Living Case- Aldi

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Aldi in Australia
Case study
Aldi in Australia
By Ingrid Bonn, Graduate School of Management, Griffith University Background
In 1948, the brothers Theo and Karl Albrecht opened
the grocery store ‘Albrecht Discounts’ (Aldi) in Essen
(Ruhr Valley), Germany. The store had a simple
layout and offered a restricted number of products at
a low price. The company grew rapidly, owning 13
stores in 1950 and about 300 stores in 1961 across
In 1961, Theo and Karl divided the company into
Aldi North (run by Theo) and Aldi South (run by
Karl). The reasons for this division, according to
Dieter Brandes, a former managing director of Aldi in
Schleswig-Holstein, Germany, were different views
about how to develop the business. However, the
brothers regularly exchanged information about a
range of issues such as performance and cost figures,
current and potential suppliers and they also conducted
joint negotiations with suppliers.
In 2003,
Theo and Karl stepped down as CEOs. Theo’s son,
Theo Albrecht Jr, now runs Aldi North, and Juergen
Kroll and Norbert Podschlapp run Aldi South.
By the end of 2003, Aldi had become one of the
world’s biggest global food retailers with over 7000
stores worldwide and estimated annual turnover of
36.2 billion euro.
Aldi’s main market is Germany,
which accounts for about two-thirds of sales and where
Aldi has a 40 per cent share of the grocery market.
Today, Aldi still operates in two divisions. Aldi
North, based in Essen, manages operations in northern
Germany, Belgium, Denmark, France, Luxembourg,
Netherlands and Spain. Aldi South, based in Muelheim,
manages operations in southern Germany, Austria,
Great Britain, Ireland, Switzerland, USA and Australia.
In Australia, the first Aldi store opened in Sydney in
January 2001. The company came with $750 million in
paid-up capital and plans to invest profits in further
This all-cash approach to expansion keeps
Aldi’s risk levels low. In 2004, Aldi owned 44 stores in
New South Wales, 20 stores in Victoria and eight stores
in Queensland. With these stores, Aldi captured almost
5 per cent of total packaged grocery expenditure in
New South Wales, 2.5 per cent in Victoria and 1.4 per
cent in Queensland.
According to AC Nielsen, Aldi
could own over 300 stores and capture 10 per cent of
the Australian packaged grocery dollar market by 2010,
if it achieves its planned store rollout program.
Aldi’s business strategy
Aldi is a typical ‘hard discounter’, pursuing a costleadership strategy (see figure 1 for characteristics of
hard discounters). Its approach is to offer a limited
number of good quality products at low prices. Aldi
stores stock about 700 products of the most popular
everyday grocery and household items.
Such a limited
number of items is in stark contrast to a standard
supermarket which carries between 25 000 and 30 000
products. Aldi’s products include frozen food, meat and
dairy products, canned food, bakery products, household
supplies, health and beauty products, nappies,
cleaning products and a selection of fresh fruit and vegetables. In addition to household staples, Aldi also
offers a selection of ‘surprise buys’, which change every week and are only available as long as the stocks last.
These items include highly discounted hardware, electrical
items, clothing, sports equipment and toys.
Aldi stocks a few national brands such as Vegemite,
Kellogg’s breakfast cereals, Milo and Nescafé, however,
95 per cent of the products are Aldi’s own brands. More
than 80 per cent of its products are Australian made
and many of its home brand products are produced by
well-known brand manufacturers. However, manufacturers
seem reluctant to be openly associated with Aldi,
fearing that they may jeopardise their relationship with
other retailers. According to Walker, it is believed that
Aldi’s suppliers include George...
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