Wednesday 12 June 2013

ALDI - Winning Awards but Misleading Consumers



Discount supermarket Aldi is in the news again. It scooped 16 gold awards at the supermarket industry magazine “The Grocer” s taste tests of various own label brands. And it has been criticised for misleading consumers by putting a Scottish flag on packs of beef and turkey from South America and the EU.

The awards story is impressive. Aldi came first, Tesco came in second with 12 golds, Asda scored 11, Marks and Spencer 8, Waitrose 3, and fellow discount supermarket Lidl achieved 4 golds. The awards come on top of Aldi’s Oliver Cromwell  gin winning silver in the International Spirits Challenge, beating  Bombay Sapphire which sells at twice the price, and collecting a silver award for champagne.

The Scottish flag story is shameful, and only came to light through the vigilance of NFU Scotland.  Aldi’s limp response was to say that no laws were broken but they recognised that featuring a Scottish flag could make shoppers think the products were wholly Scottish, and they have promised to re-label. At best their action was naive, at worst deliberately misleading.

Low prices combined with a growing reputation for quality mean that Aldi is showing the fastest growth of all supermarkets in the UK, up by 31% in the last twelve weeks according to Kantar Worldpanel, the company which monitors grocery sales. Fellow discounter Lidl grew by 9%. The only other grocer showing significant growth is Waitrose, which operates at the premium end of food shopping. The big four are stumbling along with growth in the low single digits.

The combined share of Aldi and Lidl now stands at a record 7.9%, and industry watchers are asking how far it can go. Conventional wisdom says that the strength of UK competition means that discounters will never touch the heady heights achieved in home country Germany where they enjoy a combined share of just under 30%.

But both Aldi and Lidl are raising their game. Aldi had just launched a trial convenience store in Kilburn, tapping int0 the growing tendency of shoppers to visit local stores to save petrol costs and  ensure they buy only what they need and not be tempted by the plethora of stuff available at bigger shops.

Lidl has just announced that it is increasing the shelf space it devotes to fresh meat and poultry by 50%.
Across the water in Ireland Aldi and Lidl together command a share of 13.6% of the grocery market, up from 11.6% last year. Their growth is coming from new customers as well as regular shoppers, which has not to date been the case in the UK.

There seems to be room for further discounter growth, but to achieve it requires continued rock bottom prices, whilst improving quality.

It also requires consumer trust, especially when it comes to buying fresh food. And here is where the discounters have stumbled. The Scottish flag issue reflects badly on Aldi, and both Aldi and Lidl were caught up in the horse meat scandal. Aldi and Lidl will be painfully aware of the need to take a firm grip on supply chain issues, and stop any erosion of consumer trust in its tracks.






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