 | Aldi - Hard Discounters 2012: The Winning FormatRelease date: September 6th, 2012 (129 pages) PDF/Powerpoint format. Price: GBP950.00 |
Abstract
An unprecedented growth story is unfolding, as austerity bites across the west and food price inflation will filter through into higher retail prices next year. One retailer that stands to benefit hugely from this changed macroeconomic environment is Germany’s Aldi. The retailer currently achieves record growth rates in the UK (sustained at well above 20% year on year) and in Australia, where further expansion is already financed out of the cash flow generated in the country.
The huge opportunity going forward for Aldi Sued’s stores as well as for Trader Joe’s, Aldi Nord’s premium organic discounter is the US, where the efficiency of the business model meets a consumer willing to trade down as never before. Meanwhile back in the old world, Aldi Nord is rapidly updating its stores and investing heavily into making the format fit for the next decade.
The big questions rippling through the sector is the introduction of more FMCG A brands across a number of markets, which the two businesses coordinate tightly. We predict that a more attractive SKU proposition increasing frequency (if not necessarily penetration) combined with the store updates from both Nord and Sued will ensure that Aldi will continue to outperform.
This data rich report from the EU’s premier experts on hard discounters goes behind the facade and analyses the business model and the poorly understood proposition and success factors of the discounters, with key insights and learnings for other businesses. It argues that Aldi’s principles need to be understood in the original context of Germany’s retail sector of the 1950s and subsequent development that has created the company’s unique culture and business practices, which have proven to be easily replicable and exportable around the globe.
Table of contents
| Executive summary | p17 |
| Context – the Macro-economic outlook for the EU | p20 |
| GDP sizes: EU 27, 2011 in €bn, the structure from Germany to Malta | p21 |
| GDP sizes: EU 27, 2007-2011 in ‘000 €bn | p22 |
| GDP sizes: EU 27, 11 countries still lagging behind their 2008 levels | p23 |
| GDP sizes: EU 27, Currency devaluations, Poland keeps momentum going, ECB action | p24 |
| Unemployment: EU 27, annual average 2011 (%) from Spain to Austria | p25 |
| Unemployment: EU 27, Misery in the periphery while... | p26 |
| Unemployment: EU 27, ...Germany roars on due to the right policy mix | p27 |
| Inflation: Euro Area and EU27, 2006-2011 (HICP), % | p28 |
| Inflation: EU 27, deflation avoided, lost decade in store? | p29 |
| Inflation: Euro Area 17, 2006-2011 (HICP), %, welcoming Estonia | p30 |
| Interest rates: ECB and BoE, record low rates and quantitative easing | p31 |
| Interest rates: breathing space for southern Europe, LTRO | p32 |
| Context – EU Retailing in 2012 | p33 |
| Retail sizes: EU 27, 2007-2011 in ‘000 €bn | p34 |
| Retail sizes: EU 27, crisis has left a deep, deep scar | p35 |
| Retail sizes: EU 27, 2007-2011 growth in %, CAGR | p36 |
| Retail sizes: EU 27, a sector in turmoil, e-commerce, housing markets, ageing populations | p37 |
| Per capita retail spend: EU 27, 2011 in €, from Luxembourg to Romania | p38 |
| EU Grocery Retailing in 2012 | p39 |
| Grocery sizes: EU 27, 2007-2011 in ‘000 €bn | p40 |
| Grocery sizes: shoppers cut back, shop around, trade down and go to hard discounters | p41 |
| Grocery sizes: EU 27, 2007-2011 growth in %, CAGR | p42 |
| Grocery growth rates: EU 27 2007-11 in %, growth in Poland, decline in Ireland | p43 |
| Grocery growth rates: Ireland as a template for the rest of the periphery? | p44 |
| Grocery sizes: The leading countries, Top 3 take one of every €2 spent | p45 |
| Grocery share of total retail: EU 27, 2007-2011 in % | p46 |
| Grocery share of total retail: Clear crisis impact - all but four show higher share again | p47 |
| Grocery per capita sizes: EU 27 in 2011 in €, from the UK to Bulgaria | p49 |
| Hard discounters, Aldi Sued & Nord | p50 |
| Aldi: A completely underestimated business model | p51 |
| Aldi: Simplicity, simplicity, simplicity – fine tuning a single format over decades | p52 |
| Aldi: efficient layout and product presentation and the all important SKU count | p53 |
| Aldi: Lean SKU count means bigger buying power than Wal-Mart | p54 |
| Aldi: Supplier relationships and the quality focus | p55 |
| Recent developments | p56 |
| Aldi: recent developments, truths, brands, store modernisation | p57 |
| Financials | p58 |
| Aldi: the original – split into two, an organising principle to manage complexity | p59 |
| Aldi: figures, international contributions now more important than domestic | p60 |
| Aldi: benchmarks, sales densities per country, Sued ahead of Nord | p61 |
| Aldi: a word on Aldi’s profits and margins | p62 |
| Aldi: the store estate, rapid internationalisation | p63 |
