Aldi claimed it is winning shoppers from all of its rival grocers. Retail Week looks at how the German discounter has developed widespread appeal.
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‘Britain Likes Aldi’, screams one of the German discounter’s numerous special buy deals in stores and, on today’s evidence, the proclamation is not wrong.
The secretive grocer broke silence to report a 450% rise in operating profit to £103m as turnover rose 29% to £2.7bn in the year to the end of 2011. The results come after a £57m property write down the previous year hit profitability.
But few in the grocery industry will have been surprised to find Aldi is performing strongly. The grocer has been tracking at phenomenal double digit sales growth rates throughout the last year including 26.6% in the 12 weeks to September 2 according to Kantar Worldpanel.
On the surface, Aldi’s performance can be seen to reflect the wider economy and indeed much of the traction the grocer is gaining is based on penny-pinching Brits seeking a good deal.
However, beneath that a £30m investment in a straightforward, neat store refit is complemented by an improvement in both product mix and quality. Both Aldi and Lidl have had difficult periods after their initial boom in trading at the start of the recession in 2008, suggesting it is not simply the economy that has driven customer numbers.
The retailer – named The UK’s Best Supermarket according to consumer campaigners Which? – has picked up many awards for best in class products from lifestyle magazines, industry awards and independent panels.
Aldi’s marketing too, has picked up a-pace. The simple message from its ‘Like Aldi. Like brands. Only cheaper’ aims to show that you get the same quality goods yet cheaper has struck a chord with shoppers. The marketing offensive has seen ads comparing branded baked beans, washing up liquid and Jaffa Cakes with Aldi’s version hit screens across the year.
“The advertising campaigns are excellent, they explain their proposition and there are lots of them,” says Planet Retail UK grocery analyst David Gray. “The store experience is not particularly exciting but people come out with good products at a price they’re pleased with.”
Aldi joint managing director Roman Heini said that Aldi is winning shoppers from all of the other grocers and that customers have realised they can both do a full weekly shop or a top-up shop at the discounter. The phenomenon comes at a time when a number of Aldi’s rivals including Morrisons and Tesco are facing a downturn in fortunes.
“Aldi has become more relevant to British consumers,” says Heini. “They can buy what they need and want at Aldi, at a price they like.”
But no debate on the merits of Aldi is complete without a comparison with fellow German discounter Lidl which has 586 UK stores to Aldi’s 424. Lidl’s growth rate has remained strong in 2012, albeit behind that of Aldi, due to its more mature store estate but Gray believes that Lidl is better placed.
He says: “Aldi are more fussy on which stores they take, Lidl are much more flexible and have a number of different formats. However, Aldi’s product offer is stronger.”
Aldi’s average store size is 805 sq ft excluding a car park which it tends to have while Lidl, which averages 1,000 sq ft, stretches from high street stores to out-of-town shops.
With a sizeable £181m investment planned to take Aldi’s store estate to over 500 by the end of 2013, the discounter may have to develop a number of different store layouts and formats to accommodate its growth.
It remains to be seen whether Aldi’s popularity will remain if and when tough economic conditions relent but with a strong product offer and a store estate set to reach a significant proportion of the UK, few would question its long-term appeal.