Discount grocery chain Aldi looks to westward expansion

Blair Speedy
February 12, 2013
The Australian

DISCOUNT supermarket chain Aldi is set to announce a significant expansion of its Australian operations this week with plans to open its first stores in South Australia and Western Australia.

It is understood the company has relocated a senior executive from its Queensland property team to Perth and is seeking to make a similar appointment in Adelaide to manage the acquisition of new store sites.

Aldi, which opened its first Australian store in Sydney’s west in January 2001, now has more than 200 stores across the eastern states and the ACT.

However, until now it has ruled out expansion into the other mainland states, preferring to push for critical mass in its existing markets to wring the greatest value from its supply chain infrastructure.

The move will put the acid on dominant supermarket chains Woolworths and Coles, as Aldi is regularly rated as the cheapest supermarket operator by consumer groups such as Choice.

One Adelaide commercial property manager said Aldi had long been expected to make a move into SA.

“People talk about them all the time,” he said. “In the retail marketplace here it’s very much Coles and Woolworths very aggressively trying to acquire sites ahead of each other and muscling each other out, but we have a very active independent segment here as well with the Metcash-supplied chains like IGA.”

Aldi generally seeks store sites with an immediate catchment population of more than 20,000, situated on major roads, and takes freehold and leasehold positions.

Aldi’s arrival in Australia triggered a substantial expansion of Woolies and Coles’s private label ranges to compete on price with the German company, whose limited product range is made up almost entirely of in-house brands.

As they generally stock one variant of each grocery item — there is only one orange juice on offer, for instance — the stores are also significantly smaller than full-line supermarkets.

Woolworths has consistently pointed to competition from Aldi, and to a lesser extent US big-box chain Costco, in disputes with the competition regulator over the acquisition of new development sites and existing stores.

Woolworths has said the Australian Competition & Consumer Commission should subject Aldi and Costco to the same scrutiny as the major supermarket chains when it buys new sites.