Aldi and Lidl have had a profound impact on our industry in the last five years, taking almost all the growth, and triggering significant re thinking across Retailers and Suppliers. This industry adjustment is not complete. Kantar tell us that Aldi continue to grow market share – by half a percentage point in the latest year. That half a point is worth half a billion pounds.
So how are they doing it and what can we learn from them?
First, they act consistently. They deliver consistent product quality – perfectly adequate across all products, and impressive in Specially Selected. They buy methodically, and add thin margins, meaning that they offer consistent low price on every line. £1.15 for 160 tea bags. 75p for 375g of a cereal that looks rather like Cheerios to me. They buy sites of a consistent size and build stores that look the same. This has obvious operational efficiencies but also makes things easy for the shopper when they visit different Aldi stores.
Second, they communicate consistently. Making side by side comparisons with brands, highlighting the value of switching, is their way to keep nailing the price message. Use of independent awards in press and in store, is their way to nail the quality message. Super 6 in Fruit and Vegetables is their way of nailing their credentials in that crucial category. Week in, week out, the same basic idea, highlighting their six best prices across the department (Kantar say they have an 11% volume share of Fruit and Vegetables).
Finally, they expand consistently. The increase in their estate has been mainly organic. As such they have had a steady stream of oxygen helping them to offer volume growth year in, year out, to their suppliers. This is elixir for suppliers, especially when there is precious little growth elsewhere. And Aldi have expanded across categories methodically, not all together. Baby was one example where they 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 they have 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 of Insight Traction, consulting with FMCG and Retail companies. He was formerly Head of Insight at Sainsbury’s, Waitrose and Premier Foods.