No doubt about it, Aldi is on a roll. Just in the last few weeks, it cleaned up at the FPC FreshAwards in the UK, announced its expansion into California in the US and unveiled premium stores in the Australian market. Produce Business UK asks how the discount retailer is getting it so right
Aldi seems able to do no wrong right now. Its latest triumph was in the fresh produce sector, with board-sweeping success at the UK industry’s equivalent of the Oscars – the Fresh Produce Consortium (FPC) FreshAwards.
There, the discounter won awards for multiple retailer of the year, floral retailer of the year, the best place to work and, for the second year running, marketing campaign of the year for its Aldi Super 6 weekly fruit and veg promotion. Thanks to those efforts, the burgeoning was therefore a clear winner of the top award for fresh produce business of the year too.
While a panel of judges awarded the marketing campaign and best place to work accolades, it was UK shoppers themselves who were asked to name their favourite retailers. FPC went out to consumers with a poll via Twitter, Facebook and Survey Monkey, which garnered 11,000 votes across three retailer categories; multiple, floral and convenience.
Nigel Jenney, FPC chief executive and a member of the judging panel, explains the feat: “Aldi has proved that a supermarket chain can thrive and grow in challenging times, without compromising on quality or customer service. Its commitment to high quality at low prices, dedication to staff development, innovative marketing and enthusiastic engagement with customers make it a clear FreshAwards winner.”
As far as fresh produce is concerned, Aldi’s Super 6 promotion clearly ticks a lot of boxes for consumers. Every week, they know they can buy six different fruit, vegetable or salad lines for 39-89p each. They also know they will get variety and quantities they can use without feeling obliged to buy larger volumes in order to make savings. Shoppers report a feel-good factor to the campaign that they believe has an impact on their healthy eating.
What Aldi has to say
Winning the industry’s top marketing prize two years in a row for the same promotion illustrates that this multi-channel campaign has become a dominant force in UK fresh produce price promotion.
Tony Baines, joint managing director of Aldi corporate buying, said the retailer was “really proud” to have been honoured so extensively at the FPC FreshAwards. “The results are a testament to the relationships we have built with our suppliers and our customers who have taken the time to vote for us,” he adds.
“The results further demonstrate that while we continue to open new stores across the country and expand our fresh produce range by 50 lines, we remain dedicated to offering our customers quality products at the everyday low prices that they have come to know and love, enabling them to shop with us week in, week out.”
What the analysts says
Recent analysis from investors service provider Moody’s predicts Aldi and Lidl will take a larger share of the UK grocery market as they continue to open new stores. In fact, the analyst expects the Big Four – Tesco, Asda, Sainsbury’s Morrisons – to see their share of the market fall by 4% by 2020.
In its report titled Grocery Retail – UK: No Margin Recovery For UK Big Four Yet Despite Slowing March Of Discounters Moody’s indicates that margins are unlikely to recover over the next 12 to 18 months due to further price cuts and on-going like-for-like sales declines. However, it does point to a gradual recovery from 2016 onwards.
Sven Reinke, Moody’s vice-president and senior analyst, explains: “We expect Aldi and Lidl’s combined share of the UK market to reach 12-15% by 2020. Although the discounters’ sales densities have caught up with the Big Four retailers, Aldi and Lidl could continue to gain around 1% market share every year supported by their store expansion plans at a time where the Big Four selectively close unprofitable stores in order to save costs.
“However, the UK’s economic growth, rising real wages and improving consumer sentiment could support the Big Four’s gradual recovery from fiscal 2016-17.”
Aldi the employer
Aldi’s store expansion plans are ambitious. The retailer already employed more than 25,000 people in the UK during 2014 when it announced it would invest £600 million in UK expansion and double its store numbers by opening 550 new outlets before 2022.
It will recruit up to 4,500 more store staff in 2015 alone. Its growth is seen as a long-term commitment to staff, so it was perhaps no surprise then that Aldi won the best place to work gong at the FreshAwards for its “dedication to its staff, fostering teamwork, creativity and personal development”.
Meanwhile, developments overseas continue to attract attention, with Aldi trialing premium store formats in Australia, where it has made significant inroads in recent years. As in the UK, Aldi has the bigger players Down Under looking over their shoulders and improved lighting and a focus on waiting times at the checkout are all part of an initiative that is also revamping tired categories with organic produce and in-store bakeries.
There is no suggestion so far that this could be replicated in the UK, where Aldi’s growth has been much more cautious over a longer period of time and where it seems to have a very clear market position thanks to its largely no-frills offer with a sprinkling of premium Speciality lines that have worked a treat as its profile has raised.
Looking in a different direction, in the US the headlines scream that a retailer even cheaper than the mighty Wal-Mart is about to arrive in southern California. The fact is Aldi has been expanding more-or-less quietly in the US for some time now. It had yet to head west of the Rocky Mountains until it announced last week plans to invest billions of dollars in an expansion strategy even it described itself as “aggressive”.
Aldi plans to unveil its first southern California store in March 2016 and roughly 25 are scheduled to open by July next year.
Can Aldi succeed where the mighty Tesco failed? We’re about to find out, but you wouldn’t bet against it.