ALDI - Delivering Booming Sales and Profits

Companies usually deliver either booming sales or booming profits – it is rare to see both in combination but discount supermarket Aldi managed to do just that in 2012.

Results posted on Monday at Companies House show that revenue grew by 40.9% to £3.9bn, and profit more than doubled, up from £70.5m to £157.9m. And this at a time when the total grocery market was growing by less than 4%. The result is all the more remarkable given that the company went into the red in 2010.

Why the great performance?

Above all Aldi wins customers because it is cheap. Price is key in these straightened times, and according to Aldi the average basket of goods bought from them comes in at 20 – 25% cheaper than the “Big 4” grocers, Tesco, Sainsbury, Asda and Morrisons.

They are adapting their business model to be more like the Big 4, both in the products carried and in the service provided. The range been extended from a basic 800 lines to 1350, and a premium brand “Specially Selected”  introduced to compete with the likes of Tesco’s Finest and Asda’s Extra Special.

More emphasis has been given to fresh food. Sales of fresh meat have grown by 60% in the last year and fresh vegetables by 50%.

More staff have been recruited and more tills opened in stores to cater for the growth in sales.

According to Aldi, “We learnt from customers that we needed to become more British”. This has  meant a greater commitment to buying British meat, milk and eggs, but it also seems to reflect a recognition that to grow, Aldi has to become more like the shopping experience British customers are used to, hence the move to premium, to British sourcing and to wider choice.

As to future growth, Aldi  currently have around 500 shops and plan to increase by 84 before the end of 2014. Running counter to conventional thinking about growth channels, they have stated that they will not expand into convenience stores or sell food on line. Instead they will concentrate on doing exactly what they are doing now.

Their challenge will be to hang on to their price advantage at the same time as absorbing the increased costs which come as they adapt to being more like a standard supermarket. If they lose their price competitiveness then they lose the prime reason why shoppers choose Aldi.