Revamped Aldi ‘will always win on price’

ELI GREENBLAT
May 15, 2017
The Australian

Aldi boss Tom Daunt is determined to never let supermarket rivals Woolworths and Coles beat the retailer on price.

He has backed up that pledge by investing $75 million since Christmas into lowering prices while also setting out a $500m refurbishment plan that would see every Aldi store in the country upgraded to a new format.

In its latest financial results, Aldi, which arrived in Australia in 2001 to shake up the supermarket sector, increased its sales by 12 per cent to $7.5 billion in 2016 to make it the fastest-growing retailer in the category. 

Brushing off the recent resurgence by Woolworths, which ploughed $1bn into making its own prices more competitive, and its protracted battle with Coles as simply “noise’’, Mr Daunt said Germany-based Aldi will not allow either supermarket giant to narrow the gap with its own ­prices.

Mr Daunt told The Australian that Aldi’s private owners, the Albrecht family, were fully supportive of his strategy to pass on savings to customers and push the growth accelerator, and that the discounter had set aggressive new growth targets that would lay claim to an even larger chunk of the nation’s $90bn grocery sector.

He said he now believed Aldi could quickly capture a 10 per cent share of the grocery market in its new markets of South Australia and Western Australia, and that there was still potential for further growth in its more mature markets across the eastern seaboard that should lift Aldi’s market share from 10 to 12 per cent. 

But in his strongest words in years and in a clear challenge to Woolworths and Coles — as well as Amazon, if it decides to enter the grocery market in Australia — Mr Daunt laid out his strategy for the next few years, including a new advertising and marketing strategy based on the catchline “Good Different’’ and a no surrender policy when it comes to prices. “There is definitely a competitive retail landscape at the moment, but we have not changed what we are doing. 

“We have always been the price leader and Aldi customers trust us and expect to save money when they enter our stores,’’ Mr Daunt said. 

“And I can go further to tell you there are many things that make Aldi different if you want to put it in that framework, but one of those things is that we have always been the price leader. 

“We will never ever give that up; it’s our most fundamental core advantage and is the reason people shop at us.”

Aldi had last year dropped prices for 600 products, from a total range of 1400 stock keeping units (SKUs), and as it expanded its network into South Australia and WA would generate further savings and economies of scale that would be fed back into lower prices. 

Woolworths’ and Coles’ constant publicity and claims about their own price decreases were simply “noise’’.

“There is a lot of noise around price at the moment and a lot of the noise tends to be dictated by the activities of the major supermarket players and what they do. The reality for us is we have been pursuing a long-term strategy of growing consistently and sustainably,’’ Mr Daunt said.

“So it doesn’t really matter in the market how noisy it gets around price, we continue to steadily and incrementally grow and will pass those benefits back to our customers in ever increasing value.”

To push home its advantage and reinforce its bond with shoppers, Aldi is embarking on a new advertising campaign that Mr Daunt believes will encapsulate Aldi’s unique business model and promise to consumers. “Aldi can be a little difficult to describe to the uninitiated and this is our attempt to really describe all of the things that make us who we are, and we are very different to the regular supermarket and those differences are sometimes quirky and sometimes unusual. 

“But they are the things that differentiate us and enable us to deliver to the market leading value in what we do.’’

Mr Daunt said Aldi’s recent push into South Australia and WA had been a huge success and that despite only having a handful of stores in the states it had captured 4.2 per cent market share in South Australia and a 3.1 per cent slice of the WA market. 

Aldi would also spend up to $500m to transform its complete portfolio of 450-plus stores across Australia into its new format that has a larger offering of products, a better fresh food department, more freezers and chillers as well as much improved ambience thanks to superior lighting and store design. The complete refurbishment of its store network would be achieved by 2020, Mr Daunt said.

Turning to the highly competitive nature of the Australian retail landscape, Mr Daunt said consumers would continue to seek low prices and value for money and only stores that could offer both would outperform.

“I think consumers are becoming ever more value-focused, and I use the word ‘value’ deliberately, not price, because value is a combination of quality that you receive and the price you pay for it and how relevant that product experience is for you.

“Retailers that can deliver value, like Aldi, they can succeed and continue to grow; retailers that fail to deliver value the customers are looking for, would expect they will continue to struggle.”