GERMAN supermarket chain Aldi, which made its foray into the Australian market with the opening of its first store in Sydney in January 2001, has from the outset laid claim to a “unique way of operating”.
Unique indeed, with minimal advertising expenditure (believed to be less than 0.5% of its annual turnover) and an aggressive discount pricing strategy.
This “unique way of operating” also extends to the in-store experience, with shoppers required to pack their own bags, a visible absence of fancy displays and even a trolley hire system.
And add to this the German giant’s global no media comment policy.
Aldi’s hush, hush approach to doing business attracted plenty of attention in 2001, with consumers not sure what to expect from the supermarket chain and the media kept firmly at bay.
The no media comment policy dates back to 1971 and extends to external suppliers, who are also encouraged to keep details of Aldi’s internal operations a secret.
Aldi co-founder Theo Albrecht issued his last public comment to the media in 1971 after being released by kidnappers and issuing payment of $US7m ransom.
Some leading players in the retail sector have been quick to point the finger at Aldi on this front, saying the German giant’s refusal to give details of its marketing strategy is part of a well-orchestrated ploy to spike interest in its operations and keep people guessing.
“They are neither here nor there when it comes to keeping the public informed,” one source told Professional Marketing.
“They’re obviously out there with catalogues, but other than that, they’re adopting a very low key approach.”
What is Aldi?
Aldi is a supermarket chain specialising in private label, discount products, some priced 30% lower than other brands.
Aldi opened its first store in Germany more than 40 years ago and now operates in some 10 countries including the UK, USA, France, Denmark, Ireland, the Netherlands and now Australia.
An article titled “Aldi in Australia”, released by grocery trade marketing company Professional Assignments Group and available at www.pag.com.au/articles/aldi.htm, says while Aldi has a global presence its core market is still Germany.
“Despite its presence in eight countries, Aldi is highly dependant on its home market, which in 1998 accounted for 64% of its total business,” the article states.
“However the stagnant German market, with profit margins under pressure due to rising costs and intensified competition, is leading Aldi to new sources of growth to the business.
“Aldi has expanded its assortment mainly with frozen foods, but also with fresh meat, dairy products and over-the-counter pharmacy products.”
In Australia, Aldi is making its mark, with 28 stores in NSW and new stores slated for Victoria in 2003.
Aldi has snatched a 2.6% share of the NSW market, according to the latest ACNielsen data.
Retail World publisher and editor-in-chief Barry Flanagan says Aldi has taken off in the NSW market and its performance has surpassed initial expectations.
“Aldi’s share per store is higher than most people were anticipating,” he says.
In Europe, Aldi also has a stronghold on the grocery market and was rated among the Top 20 Retailers in Europe, according to a 2001 report by Retail Intelligence.
Plan of attack
The discount retailer is confident it has struck a winning formula that is adaptable to any market, according to its Web site.
“We sell at the lowest possible price,” the Web site says.
“Our unique way of operating makes it virtually impossible for competitors to match our combination of price and quality.”
Aldi’s cost-cutting culture is evident across the board and forms the backbone of its business.
The German giant boasts that customers pay entirely for products and not “extras” when they make a purchase at an Aldi store.
“Aldi eliminates some of the ‘extras’ found at other grocery stores; for example, baggers, fancy displays, and preferred customer savings,” the Web site says.
On the marketing and advertising front, Aldi has traditionally relied on catalogues, local press advertising and Web updates to generate word of mouth.
Aldi last year appointed Sydney agency Interface to handle its creative and marketing business.
More recently, Aldi handed its estimated $10m account to Sydney agency Brown Melhuish Fishlock (BMF), which already boasts a handful of challenger brands including ING Direct.
Aldi the challenger brand
Like Richard Branson’s Virgin brand, Aldi also sits in the challenger brand category.
BMF managing director Martin Rippon, who declined to comment specifically on Aldi’s marketing and advertising activity, says challenger brands have a number of qualities that distinguish them from the pack.
“A challenger brand comes in, looks at the market leader and how it can engineer its product differently,” Rippon says.
“They change the rules of the game.”
Rippon is the first to admit that the challenger brand proposition runs a lot deeper than pricing and may not be for everyone.
“[Discount] pricing is central to getting people to take another look, but it’s definitely not for everyone,” he says. Aside from adding another dimension to consumer choice, Rippon says challenger brands force established players in the market to “take notice”. “They come into the market and encourage major players to respond.
