Aldi - Hard discounters 2012: the winning format

Published: September 2012

Publisher: ResearchFarm Ltd

Product ref: 165202

Pages: 129

Format: PDF

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Report description

An unprecedented growth story is unfolding, as austerity bites across the west and food price inflation will filter through into higher retail prices next year. One retailer that stands to benefit hugely from this changed macroeconomic environment is Germany’s Aldi. The retailer currently achieves record growth rates in the UK (sustained at well above 20% year on year) and in Australia, where further expansion is already financed out of the cash flow generated in the country. The huge opportunity going forward for Aldi Sued’s stores as well as for Trader Joe’s, Aldi Nord’s premium organic discounter is the US, where the efficiency of the business model meets a consumer willing to trade down as never before. Meanwhile back in the old world, Aldi Nord is rapidly updating its stores and investing heavily into making the format fit for the next decade. The big questions rippling through the sector is the introduction of more FMCG A brands across a number of markets, which the two businesses coordinate tightly. We predict that a more attractive SKU proposition increasing frequency (if not necessarily penetration) combined with the store updates from both Nord and Sued will ensure that Aldi will continue to outperform. This data rich report from the EU’s premier experts on hard discounters goes behind the facade and analyses the business model and the poorly understood proposition and success factors of the discounters, with key insights and learnings for other businesses. It argues that Aldi’s principles need to be understood in the original context of Germany’s retail sector of the 1950s and subsequent development that has created the company’s unique culture and business practices, which have proven to be easily replicable and exportable around the globe.

Table of contents

Executive summary
Context – the Macro-economic outlook for the EU
GDP sizes: EU 27, 2011 in €bn, the structure from Germany to Malta
GDP sizes: EU 27, 2007-2011 in ‘000 €bn
GDP sizes: EU 27, 11 countries still lagging behind their 2008 levels
GDP sizes: EU 27, Currency devaluations, Poland keeps momentum going, ECB action
Unemployment: EU 27, annual average 2011 (%) from Spain to Austria
Unemployment: EU 27, Misery in the periphery while...
Unemployment: EU 27, ...Germany roars on due to the right policy mix
inflation: Euro Area and EU27, 2006-2011 (HiCP), % inflation: EU 27, deflation avoided, lost decade in store? inflation: Euro Area 17, 2006-2011 (HiCP), %, welcoming Estonia 
interest rates: ECB and BoE, record low rates and quantitative easing
interest rates: breathing space for southern Europe, LTRO
Context – EU Retailing in 2012
Retail sizes: EU 27, 2007-2011 in ‘000 €bn
Retail sizes: EU 27, crisis has left a deep, deep scar
Retail sizes: EU 27, 2007-2011 growth in %, CAGR
Retail sizes: EU 27, a sector in turmoil, e-commerce, housing markets, ageing populations
Per capita retail spend: EU 27, 2011 in €, from Luxembourg to Romania
EU Grocery Retailing in 2012
Grocery sizes: EU 27, 2007-2011 in ‘000 €bn
Grocery sizes: shoppers cut back, shop around, trade down and go to hard discounters
Grocery sizes: EU 27, 2007-2011 growth in %, CAGR
Grocery growth rates: EU 27 2007-11 in %, growth in Poland, decline in ireland
Grocery growth rates: ireland as a template for the rest of the periphery?
Grocery sizes: The leading countries, Top 3 take one of every €2 spent
Grocery share of total retail: EU 27, 2007-2011 in %
Grocery share of total retail: Clear crisis impact - all but four show higher share again
Grocery per capita sizes: EU 27 in 2011 in €, from the UK to Bulgaria
Hard discounters, Aldi Sued & Nord
Aldi: A completely underestimated business model
Aldi: Simplicity, simplicity, simplicity – fine tuning a single format over decades
Aldi: efficient layout and product presentation and the all important SKU count
Aldi: Lean SKU count means bigger buying power than Wal-Mart Aldi: Supplier relationships and the quality focus Recent developments Aldi: recent developments, truths, brands, store modernisation 
Aldi: the original – split into two, an organising principle to manage complexity

