Exciting stuff from Aldi this morning. Superficially, anyway.
The discounter, or “British supermarket”, as Aldi CEO Matthew Barnes described it this morning, served up record sales, record market share, an online debut and a fall in profits.
Everyone is used to hearing the first two. The last two, not so much. So how significant are they?
The major talking point was Aldi’s online debut, taking place “early next year”.
Barnes called it an “exciting new chapter”. And no question, rival supermarket CEOs will have sat up when they saw the ‘Aldi Online!’ headlines. But they will have all relaxed a little when they saw that Aldi is only selling wine.
Without underplaying the future significance of the move, if Aldi were planning to sell grocery proper that would be very interesting indeed. Amazon’s imminent entrance is already causing consternation among the big four. Throw Aldi into the mix and it would really shake things up.
But Aldi CEO Matthew Barnes insists online food isn’t on Aldi’s radar. So, in effect, Aldi is just testing out online by selling wine (although it should make a tidy return – it says it sells over 1,000 bottles of its well-reviewed Exquisite Collection every hour, with year-on-year sales up 40%).
And although it plans to add non-food special buys to its online offer in the spring, that’s no real drama for the supermarkets either. It’s as much a problem for Argos as it is for Asda.
The other major talking point was profit, or rather the lack of it.
Last year, for 2013, pre-tax profits were up 65% and operating profit was up 58%. In 2014, pre-tax profits are down 3.9% (from £260.9m to £250.6m) and operating profit is down 4.1% (from £271.4m to £260.3m). So is this a ray of sunshine for Aldi’s embattled rivals?
No. Of course it’s highly unusual to see negative numbers from Aldi in very recent years, but 2014 profits were always likely to reflect the huge amounts Aldi has been spending on itself to keep up with demand from shoppers.
Aldi has had the fastest-growing sales of any grocer for the last 50 months, according to Kantar Worldpanel – sales hit £6.9bn in 2014, up from £5.3bn in 2013 and more than triple the £2.1bn when Barnes and Roman Heini took over as joint general managing directors in 2010. So it’s been spending hard to accommodate new customers, and existing ones buying more than before.
Last year Aldi spent a record £438m on new stores and DCs, a 60% increase on the £274m it spent in 2013. It also spent big on extensions, refits, extended car parks, thousands of new staff, advertising and sponsorship. And it spent £35m to launch online.
So far from celebrating the dip in profits, rivals will know Aldi is playing the long game. That isn’t particularly exciting. But it’s rarely a bad strategy.