Aldi 2022

Aldi 2022

We believe that there was no otheralternative to the FMCG A brandintroduction at Aldi and what it hasmeant subsequently, especially as Lidlis now showing higher sales densitiesthan Aldi in Germany for the first timeever.

That said, now the pricecompetition on FMCG A bandsbetween the retailers means thatprice rises are pushed through onprivate labels in a complete reversalof historic norms. How this will affectAldi’s price leadership image remainsto be seen, it’s down to managementto steer the business through thisdifficult period.

And looking towards the future, theonline proposition needs to beworked out. We believe for adiscounter a click & collect modelwill work best - as it removes thecostly last mile home delivery aspect,where a lot of money gets lost byother grocery players. The ITarchitecture and infrastructure is nowin place to make online grocery areality at Aldi.

There are other big changes on thehorizon for Aldi too. Aldi hasbecome more successful in the USthan in Germany, especially whenfactoring in the Trader Joe’scontribution. In total Aldi Germanystood at €28.8bn and US sales at€29.5bn in 2021. This is a seachange. The US is now the growthdriver for the discounter. Aldi Suedwants to invest US$5.0bn over thenext three years to protect its lucrativeUS business from Lidl’s entry into themarket.

Looking ahead, Aldi is set tobecome more of an Anglo Saxonretailer than a German one. Aldi willundoubtedly become more of a USplayer, reflecting the new internalgravity within the retailer, but it hasalso had outstanding successes inAustralia. Brexit induced pressuresand changes have made Aldi UK moreof a UK player (especially in sourcing)and in the UK Aldi has now overtakenMorrisons and broken into the top 4.This shift in the center of gravity willthen involve more independence fromGerman management and moreregional and local flexibility for thesuccessful markets.

That said, as a discounter Aldi willmanage complexity and localdeviations from the model byfocussing on systemic streamlining,processes and the Aldi principle.Aldi wants to offer around 80% of itsrange (the same SKUs) everywhere,as the discounter sees itself as aprovider of the essentials. Thiscalculation would include productssuch as flour or grains, which don’tshow any great regional differences inproduct specs.

And further international expansion isalso on the cards - with Aldi lookingfurther afield to South America forexample. After Aldi Nord’s big LeaderPrice acquisition in France further EUtargets could also become apossibility.

For grocers in general there will be alot of upheaval from technologicalinnovations in future and both Aldicompanies have reacted by launchingtheir very own “just walk out” storessimilar to Amazon. How many of thesewe will see in future is still very muchopen to debate - in theory they wouldbring down staffing costs (eventhough replenishment has not beensolved yet), and abolish theft, but onthe flip side these stores areexpensive to set up with very highcosts for equipment. At the momentmuch focus seems to be on Scan &Go, as a much cheaper alternative.

While there are significantchallenges (from the store conceptto brands and online) to make thediscounter future proof, there is noother retail format that stands tobenefit as much from the currentmacro economic environment asAldi and Lidl do.

And crucially, now Aldi is (anticyclically) modernising and gettingits positioning and propositioncloser to where it makes sense fora 21st century retailer. This willmean once the macro environmentimproves again, the retailer will haveadded significant market share.

Key Questions answered

What will Aldi do about online grocery? Will it all be click &collect? Or will it all be about partnerships with ultra fastdelivery players (deliveroo, Instacart etc)?

How will the IT/backend move towards “one” Aldi affect thetwo businesses going forward? How will this affect privatelabel harmonisation, pricing, OSA? How will this affect theintroduction of FMCG A brands?

How will SAP and auto replenishment affect the storeconcept? What will happen to the fresh ranges and theirsupply chain set up?

Is the new IT architecture powerful enough to supportcashierless “just walk out” stores the two Aldis are launching?Will those be the future? Or will it all be about scan & go?What is happening in Aldi’s supply chain? How far are themoves towards vertical integration progressed? How isthe retailer dealing with the current global disruption andsoaring inflation?

How far will the retailer go in introducing FMCG A brands,coping Lidl and making itself price comparable? Especiallynow, that shoppers look for cheaper private label optionsagain and trade out of brands?

What will the retailer do in the domestic market, where thecompany is treading water? And which is still so importantfor the profit contribution?

Now that Aldi is becoming more of an Anglo Saxon playerwith the lion share of sales generated in the USA, what willchange internally? Will Aldi become an American company?After having overtaken, how long until Aldi pulls awayfrom Morrisons in the UK? What will now happen inFrance after the Leaderprice acquisition, and closing thegap to Lidl at least in store numbers?

Is there more geographical expansion on the cards? What willhappen to Aldi China? Which Continent has come into Aldi’sfocus now?