Discount Grocery Chains Battle for Hegemony in Southeast

Several national discount grocery chains are racing to expand their footprints in the Southeast, which experienced the largest population growth of any region in the U.S. in 2023.

Grocery Outlet has acquired discount grocer United Grocery Outlet from Gen Cap America for $62M. The deal includes UGO’s 40 stores in the Southeast, according to a regulatory filing.

“This acquisition provides Grocery Outlet with scale in a new region as well as a platform for future expansion in the Southeast,” said R.J. Sheedy, Grocery Outlet’s CEO, in a statement.

Based in Athens, TN, UGO has 25 stores in Tennessee, nine in North Carolina, four in Georgia and one each in Alabama and Kentucky. The discount grocer also has a distribution center in Athens.

In a November earnings call, Sheedy said the company’s long-term growth plan envisions more than 4,000 U.S. stores, including stores purchased through strategic regional acquisitions as well new stores.

Including the UGO acquisition and 20 new stores the company is planning to open this year, Grocery Outlet’s portfolio will exceed 500 outlets in 2024. Last year, the chain opened its first outlets in Las Vegas and Ohio.

Discount grocer Aldi, which currently has more than 2,300 U.S. store locations, is in the midst of an expansion in five states in the Southeast.

In an all-cash deal announced in August and expected to close in the first half of this year, Aldi is acquiring 400 Winn-Dixie and Harveys Supermarket outlets in the Southeast from Southeastern Grocers.

The grocery stores acquired by Essen, Germany-based Aldi include locations in Alabama, Florida, Georgia, Louisiana and Mississippi.

Aldi said it will evaluate whether to convert the Winn-Dixie and Harveys stores into Aldi outlets and may continue to operate several under their original brands, Jason Hart, Aldi’s CEO, said in a statement.

Aldi has invested $2.5B in the Southeast region since the mid-1990s. Last year, the discount retailer opened a distribution center and regional headquarters in Loxley, AL. The logistics center is designed to support up to 100 stores.

Another discount chain, Save A Lot, also has a long-term plan to triple its U.S. store portfolio, which currently numbers 800 outlets.

Save A Lot last year transferred ownership of all of its stores to independent licensees as part of a switch from a retailer to a wholesaler. In August, Save A Lot sold 18 St. Louis-area locations to Leevers Supermarkets.