Sales Boost

Aldi Nord Revamp Pays Off

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The discount goods are flying out of the door at Aldi Nord.
  • Why it matters

    Why it matters

    Aldi Nord has long been considered a sleepy player in the discount retailer sector but its sales increase and store revamp project could see it soon challenge its rivals.

  • Facts

    Facts

    • Aldi Nord is currently the fourth-largest operator in the discount supermarket sector in Germany.
    • It has a market share of 16.1 percent, compared to market leader Lidl’s 26.6 percent.
    • It has seen a 3 percent growth in sales this year; last year it managed growth of just 1.7 percent.
  • Audio

    Audio

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The German discount retailer Aldi Nord, which tends to be secretive about its finances, has announced this year that its sales have grown by 3 percent.

Kay Rüschoff, head of marketing and communications, told Handelsblatt net sales in Germany are set to grow from €12.3 billion ($13.6 billion) to almost €12.7 billion this year. Last year Aldi Nord grew by just 1.7 percent.

Aldi Nord is one of Germany’s food giants, with a 16.1 percent market share. It lags behind market leader Lidl, with a market share of 26.6 percent.

That is one of the reasons why the management of Aldi Nord has now decided to discuss figures: they show that the Essen-based company could catch up with the competition. Sources in the sector estimate that Lidl grew by only 2 percent last year. Aldi Nord was until recently regarded as a comparatively sleepy company that was at risk of slipping further down the rankings.

But the group is reaping the rewards of an extensive modernization program launched in its German outlets in 2012. Since then, Mr. Rüschoff says: “Sales per supermarket have grown by an average of 19 percent.” They now total €437,000 per outlet per month. That is equivalent to average annual sales of €5.2 million for each of the group’s 2,339 European stores.

“Aldi Nord appears to be slowly moving into a leading position in the modernization of discount business.”

Boris Planer, Market researcher, Planet Retail

However, this is considerably lower than the average figure of approximately €7.5 million for Aldi Süd’s 1,858 supermarkets. Aldi split into the legally separate entities of Aldi Nord and Aldi Süd in 1966, and while Aldi Nord has a larger market share, Aldi Süd tends to have stores in wealthier areas.

The biggest threat to Aldi Nord however comes not from its rivals, but from a family feud. All major investments are financed by three foundations set up by the Albrecht family, which founded the company. Funds may be invested only if all three foundations agree unanimously.

But Theo Albrecht, son of the company founder, has fallen out with the widow of his brother Berthold. While Theo and his mother control two of the foundations, the third is in the hands of his sister-in-law Babette and her children. Although Babette’s lawyer emphasizes that she and her children have not blocked any important decision about the company to date, it is feared that cooperation at an operational level could cease if the dispute escalates.

This could prove catastrophic for Aldi Nord, particularly as competitors are also planning further modernization. Lidl wants to invest around €3 billion in its network in Germany, which comprises over 3,000 supermarkets. Aldi Süd also presented its “store of the future” in Unterhaching near Munich in mid-March, saying it plans to convert all of its approximately 1,860 outlets in Germany to this format in the medium term.

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Aldi Nord’s planned revamp, which industry experts estimate will cost more than €1 billion, goes well beyond the renovation of stores. Last year alone the group closed about 50 smaller, unprofitable supermarkets, opened ten new outlets, revised its product range and streamlined processes. It took on around 4,000 new staff. A new head office will open in Essen early next year.

“Aldi Nord appears to be slowly moving into a leading position in the modernization of discount business,” says Boris Planer at market research company Planet Retail. “The company has gone from a more passive role to a more active one.” He pointed out however that Lidl was the first to discover a gap in the market for more upscale discount retailers and that this is still giving it an advantage over competitors who were slower to respond.

The overhaul of Aldi Nord stores has included the introduction of wider aisles and more brightly lit shelving, with more branded goods and other products such as vegan food and fresh bread. Products are stylishly presented, rather than simply being put out in cardboard boxes. The group’s logistics have been reviewed and opening hours extended. Own-brand items now account for only 93 percent of the 1,200 products in the company’s range, although Mr. Rüschoff emphasizes: “Our own brands will naturally continue to be our core business.”

New ideas are tested at the group’s outlet in Raesfeld, a small town in the state of North Rhine-Westphalia in western Germany. If innovations prove successful, they are quickly rolled out across the network.

 

Florian Kolf leads a team of reporters covering the retail, consumer goods, luxury and fashion markets. To contact the author: kolf@handelsblatt.com

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