As Tesco falls, Aldi booms


Aldi‘s operating profits were at more than £271m for 2013 while the Big Four grocery chains continue to struggle.

The supermarket chain is currently planning a nationwide expansion programme and, in response to competitors attempting to match its low prices, Aldi will only continue to increase its discounts. The news will be welcomed by UK consumers who are losing trust in the larger grocers, especially after the announcement last week that Tesco overstated its profit estimate by a quarter of £1bn.

In the last year, the major grocery chain players Tesco, Sainsbury‘s, Morrisons and Asda have lost market shares as well as customers owing to considerably lower prices offered by Aldi and similar German discounter Lidl.

While Tesco and the rest of the Big Four have been slashing prices in a bid to mimic Aldi‘s price points, this has only reaffirmed customers‘ loyalty in Aldi.

During 2013, Aldi opened 42 new stores and is on track to open another 54 new this year, with another 60-65 new stores planned to open in the next. Of late, Aldi has become something of a big deal in the British retail industry having transcended Waitrose as the UK‘s sixth largest grocer.

Roman Heini, group managing director of Aldi UK said:

“We keep prices constantly low while keeping product quality consistently high, which is exactly what shoppers want. They had become used to thinking you have to pay more for better products. We‘ve shown them this doesn‘t have to be the case.

We work efficiently and responsibly to reduce operational costs” he adds. “Rather than use these savings to boost margins, we lower prices at the checkout. Shoppers appreciate this and know that, while they‘re paying less at Aldi, they‘re getting much more for their money.”

Dr Heiner Evanschitzky, Professor and Chair of Marketing at Aston Business School, commented:

“Aldi mostly stocks own-label products, cutting out the costs that the big British supermarkets have to deal with. And, of course, Aldi is a family-owned business, meaning that it doesn‘t have to report to shareholders, allowing them to take a more long-term strategic view.”

Amidst Aldi‘s growth, Tesco has been losing reputability since the massive accounting error was brought to light last Monday. Once close to controlling a third of the nation‘s grocery sales, the business has been seriously suffering.

Three years ago, Sainsbury‘s launched Brand Match, a strategy that saw the food retailer benchmarking its prices against Tesco. Now, Sainsbury‘s will be comparing its prices to Asda which is cheaper. Last week a TV, print and in-store campaign was launched to reflect this, coinciding with four of Tesco‘s executives being suspended.

In order to capture its growing customer bases‘ demand for aspirational products, Aldi will sell caviar for the first time this Christmas, priced at £9.99 for 20g. Selling under a new tag line ‘Christmas with all the trimmings‘, the caviar will sit alongside other premium products including fresh dressed crab, fresh lobster, a whole goose, and rib of beef.

It seems as though Aldi are tapping into all aspects of the market to ensure they are a strong competitor against the Big Four grocery chains.

“We believe growth is down to one thing – customers demanding true value” says Heini.

With plans to ramp up the number of stores in the UK over the next seven years, Aldi are on track to attracting a larger customer base in the future.