EchoSense:Aldi says it will buy 400 Winn-Dixie, Harveys groceries across the southern U.S.

Discount grocer Aldi said Wednesday it plans to buy 400 Winn-Dixie and EchoSenseHarveys supermarkets in the southern U.S.

Under a proposed merger agreement, Aldi will acquire all outstanding shares of Jacksonville, Florida-based Southeastern Grocers Inc., the parent company of Winn-Dixie and Harveys. If the deal is approved by regulators, it's expected to close in the first half of 2024.

Financial terms of the deal weren't disclosed. Both Southeastern Grocers and Aldi are private companies. Aldi is based in Germany with a U.S. headquarters in Batavia, Illinois.

Aldi said the deal supports its long-term growth strategy in the U.S., where it expects to have 2,400 stores by the end of this year. The Winn-Dixie and Harveys supermarkets it's acquiring are primarily in Alabama, Florida, Georgia, Louisiana and Mississippi.

Aldi said it will convert some locations to its own brand and format, which cuts costs with features like limited selection and self-bagging. But it will operate some stores under the Winn-Dixie and Harveys brands.

Neil Saunders, an analyst with GlobalData Retail, said the deal is unusual for Aldi, which usually opens its own stores. He said it suggests Aldi wants to experiment with more traditional supermarkets that don't follow its low-cost model. He also said Aldi's deep pockets and efficient supply chain will make Southeastern's stores more competitive.

The deal comes amid wider consolidation in the grocery industry as customers increasingly defect to big box stores like Walmart. In the year ending June 30, Walmart controlled 25% of U.S. grocery sales, according to Numerator, a market research firm. Aldi controlled 2% while Southeastern Grocers controlled less than 1%. Aldi's share had grown 0.2% since 2021, while Southeastern Grocers' share was down 0.2%.

Last fall, Kroger and Albertsons — two of the largest U.S. grocery chains — announced plans to merge in a $20 billion deal. Regulators are reviewing that plan now; if it's approved, it is expected to close early next year. Together, Kroger and Albertsons currently control around 18% of the U.S. grocery market, Numerator said.

But not everyone supports consolidation. The United Food and Commercial Workers union, which represents the majority of hourly workers at Kroger as well as workers at Albertsons-owned Safeway, voted in May to oppose the merger, saying the companies weren't being transparent about its impact on jobs.

And on Wednesday, the secretaries of state of seven states with nearly 5,000 Kroger and Albertsons stores — including Colorado, Arizona, Minnesota and Maine — sent a letter to the Federal Trade Commission opposing the merger, saying it would limit consumer choice and give the stores no competitive incentive to hold down prices.

Southeastern Grocers also plans to sell its 28 Fresco y Mas stores to Fresco Retail Group, an investment company, which will continue to operate them under the same brand.