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Karl Albrecht, Co-Founder of Global Supermarket Dynasty Aldi, Dies at 94

Aldi store, Essen Schoenbeck, Cropped, July 2014
The building in Schoenebeck neighborhood of Essen in northwest Germany, where Karl and Theo Albrecht started the Aldi retailer empire.
  • Why it matters

    Why it matters

    Aldi co-founder Karl Albrecht, the last surviving founder of his family’s discount supermarket empire, was one of the last living entrepreneurs who helped shape post-war German reconstruction.

  • Facts

    Facts

    • Karl and his brother Theo Albrecht founded Aldi from a family store in Essen, Germany.
    • The brothers went on to become Germany’s richest men, and the world’s largest supermarket retailers.
    • In Germany, Aldi has more than 4,000 stores and is one of the country’s most popular retail channels.
  • Audio

    Audio

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Karl Albrecht, the reclusive co-founder of the world’s leading food discounter Aldi Group and among the last of Germany’s great post-war business patriarchs, has passed away at the age of 94.

The retail magnate was laid to rest Monday morning, according to a spokesperson for his hometown of Essen, a former coal-mining town in northwestern Germany where Karl and his brother Theo Albrecht took over their mother’s family-run store in 1945.

Mr. Albrecht, whose brother died in 2010, passed away last Wednesday, but his family released the news after his burial had taken place.

The Albrecht brothers took control of their mother’s general “Colonial Wares” store to embark on an expansion that would see them become the two richest men in Germany. In their lifetimes, the pair defined a discount form of retailing attuned to changing social norms that became a symbol of Germany’s “Economic Miracle” after World War II.

In the decade after the war, Aldi expanded during German reconstruction to 77 stores by 1954.

 

The Albrecht brothers took mother’s model general goods store and embarked on an expansion that would make the richest men in Germany, founding a discount brand of retailing in tune with changing social norms.

Karl Albrecht, who was widely considered the driving force of the chain, handled the internal operations – seeking suppliers who could provide food at the right price and quantities, something that was not always easy in a country mostly destroyed after the war. Theo Albrecht handled the external side, managing the stores themselves, the administration and finances.

The retailer was split into two companies in 1961 that essentially ran along a north-south divide in Germany – Aldi Nord run by Theo and Aldi Süd run by Karl. The rest of the world was also divided up – Aldi Nord took over continental European businesses while Aldi Süd began considering an entry into the English-speaking world.

From its humble beginnings, Aldi has grown to more than 10,000 stores worldwide, including more than 4,000 in Germany, posting annual revenue of $50 billion in 2013. The brothers pioneered the discount grocery brand in Europe, much like Wal-Mart has done in the United States. Aldi Group is now the world’s largest discounter and eighth-largest grocery retailer, according to Euromonitor International.

The delayed announcement of Mr. Albrecht’s death was in keeping with the reclusive ways of the Albrecht family, which has long shied away from the public eye, even more so since Theo Albrecht was famously abducted on November 29, 1971. He was released 17 days later for an estimated ransom of 7 million deutschmark (€3.6 million), which the family never confirmed.

The Albrecht brothers are now buried a few meters apart from each other at a state cemetery in Essen, the private nature of the burial ceremony and delayed public announcement being Mr. Albrecht’s wishes, according to the German daily Frankfurter Allgemeine Zeitung.

With a net worth of $25.9 billion, Karl Albrecht was Germany’s richest man and the 24th richest man in the world when he passed away, according to the latest international list compiled by Forbes magazine. He has not been directly involved in the business for many years, pulling out of day-to-day management in 1994 and resigning from his post on the company’s supervisory board in 2002.

 

Karl Albrecht
Aldi co-founder Karl Albrecht, who dies on 16 July 2014 at the age of 94. Mr. Albrecht’s brother, the co-founder Theo Albrecht, died in 2010. The two brothers from Essen, Germany, created Europe’s largest discount supermarket chain and one of its most powerful retailers. Source: AP

 

Analysts said the conservative management style pioneered by Mr. Albrecht remains one of its Aldi’s hallmarks. While other retailers have toyed with other formats such as hypo-markets, Aldi has stayed true to its roots of smaller mini-market discount stores, typically measuring about 900 square meters.

Aldi remains the largest discounter in Germany but is losing market share to rivals that have copied its approach. Top among them is Lidl, which is running neck-and-neck with Aldi in much of continental Europe, while Penny and Netto are also growing on the continent.

“Aldi is suffering from stagnation not only in Germany but also in other markets where the company already has a strong presence and has little prospects for expansion without cannibalising existing stores,” Raphael Moreau, a retailing analyst at Euromonitor International, told the Handelsblatt Global Edition.

But while the company has struggled in Germany, Mr. Moreau notes it has found success expanding into Britain and Australia, where it is the only discounter on the market. It has also been expanding in the United States, where the popularity of discount markets has been growing since the 2008-2009 financial crisis.

Stephen Springham, an analyst with the U.K.-based Planet Retail, said Aldi has been successful in adapting its conservative mini-market model to the international marketplace. It has also had the luxury of patience that only a privately-owned firm can have, entering the British market at the start of the 1990s but gaining traction only in recent years.

 

From its humble beginnings, Aldi has grown to more than 10,000 stores worldwide, including more than 4,000 in Germany, posting annual revenue of $50 billion in 2013.

“When they entered the UK, I know for a fact that they didn’t expect to make a profit for 10 years. They’re quite happy to play a long game and learn about the market,” Mr. Springham said. “Being a private company gives them the leverage to do that.”

But Aldi has also made subtle changes to reflect the domestic marketplace, such as offering a wider variety of goods in Britain, something Mr. Springham speculates may have only been possible once Mr. Albrecht was no longer in charge.

Despite the subtle changes, Mr. Albrecht’s pioneering approach to discount retail will long have an impact on the sector. Mr. Springham said: “Not many people can say they invented a retail channel.”

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