Friday, 3 August 2012

Shopping at ALDI Again

Spurred on by reports of a return to booming sales through discount grocers and news that ALDI is so confident about its growth prospects that it intends to employ an additional 3000 people in the next year, I visited a brand new ALDI in leafy Stratford on Avon to work out why discounters are proving more popular than ever.

Discounters first came to national consciousness in 2008 as a way to save on groceries at a time of economic pressure.  When things got a bit better economically speaking in 2009/2010, discount supermarket sales levelled off. But now in the face of further economic challenges discount supermarkets ALDI and Lidl have come into their own again, and in the last 12 weeks according to Kantar Worldpanel, ALDI grew by 26% and Lidl by 11% when the total market was down by 2%. Now ALDI and Lidl have record brand shares of 2.9% each.

The IGD (Institute of Grocery Distribution) tells us that the number of people visiting a discounter in the last month grew from 35% in May 2011 to 42% in May 2012, and that 31% say they will shop again in the next month, up from 24% last year. Thus discounters are benefitting from more people through their doors as well as regular customers choosing to spend a bigger slice of their food budget in a discount shop.
Indeed according to IGD it is better off families with children who are frequenting discounters more often, with 39% of ABC1’s with children saying they will return to shop compared with 30% of CDE’s with children.

It is clear from the trip to Stratford that ALDI is moving away from its traditional business model.  It continues to sell most of its packaged  goods under brand names only available at ALDI , in pack designs remarkably close to the national brand equivalent but at prices significantly below that of the national brand or a supermarket own label offering. The ALDI ginger nuts pictured cost 29p, versus McVities at over a £1. The company has also started to bolster its price credentials through witty advertising.

However, it now stocks many more national brands than previously, including Tetley, Nescafe, Mars, and Cadbury.

In the fresh arena it has started to offer premium lines, mimicking the “good, better, best “ approach taken by bigger supermarkets. Thus we find a “Specially Selected” range featuring lines like West Country butter with sea salt crystals.

The store acknowledges trends such as free range eggs and chicken, and seems to be a supporter of British produce. The chicken was British as was beef and some cuts of pork, although not bacon or sausages. Packs featured the Union flag and Red Tractor logo.

Despite the move upmarket,  fresh food prices in most cases remain remarkably low. However, there are signs of an upward drift. Beef mince claiming less than 28% fat was £3.11p per kilo, compared with Tesco less than 25% fat at £3.00.

The products Aldi sells are changing, and there are signs that the way in which they sell them is changing too. Of those extra 3000 staff, many will be employed in existing stores which will mean an  increased cost. I noticed too that the old speedy and cost efficient way of checkout whereby customers cannot pack at the till but have to throw goods back in the trolley and pack on one side is changing too. In Stratford, customers were packing at the till, leading to long queues. Another change is the availability of baskets which again are more time consuming to checkout as well as taking up valuable selling space.

 Some things have not changed. Trolleys still cost £1, redeemable on return, which means no staff are needed to collect them from the car park. Product is still displayed in boxes to reduce staff time involved in stacking shelves.

 There is no doubt that ALDI is evolving to offer more of what customers seem to want. However the big thing which makes ALDI successful is the low prices they offer – if all the new ideas interfere with that they will lose not only those seeking bargains at a time of austerity, but their core budget conscious customers too. And that way lies disaster.