Blog: Olly WehringThe 'Aldi effect' - what will it mean for you?

Olly Wehring | 16 July 2008

A 0.4% rise in sales at a UK pub chain wouldn’t normally give much rise to discussion on the pages of just-drinks. However, news today that JD Wetherspoon has reported a small rise in sales in the 11 weeks to July 13 - taking the performance for the second half as a whole to flat – is significant on two fronts.

Firstly, the result is well ahead of the 3.1% decline experienced in the second quarter. And, as a result its gives the struggling UK pub industry a welcome fillip.

More interestingly, though, is the way the story is being portrayed in the UK and the perceived reasons behind this change in fortunes. “‘Aldi effect' boosts JD Wetherspoon”, runs the headline in The Times today.

Aldi, for those unfamiliar with the European retail landscape, is one of a clutch of discount retailers currently clawing market share off the traditional retail food giants as consumers look to stay on top of soaring food bills amid the credit crunch.

“JD Wetherspoon, the pub operator that has made a speciality of serving cheap food and drink, is benefiting from the 'Aldi effect' as hard-pressed consumers trade down to cheaper alternatives,” The Times’ correspondent Dominic Walsh wrote today.

There is little evidence yet as to how all this is going to affect the drinks producers. But there is enough in the way of figures to suggest there is going to be pressure on margins from the on- and the off-trade here in the UK.

Whilst we are on the subject of Aldi, this month’s free members’ briefing on just-drinks is an in-depth study of the discount retail trade in the UK. Anyone interested in the winds that are sweeping through this sector should really check it out.

The briefing takes a look at the major players and reviews the latest sales data and expansion plans from Aldi, Lidl and Netto. It also highlights best-practice strategies that these players are taking in order to increase market share. By adopting strategies such as private-label NPD, building on economic concerns and becoming more fashionable, the discounters are ensuring they are here to stay.

Download the 'Aldi Briefing' here.


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