Compared to other parts of the food retail business, the discounters are not renowned for their track record in mergers and acquisitions.
That is due to a variety of factors – primarily their preference to expand organically by opening new-build stores to their exact specifications, but also due to a paucity of suitable businesses to acquire. It’s not that often that other discount chains are up for sale.
There have been a few notable exceptions over the years, such as Aldi Sud’s acquisition of Hofer in Austria, Aldi Nord’s purchase of Trader Joe’s in the USA and Lidl buying a supermarket business in America to accelerate its entry into that market.
Other players such as Plus, Dia and Netto have been involved in assorted deals around Europe in the mists of time, but significant swoops such as Aldi Nord’s apparently impending acquisition of Leader Price in France are far and few between.
Leader Price’s indebted parent company Casino has been selling off bits and pieces for some time in an attempt to reinvigorate its balance sheet, so disposal of its French discount business is not a huge shock.
Perhaps more surprising is that it is Aldi Nord that has stepped up for the deal – this division of the Aldi empire has generally been seen as less adventurous and bold than its sibling. Aldi Sud has typically been more innovative and progressive in fields such as expansion, store formats, merchandising and marketing.
The last year or two has seen something of a rapprochement between the two arms of the business.
Nord and Sud went their separate ways in the 1960s when the Albrecht brothers Theo (Nord) and Karl (Sud) had a falling out over selling cigarettes and the divisions have operated in virtual isolation ever since.
Moving through the gears
Aldi Sud has been making waves in markets such as the UK, the USA, Australia and China, while Aldi Nord has ploughed a more modest furrow in the Benelux countries, Iberia, Poland and Denmark.
It’s also fair to suggest that Aldi Nord has historically been a behind the curve in terms of the in-store experience, sticking very much to the brutal end of the efficiency spectrum and not venturing too far away from its core DNA as a hard discounter.
That has really changed over the last three years, with store visits in France, Benelux and Spain prompting the conclusion that Aldi Nord branches are actually pretty nice now – bakeries, fresh, signage and customer service are all improving exponentially.
“Nord and Sud are massively powerful in their own right… so the prospect of them becoming more aligned should be scary”
Nord and Sud have started playing together nicely now. There have been manifold examples of enhanced cooperation in terms of buying, promotions and marketing in Germany, and there is every indication that the hatchet has been buried.
This should cause some consternation among other retailers, not just in France but in every market where Aldi is trading. Nord and Sud are massively powerful in their own right with huge buying power across food and general merchandise, so the prospect of them becoming more aligned should be scary.
France is a market where discounters have perhaps not really had the impact they have elsewhere, thanks to shopper preferences and the obsession of retailers such as Leclerc to beat everyone on price.
If Aldi does successfully absorb Leader Price, then the discounter offensive should move up a gear or two.
As so-called ‘non-food’ discounters such as Action and Babou/B&M also expanding at a rate of knots, I wouldn’t fancy being a French food retailer at the moment.
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