Aspirational Aldi threatens on more than just price

MIRANDA MAXWELL
20 JUL, 2015
Spectator
Grass-fed eye fillet and Australian extra virgin olive oil; gluten-free penne, award-winning pumpkin and sage girasoli; Bollinger and Persian feta; oh, and capsule espresso machines plus ski wear.
This small sample reveals how Aldi is successfully capturing a large and growing chunk of middle-class shoppers.
First and foremost a discounter, selling its own-brand baked beans at well under $1 a can and popular nappies at around 20 cents each, Aldi’s range increasingly extends to pinot noir, craft beers and ciders, fresh salmon and brie — the clear preserve of the middle class.
And it’s working. Nielsen Homescan found that only 30 per cent of Aldi’s Australian shoppers came from households earning less than $45,000 last year. Shoppers from households earning more than $90,000 were up 6.7 per cent since 2011, and 34 per cent of Aldi shoppers sat between the two.
“Aldi has not only offered lower prices but has provided groceries of similar and at times better quality than its competition,” says Canaccord chief investment officer Marcus Bogdan.
UK market research company him! found that upper and middle class shoppers make up a third of shoppers at Aldi and Lidl. That’s up from around one in 10 just two years ago as discount supermarkets add premium products to their ranges and win medals on products such as competitively-priced wine. Thirty-one per cent of UK Aldi and Lidl shoppers were from the “AB” demographic — managers and professionals.
In Australia, Aldi’s market share has more than tripled to 11.6 per cent in a decade, while Woolworths holds 38.5 per cent and Coles 31.8 per cent.
Aldi has begun a plan to open as many as 130 stores in South Australia and Western Australia, and a further 20 stores in the eastern states.
“Aldi remains a distant third, but its push beyond the eastern seaboard suggests that its upward trajectory is not about to plateau any time soon,” says Roy Morgan.
Aldi is also experimenting with four trial stores — in Kallangur, Queensland, Chisholm in the ACT, McGraths Hill in NSW and Highton in Victoria — which offer more fresh fruit and vegetables, meat, dairy and freshly baked goods with better lighting and layout in a bid to appeal to households with higher incomes.
Premium food retail is an area of growth globally. JPMorgan analyst Shaun Cousins says an “enduring trend in the consumer” is a willingness to operate at both the high and the low end of the market.
The German group recently issued a fuller snapshot of its financial accounts for the first time to disclose a huge uplift in profitability that has seen sales leap from $3.14 billion in 2010 to $6 billion in 2013 and its Australian pre-tax earnings accelerate from $121 million to $261 million.
Aldi’s profitability and stellar growth trajectory allow it room to experiment in products outside the original bargain discount remit. The firm also has experience with aspirational food products at low prices via its expansive and popular Trader Joe’s wholefood chain in the United States, which relies on the familiar own-brand format but offers specific-appeal products such as quinoa and spinach and kale Greek yoghurt dip.
This week’s “special buy” is a dead giveaway that Aldi is taking Woolworths and Coles on head to head to snare middle Australia; on Saturday it will offer a selection of “Green Action” eco-cleaning products, complete with phosphate-free bath cleaner, jute shopping bags and bamboo sponges.