Aldi

Sector: Food, drug and mass retailers Countries of operation: Aldi Süd—Australia, Austria, China, Germany (South and West), Hungary, Ireland, Italy, Slovenia, Switzerland, the US, and the UK. Aldi Nord—Belgium, Denmark, France, Germany (North and East), Luxembourg, the Netherlands, Poland, Portugal, Spain and the US (under the Trader Joe’s banner) Key product categories: Consumer electronics, food and beverages, health and beauty, home and garden, and sports and outdoor Company owners: Albrecht family Summary Aldi comprises two associated but separate privately owned German retailers that operate value-focused grocery retail stores. Aldi sells products in baby and toddler, beverages, consumer electronics, fresh food, health and beauty, home and garden, specialty food products, sports and outdoor and travel categories. The company was founded in 1946 and split legally in 1966: its two separate groups are Aldi Nord and Aldi Süd. They divide both Germany and international markets between them. Aldi Süd has expanded beyond Europe, with operations in Australia, China and the US, while Aldi Nord’s operations are mainly limited to Europe, although it owns discount grocery chain Trader Joe’s in the US. Aldi Süd is headquartered in Mülheim and Aldi Nord in Essen. As of June 2021, Aldi Süd operates 1,940 stores in Southern and Western Germany, 1,980 stores across 36 states in the US, 880 stores in the UK, 550 stores in Australia, 530 stores in Austria, 144 stores in Hungary, 80 stores in Italy and five stores in China. Aldi Nord operates more than 2,300 stores in Northern and Eastern Germany, 883 stores in France, 500 stores in the Netherlands, 450 stores in Belgium, more than 260 stores in Spain, 182 stores in Denmark, more than 100 stores in Poland, 40 stores in Portugal and 13 stores in Luxembourg. It also operates over 500 Trader Joe’s stores in the US. Company Analysis Coresight Research insight: Aldi is known for its low prices and no-frills shopping experience. However, Aldi Süd is adapting its store formats to suit new markets, borrowing from rival Lidl’s more flexible and softer approach to discount retail. In the China market, where the grocer operates five stores, the stores target affluent Chinese customers and carry a broader range of products compared to other markets. Aldi Süd’s success in adjusting its propositions in international markets contrasts with the hard-discount approach taken by Aldi Nord, which has generally been less successful internationally. Aldi Süd’s divergence from a pure hard-discount model will pile on extra costs and add bottom-line pressure, but the company seems to be willing to make short-term sacrifices to build long-term strength. The growth of Aldi in the US and its relentless real-estate expansion will further drive margin pressure across the US grocery space, forcing traditional grocers to improve their operations and look for new efficiencies. This will also likely push the pace of consolidation in the fragmented US grocery market, as small, less differentiated players that are unable to cope with the margin pressure exit the space or are acquired by larger players.

Tailwinds	Headwinds
Opportunities for sustained expansion in China Opportunities to expand discount strategy online Opportunities to continue expanding in markets, such as the US and the UK	Higher focus on expansion and price competition likely to be impacting profitability Underexposure to high-growth e-commerce, which proved to be a weakness in some markets during lockdowns High store proliferation cannibalizing existing store sales

  Strategy Aldi’s strategy focuses on a no-frills shopping experience, offering quality products at low prices. We have identified four key elements of the grocer’s strategy: 1. Focus on private-label brands

• Emphasize selling a high proportion of private-label brands to keep prices low through lower marketing costs and greater control over distribution. More than 90% of the products on Aldi store shelves are the company’s exclusive brand products.

2. Maintain limited assortment

• Focus on a limited assortment to funnel demand and generate high sales volumes for the products it stocks—in turn enabling competitive pricing and high product quality. Aldi typically stocks only up to 1,750 items in each store every day, far fewer than the tens of thousands typically stocked by large supermarkets.

3. Reduce costs in its supply chain

• Use cost-reduction options such as shelf-ready packaging throughout the supply chain to keep expenditure low.

4. Maintain optimized store size

• Keep its store sizes small. In the US, stores are typically 16,400 square feet, while in the UK, average new stores cover around 13,500 square feet.

Company Developments

Date	Development
October 14, 2021	Aldi UK announces that it will open 100 new stores across the UK over the next two years.
August 16, 2021	Aldi US announces that it will hire more than 20,000 store and warehouse employees to prepare for the holiday season.
April 27, 2021	Aldi Hungary announces that it will install solar rooftops at 16 of its stores by autumn 2021.
April 26, 2021	Aldi Süd (Germany) announced that it has significantly expanded its organic range of products during 2020, adding around 100 organic products in its portfolio.
February 10, 2021	Aldi US announces plans to open around 100 new stores and expand curbside pickup to more than 500 additional stores by end of 2021.
December 30, 2020	Aldi UK announces plans to boost the amount of food and drinks it buys from British suppliers by .
July 21, 2020	Aldi US opens 2,000 stores in the US and plans to open 70 new stores by the end of 2020.
May 28, 2020	Aldi US announces plans to offer curbside grocery pickup service at nearly 600 stores across the country by the end of July.
May 26, 2020	Aldi UK announces that it will roll out automated traffic light systems at store entrances to control customer traffic.
May 18, 2020	Aldi UK partners with Deliveroo to pilot on-demand home delivery of groceries in the UK.
April 16, 2020	Aldi UK begins to sell groceries online for the first time in the UK for stay-at-home consumers.
March 20, 2020	Aldi UK launches a recruitment drive to hire 9,000 workers in an effort to support communities affected by the coronavirus outbreak.
October 15, 2019	Aldi China opens three new pilot stores in Shanghai, taking its total store count in China to five.
September 16, 2019	Aldi UK announces a three-year logistics partnership with online-only electric retailer AO.com.
September 15, 2019	Aldi Stores Limited, the UK and Ireland division of Aldi Süd, announces plans to target a store count of 1,200 by 2025. It also reports total sales of £11.33 billion, up 11.3% year-over-year, for the year ending December 31, 2018.
June 12, 2019	Aldi opens two brick-and-mortar pilot stores in Shanghai, China. The company has been selling its products online in China since 2017 via online platform Tmall Global.

  Management Team Aldi Süd (US)

• Jason Hart—CEO
• Eric Riegger—CFO
• Deborah Fernandez—Corporate Director Finance & Administration

Aldi Süd (UK)

• Giles Hurley—CEO
• Richard Thornton—Communications Director
• K P Jansen—Secretary

Aldi Nord

• Torsten Hufnagel—CEO
• Rolf Buyle—Managing Director International Buying

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Source: Company reports/S&P Capital IQ