| Aldi: 10,000 stores, more international openings to come | p64 |
| Aldi Sued and Nord in Germany | p65 |
| Aldi: Germany, data, benchmarks, reaching saturation | p66 |
| Aldi: Germany, tweaking the store network, organic ranges, convenience | p67 |
| Aldi: Germany, organic, in store bakeries – outlook | p68 |
| Aldi: exporting a modus operandi, the direct comparison to the competition | p69 |
| Aldi Sued | p70 |
| Aldi Sued: Countries, benchmarks, sales, stores, sales densities | p71 |
| Aldi Sued: 2011, sales per country in €m, market shares of total grocery universe in % | p72 |
| Aldi Sued: rapid growth in recession plagued Anglo Saxon markets, retreat from Greece | p73 |
| Aldi Sued: shift from entering new markets to saturating existing markets, the US opportunity | p74 |
| Aldi Sued: Investing in Australia, UK, stellar growth, the figures | p75 |
| Aldi Sued: UK, choosing poor site locations in the 1990s, store disposals | p76 |
| Aldi Sued: UK, the golden opportunity, record market shares, future plans, where’s the ceiling? | p77 |
| Aldi Sued: UK, new private label launch, moving towards good, better, best, a good idea? | p78 |
| Aldi Sued: Hungary as the test bed for new developments, 6 P&G brands, an end to EDLP? | p79 |
| Aldi Sued: Hungary – a template for the rest of the group? | p80 |
| Aldi Sued: Switzerland – market entry lowering price points of the entire retail universe | p81 |
| Aldi Nord | p82 |
| Aldi Nord: Countries, benchmarks, sales, stores, sales densities | p83 |
| Aldi Nord: 2011, sales per country in €m, market shares of total grocery universe in % | p84 |
| Aldi Nord: Trader Joe’s – highest sales density in the USA | p85 |
| Aldi Nord: Trader Joe’s – serving the organic and natural trend, a honest proposition | p86 |
| Aldi Nord: France, rapid space growth as the LME opens the market to discounters | p87 |
| Aldi Nord: France: the introduction of Coke, Netherlands: still ahead of Lidl, Poland | p88 |
| Location, format and expansion strategy | p89 |
| Aldi: Store expansion strategies, Sued to fill in, Nord to modernise | p90 |
| Aldi: The expansion into Eastern Europe, East Germany as a test case | p91 |
| Aldi: expansion financed out of cash flow, location choice criteria | p92 |
| Aldi Nord: innovating the format, raising the average space above Aldi Sued | p93 |
| Aldi Nord: new generation, new thinking, new location choice criteria | p94 |
| Aldi Sued & Rewe: teaming up in Germany, creating destination status | p95 |
| Aldi Sued & Rewe: From competition to cooperation | p96 |
| Aldi Sued: Sale and leaseback deals, funds earmarked for Anglo Saxon expansion | p97 |
| Aldi Sued: standardisation and internationalisation, exporting a success model | p98 |
| Aldi: the non food footfall driver, spend migrating online, redundant space can be recycled | p99 |
| Aldi: Logistics and the back end, standardisation and keeping it simple | p100 |
| Strategy | p101 |
| Hard discounters: Strategic bifurcation process between two business models | p102 |
| Aldi: The exception | p103 |
| Aldi: going hard, minimising complexity, keeping OSA simple, product centricity | p104 |
| Aldi: always the late, second mover, social media, only one can be the cheapest | p105 |
| Aldi: The business model | p106 |
| Actionable recommendations: learning from the hard discounters | p107 |
| Outlook and forecast | p108 |
| Aldi: a new generation in charge, adaptability, tailwinds from the economy | p109 |
| Aldi: international expansion and private ownership benefits | p110 |
| Aldi: a debt free business, excess liquidity and emergency cash facilities | p111 |
| Aldi: doubling share in growth markets, stable in mature, where will it be in € terms in 5 years? | p112 |
| Brands in discounters – the data | p113 |
| Aldi: average € per SKU per country in 2011, massive opportunity in DE and the US | p114 |
| Aldi: Does the 80/20 principle apply at Aldi? Loss leaders, global synergies | p115 |
| Aldi: Sued ahead on average SKU per store basis, how big is the global range in €? | p116 |
| Brands in discounters | p117 |
| Brands in discounters: the introduction, a win-win or a clear threat to the model? | p118 |
| Brands in discounters: Lidl, Edeka’s Netto, Aldi’s FMCG brands, Aldi Nord’s big opportunity | p119 |
| Brands in discounters: 8 reasons to be skeptical, reverting to type, limited space | p120 |
| Brands in discounters: 8 reasons to be skeptical, conservatism, cannibalisation | p121 |
| Brands in discounters: 8 reasons to be skeptical, Lidl’s cut backs, organisational set up | p122 |
| Brands in discounters: 8 reasons to be skeptical, strategic fit, the control issue | p123 |
| Brands in discounters – what FMCG companies need to consider | p124 |
| Brands in discounters: questions from retailers, just a short term tactic, not a strategy? | p125 |
| Brands in discounters: FMCG brands, price points and pack sizing | p126 |
| Brands in discounters: lessons from Hofer Austria and Lidl Germany | p127 |
| Sources | p128 |
