Aldi is increasingly shoppers’ first-choice supermarket for their weekly shop, its boss has claimed, as soaring food costs see Britons change their buying habits and prioritise value “like never before”.
Giles Hurley, the chief executive of Aldi UK and Ireland, said shoppers were increasingly using it as “first-stop shop”.
The discounter has traditionally been seen as a “top up” destination because it sells just 2,000 products, with consumers then heading to mainstream rivals such as Tesco, which stock 40,000 products and all the big brands in a typical store, for the bulk of their groceries.
However, with the cost of living crisis stretching into its second year, Hurley said this pattern of behaviour was changing. “In the last 12 months, we’ve welcomed 1.1 million new customers and … we’ve also seen existing customers consolidating their shop with Aldi. There’s no doubt that consumers are prioritising value like never before.”
This was partly because people saw the opportunity to save money by buying supermarket own-label products over well-known household brands. “Now when you think 90% of what we sell is Aldi exclusive label, we’re clearly beneficiaries of that decision-making,” Hurley said, as he used the launch in Woking of its 1,000th UK store to set out an ambitious plan for another 500.
The thirst for expansion goes against the prevailing wisdom in the industry and comes after a series of milestones for the fast-growing business. Last autumn Aldi became the UK’s fourth largest supermarket chain, ejecting Morrisons from a “big four” lineup that had remained roughly the same for nearly 20 years: Tesco, Sainsbury’s, Asda and Morrisons.
Then in April Aldi’s market share smashed through 10% for the first time. It is still on a roll as the the fastest growing supermarket in the UK according to industry analysts Kantar, which tracks grocery sales.
The run of success has given it confidence to invest in the UK and after conducting a detailed analysis of the market identified the scope to open another 500 stores. “We can see very clearly that there are communities across the UK who only have access to high-priced groceries because they’re served by a traditional full-price supermarket or by their very expensive convenience arm,” said Hurley.
The soaring cost of food in the UK has led to accusations of “greedflation” – pushing up prices beyond cost rises to increase profit margins – in the food industry and as inflation starts to cool all eyes are on the direction in which prices are going on supermarket shelves.
Aldi will pass on “as many savings as possible when they become available”, said Hurley. This week it pushed though price cuts on a dozen products, including cheese, which equated to an investment of £3.5m. “I’m optimistic between now and Christmas that we can build on that and that there’ll be more price reductions,” he added.
As in previous downturns the appeal of Aldi and fellow discounter Lidl has grown and their strong performance has forced the traditional major players to compete more aggressively. Tesco and Sainsbury’s have schemes that match Aldi prices on hundreds of key products, while they have accepted a profit hit to keep prices down. Both say the price gap with Aldi UK has significantly narrowed.
The two biggest players now use loyalty card offers – Clubcard and Nectar respectively – to pull in shoppers, but Hurley said they did not pose a threat.
“I actually see now more than ever that our very simple, honest pricing is a unique competitive advantage,” he said. “When you come shopping at Aldi, you don’t need to join a club, you don’t need to hand over personal information. There’s no smoke and mirrors. It’s just very simple pricing.”
During the crisis Hurley insisted that Aldi’s prices had not gone up by as much as rivals. “If you look at the average item price across the supermarket sector, in the last year, it’s gone up by 23p. Now at Aldi it’s gone up by 21p. So we have inflated our prices but well below the market average. While you might say 2p doesn’t sound very much, actually when you think about the volume of groceries that are sold that is a monumental difference.”
He also welcomed the findings of the recent probe into grocery pricing by the Competition and Markets Authority (CMA), which he suggested identified Aldi as a “force for good” in that it was the benchmark for the industry when it comes to price. “That is that is why there are price-matching schemes out there because when it comes to price, we offer the best value,” he said.
