The news: Aldi plans to invest £1.6 billion ($2 billion) in the UK over the next two years as it looks to take advantage of shoppers’ “demand for discount” and cement its position as one of the country’s largest grocers.

The retailer expects to open 80 stores in that period, bringing it closer to its long-term goal of having 1,500 UK locations.

Why it matters: Aldi’s rationale for investing in the UK mirrors its aggressive US expansion strategy. With food inflation edging up in both markets and adding strain on already-strapped consumers, discount grocers are in a prime position to take share in both markets—and are doing so by rapidly growing their footprints and investing in low prices.

• Aldi and Lidl accounted for nearly 20% of UK grocery spending in the 12 weeks ended August 10, increasing sales by 4.8% and 10.7% YoY respectively, in that period, per Worldpanel (formerly known as Kantar).
• That share could rise quickly once pressures from the Labour government’s budget hit consumers and businesses. An industry group representing food and drink manufacturers expects food inflation to climb to 5.7% by December, its highest level in nearly two years, due to minimum wage increases and rising payroll taxes.
• While higher costs could dampen retailers’ holiday plans, Aldi sees an opportunity to benefit, with UK & Ireland CEO Giles Hurley noting an uptick in shoppers “treating themselves at home rather than going out.”

Our take: Aldi and other discount grocers are shaking up the supermarket landscape, both in the UK and US, through their rapid expansion and array of affordable—and more exciting—products. Their success gives competitors a blueprint to keep shoppers from trading down. That includes investing in a tiered selection of private-label products, lowering prices where possible, and satisfying consumers’ desire for at-home indulgences.