Aldi is fixing is biggest weakness — and that should terrify Whole Foods

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Secrets of Aldi's Retail Success Story

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 insanely low prices.

The chain's prices on 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 of its private-label products, which make up 90% of what Aldi sells, the company told Business Insider.

AldiBusiness 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 additionally expanding its SimplyNature line, which is free of more than 125 artificial ingredients, and its gluten-free liveGfree brand.

Aldi's milk is already free of artificial growth hormones, but its 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.

AldiBusiness Insider/Hayley Peterson

Aldi currently 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 its 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-ever quarterly sales drop.

AldiBusiness 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.

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Related: A look inside Aldi's competitor: Whole Foods

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Aldi is fixing is biggest weakness — and that should terrify Whole Foods
Pedestrians pass in front of a Whole Foods Market store in Union Square, Wednesday, June 24, 2015, in New York. New York City's consumer chief said Wednesday that Whole Foods supermarkets have been routinely overcharging customers by overstating the weight of prepackaged meat, dairy and baked goods. (AP Photo/Julie Jacobson)
Pedestrians and motorists pass in front of a Whole Foods Market store in Union Square, Wednesday, June 24, 2015, in New York. New York City's consumer chief said Wednesday that Whole Foods supermarkets have been routinely overcharging customers by overstating the weight of prepackaged meat, dairy and baked goods. (AP Photo/Julie Jacobson)
Shoppers come and go from a Whole Foods Market store in Union Square, Wednesday, June 24, 2015, in New York. New York City's consumer chief said Wednesday that Whole Foods supermarkets have been routinely overcharging customers by overstating the weight of prepackaged meat, dairy and baked goods. (AP Photo/Julie Jacobson)
In this photo taken Friday, Oct. 17, 2014, a cash register terminal promotes usage of the new Apple Pay mobile payment system at a Whole Foods store in Cupertino, Calif. The new system launches on Monday. (AP Photo/Eric Risberg)
In this Thursday, March 27, 2014 photo, a woman walks out of the Whole Foods Market in Woodmere Village, Ohio. Whole Foods reports quarterly financial results on Wednesday, Nov. 5, 2014. (AP Photo/Tony Dejak)
In this March 27, 2014 photo, a woman shops at the Whole Foods Market in Woodmere Village, Ohio. Whole Foods reports quarterly financial results on Wednesday, July 30, 2014. (AP Photo/Tony Dejak)
FILE - In this March 25, 2014, file photo, shows a Whole Foods store in Philadelphia. Whole Foods reports quarterly earnings on Tuesday, May 6, 2014. (AP Photo/Matt Rourke, File)
Pedestrians go past a car with a figurine of a soybean crossed with a fish on top in front of a Whole Foods Market in downtown Seattle, on Election Day, Tuesday, Nov. 5, 2013. The vehicle was promoting a Yes vote on Initiative 522, which would require the labeling of food that contains genetically modified ingredients. (AP Photo/Ted S. Warren)
FILE - This July 29, 2013 file photo shows produce on a Whole Foods paper bag in Andover, Mass. Whole Foods Market Inc. said bad weather in 2014 has shoppers making fewer trips to its stores, hurting sales growth. (AP Photo/Elise Amendola, File)
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