Aldi and Lidl have had a profound impact on our industry in the past five years, taking almost all the growth, and triggering significant re-thinking across retailers and suppliers. This industry adjustment is not complete. Kantar tells us that Aldi continues to grow market share - by half a percentage point in the latest year. It might not sound like much, but that half a point is worth half a billion pounds.
So how is Aldi doing it and what can we learn from it?
First, it acts consistently. It delivers consistent product quality - perfectly adequate across all products, and impressive in Specially Selected. It buys methodically, and adds thin margins, meaning it offers consistently low prices on every line. For example: £1.15 for 160 teabags; 75p for 375g of a cereal that looks rather like Cheerios to me. It buys sites of a consistent size and builds stores that look the same. This has obvious operational efficiencies but also makes things easy for the shopper when they visit different Aldi stores.
Opinion: It’s time for suppliers to re-evaluate the stunning rise of Aldi and Lidl
Second, it communicates consistently. Making side-by-side comparisons with brands, highlighting the value of switching, is its way to keep nailing the price message. Use of independent awards, in press and in store, is its way to nail the quality message. Its Super 6 fruit & vegetables promotion is its way of nailing its credentials in that crucial category. Week in, week out, the same basic idea, highlighting its six best prices across the department (Kantar says it has an 11% volume share of fruit & vegetables).
Finally, it expands consistently. The increase in its estate has been mainly organic. As such, it has had a steady stream of oxygen helping it to offer volume growth year in, year out, to its suppliers. This is elixir for suppliers, especially when there is precious little growth elsewhere. And Aldi has expanded across categories methodically, not all together. Baby was one example where it took a giant step - the Mamia brand offering a quality and price combination that must be a real headache for big-name brands. Food on the go is a recent area in which Aldi has strengthened - well-filled sandwiches at low prices, a bottle of water at 25p.
In our industry, it is so tempting to get bored, to keep ourselves busy and amused by trying something new. Perhaps especially when we are feeling confident, on the back of consistent success. Sadly, new things often fail (products, formats, marketing campaigns). The really smart and profitable thing to do is to identify what is working and then consistently, doggedly stick with that.
Aldi is a shining example.
Jeremy Garlick is a partner at Insight Traction
No comments yet