Figures, international contributions now more important than domestic
Aldi: benchmarks, sales densities per country, Sued ahead of Nord
Aldi: a word on Aldi’s profits and margins
Aldi: the store estate, rapid internationalisation
Aldi: 10,000 stores, more international openings to come
Aldi Sued and Nord in Germany
Aldi: Germany, data, benchmarks, reaching saturation
Aldi: Germany, tweaking the store network, organic ranges, convenience
Aldi: Germany, organic, in store bakeries – outlook
Aldi: exporting a modus operandi, the direct comparison to the competition
Aldi Sued Aldi Sued: Aldi Sued: Aldi Sued: Aldi Sued: Aldi Sued: Aldi Sued: Aldi Sued: Aldi Sued: Aldi Sued: Aldi Sued: Aldi Sued:
Countries, benchmarks, sales, stores, sales densities
2011, sales per country in €m, market shares of total grocery universe in %
rapid growth in recession plagued Anglo Saxon markets, retreat from Greece
shift from entering new markets to saturating existing markets, the US opportunity
investing in Australia, UK, stellar growth, the

UK, choosing poor site locations in the 1990s, store disposals
UK, the golden opportunity, record market shares, future plans, where’s the ceiling?
UK, new private label launch, moving towards good, better, best, a good idea?
Hungary as the test bed for new developments, 6 P&G brands, an end to EDLP?
Hungary – a template for the rest of the group?
Switzerland – market entry lowering price points of the entire retail universe
Aldi Nord
Aldi Nord: Countries, benchmarks, sales, stores, sales densities
Aldi Nord: 2011, sales per country in €m, market shares of total grocery universe in %
Aldi Nord: Trader Joe’s – highest sales density in the USA
Aldi Nord: Trader Joe’s – serving the organic and natural trend, a honest proposition
Aldi Nord: France, rapid space growth as the LME opens the market to discounters
Aldi Nord: France: the introduction of Coke, Netherlands: still ahead of Lidl, Poland
Location, format and expansion strategy Aldi: Store expansion strategies, Sued to fill in, Nord to modernise
Aldi: The expansion into Eastern Europe, East Germany as a test case
Aldi: expansion financed out of cash flow, location choice criteria
Aldi Nord: innovating the format, raising the average space above Aldi Sued
Aldi Nord: new generation, new thinking, new location choice criteria
Aldi Sued & Rewe: teaming up in Germany, creating destination status
Aldi Sued & Rewe: From competition to cooperation
Aldi Sued: Sale and leaseback deals, funds earmarked for Anglo Saxon expansion
Aldi Sued: standardisation and internationalisation, exporting a success model
Aldi: the non food footfall driver, spend migrating online, redundant space can be recycled
Aldi: Logistics and the back end, standardisation and keeping it simple
Hard discounters: Strategic bifurcation process between two business models
Aldi: The exception
Aldi: going hard, minimising complexity, keeping OSA simple, product centricity
Aldi: always the late, second mover, social media, only one can be the cheapest
Aldi: The business model
Actionable recommendations: learning from the hard discounters
Outlook and forecast
Aldi: a new generation in charge, adaptability, tailwinds from the economy
Aldi: international expansion and private ownership benefits
Aldi: a debt free business, excess liquidity and emergency cash facilities
Aldi: doubling share in growth markets, s
Table in mature, where will it be in € terms in 5 years?
Brands in discounters – the data
Aldi: average € per SKU per country in 2011, massive opportunity in DE and the US
Aldi: Does the 80/20 principle apply at Aldi? Loss leaders, global synergies
Aldi: Sued ahead on average SKU per store basis, how big is the global range in €?
Brands in discounters
Brands in discounters: the introduction, a win-win or a clear threat to the model?
Brands in discounters: Lidl, Edeka’s Netto, Aldi’s FMCG brands, Aldi Nord’s big opportunity
Brands in discounters: 8 reasons to be skeptical, reverting to type, limited space
Brands in discounters: 8 reasons to be skeptical, conservatism, cannibalisation
Brands in discounters: 8 reasons to be skeptical, Lidl’s cut backs, organisational set up
Brands in discounters: 8 reasons to be skeptical, strategic fit, the control issue
Brands in discounters – what FMCG companies need to consider
Brands in discounters: questions from retailers, just a short term tactic, not a strategy?
Brands in discounters: FMCG brands, price points and pack sizing Brands in discounters: lessons from Hofer Austria and Lidl Germany Sources

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