Value grocer Aldi achieved record sales last year but some wonder whether its relentless growth can continue
Value grocer Aldi posted record sales last year – up 16% to £17.9bn – when pre-tax profits more than tripled to £536.7m and margin improved.
The retailer has no intention of taking its foot off the pedal and has announced its biggest-ever investment programme of £800m, including in prices, store openings and infrastructure improvements.
However, some observers question the extent to which Aldi’s relentless pace can continue as the rate of growth falls and competitors seek to match it on price.
Sales growth slowing – but still on the up
Aldi UK and Ireland chief executive Giles Hurley acknowledged that it in the current year “sales growth is slower”. The most recent Kantar 12-week data showed growth of 0.5% compared to more than 20% on a two-year basis.
Hurley said the change “isn’t surprising, given that we’re lapping some very high previous year figures”.
He observed: “Another factor is that we’ve been reducing prices ahead of the market. The latest data from Kantar shows that Aldi is the only supermarket that’s not inflating.”
He saw opportunities to continue growing, including over the forthcoming golden quarter, and Aldi will open 23 new stores in the final 16 weeks of this year.
Hurley maintained: “I’m confident our total sales will increase as comparatives move past the high growth peak of the late summer of last year and, more importantly, as we accelerate our store opening programme in the final quarter, implement further price cuts and unveil our Christmas range.”
Aldi, which has 1,030 stores now, wants to operate 1,500. Hurley said: “Our sales will continue to grow. We are, by British grocery standards, still a business that’s maturing. There is still real pent-up demand.”
Market share ‘not an aim’
Aldi unseated Morrisons to join the big four grocers in 2022. Now some wonder whether it will overtake Asda next. However, Kantar data covering the 12 weeks up to August 4 actually showed a small market share decline from 10.2% to 10%.
Whether market share is going up or down, Hurley said it is not his number-one concern.
He said: “Of course, market share is interesting, and of course we look at it and there are various milestones in our journey of growth, but it’s not a target, it’s not an aim.
“Our focus is on growing our business and the outcomes will be what they’ll be. Our priorities are ensuring that every day customers shop with the absolute certainty that they’re getting the best value, and making sure that we deliver on our expansion programme, bringing our offer to more people in more places.”
‘Real loyalty’ isn’t about loyalty schemes
Loyalty schemes and the advantages they can bring are high on the agenda of grocers such as Sainsbury’s and Tesco but Hurley argued that Aldi’s success was based on a more fundamental appeal – straightforward value for money.
He said: “We still can’t be matched, even with a loyalty scheme.”
Sainsbury’s and Tesco may highlight their Aldi price match promises but Hurley said: “I’m delighted that full-price, more expensive supermarkets have recognised us as the benchmark. It confirms what we’ve always known - that price is of paramount importance to customers.
“These revolving price matching schemes are a game of chance for customers. They aren’t consistent, they do change… the only place you’re guaranteed to get Aldi prices is Aldi.
“Our business is built on loyalty and that comes in the tried and trusted strategy of low prices. That’s real loyalty in action.”
Customers still looking for value but cost-of-living pressure easing
While consumer spending power may still be tight, things are nevertheless looking up.
Hurley said: “The cost-of-living crisis changed the way people shopped last year. There was a shift from brands to own-label and we’re seeing that trend continue. While it’s still very tough for a lot of families, we are seeing more shoppers switching upwards across our tiers from our value range to exclusive own-label, and from standard tier to Specially Selected, which suggests that for some pressure is easing on household budgets.”
Christmas prospects
Hurley envisages a successful Christmas for Aldi. He explained: “With headline and grocery inflation easing, we’re expecting to see more switching upwards through our product tiers and we’re in full planning for the Christmas trading period.
“We know Christmas is a time people treat themselves and trade up, which is why over half of our range will be Specially Selected this year.
“The most important thing we can continue to do is to keep our prices the lowest in the grocery sector, making a great quality Christmas affordable for all.”
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