The discount supermarket chain Aldi is outrunning the field in sales and profit; it has seen pre-tax profits in the UK soar 124% in 2012, to £157.9m, and revenues increase by 41% to £3.9bn in the same year. The company opened 34 new stores in 2012 and expects to open another 50 by the end of 2013. Aldi is expanding with confidence, whilst its chief rivals, Tesco, Morrisons and Asda, are all scaling back on their expansion plans.
There are a couple of good reasons for the phenomenon; Aldi has consistently lower prices on a large percentage of of the grocery and merchandise items common to all the big chains, including Walmart, and the quality is consistently as good or higher than what’s offered by its competitors. According to managing director Matthew Barnes, pricing strategy is the main contributor in its surge ahead of other major UK supermarkets.
Mr. Barnes said that they keep pricing simple and don’t try to confuse buyers with special promotions such as “buy-two-get-one-free” and the like. He also noted that Aldi is attracting more affluent customers with its new stores in more exclusive neighbourhoods, like Knutsford and Winchester, where customers are attracted by the combination of quality and value. He said opening new stores that are convenient to shoppers in these more affluent areas is one of Aldi’s goals for the near future.
Outside analysts have noted that the company is not only reaping the reverse benefits of belt-tightening in this economic time of austerity, but they’ve also upgraded the store’s image with the public. Offering better quality in their store brand and better bargains in the premium ‘Specially Selected’ products has resulted in a 40% sales growth in the premium line and more than 50% in sales of meats, fruits and vegetables.
In June this year Kantar Worldpanel published figures that showed Aldi had grabbed a record 3.6% share of the market in the three months to 9 June. In the same month the company was awarded the Grocer Gold Awards ‘Grocer of the Year’ title, and its own label products won 16 Gold awards, outstripping Asda, Sainsbury’s, Tesco and Morrisons.
On top of that, for the second time Aldi beat the competition for ‘best supermarket’ at the annual Which? Awards. That, says Barnes, is an indication that UK consumers are realising that switching to Aldi means they can save a significant amount of money without compromising on quality, and that’s really the name of the game.