding its SimplyNature line, which is free from 125 artificial ingredients, and its gluten-free liveGfree brand.

Aldi’s milk is already free from artificial growth hormones, but it’s now stripping yogurt, sour cream, cottage cheese, and other dairy products of growth hormones as well.

In addition to broadening its organic offerings, Aldi has started to offer “fancier” foods, like artisanal cheeses, smoked salmon, quinoa, and coconut oil.

The steps will enable Aldi to better compete with not only Whole Foods, but also Kroger, which has been rapidly expanding its organic line, called Simple Truth, and Walmart’s Neighborhood Markets.

Business Insider/Hayley Peterson

Aldi has about 1,500 stores in the US and has plans to open roughly 500 more stores over the next two years as part of a $3 billion expansion.

Aldi and rival discounter Lidl have upended the grocery market in the UK, forcing the nation’s largest supermarkets to dramatically cut prices and lay off workers to stay competitive.

The CEO of Asda, the UK’s second-largest grocery chain, has called the new competitive environment created by Aldi and Lidl “the worst storm in retail history.”

“When we set the plan, I don’t think anyone anticipated the market being in meltdown,” Asda CEO Andy Clarke said in August after the Walmart-owned company reported its worst quarterly sales drop ever.

Business Insider/Hayley Peterson

Aldi keeps prices low by limiting inventory to a lean selection of private-label items, versus traditional supermarkets that tend to carry several different brands of a single product.

Aldi also invests far less in customer service and merchandising than traditional grocers.

Most of the store’s products are displayed in their shipping cartons to make restocking quick and easy. That means fewer workers are needed on the sales floor.

Aldi also requires customers to bring their own shopping bags, bag their own groceries, and pay a deposit to use a cart. Customers get their deposit back when they return the cart, so Aldi doesn’t have to pay employees to round up carts.