Tuesday, April 07, 2015

Aldi Has A Bright Future Ahead Of Him

Very interesting article in French retail magazine "Linéaires". It discusses a potential merger between both entities of Aldi, Aldi Nord, and Aldi Süd. Aldi has been created in the 40s by 2 brothers that decided to split their business in 2 and seperate in two different German region. That allowed them to spread their concept throughout the country first without competing, and secondly to share the world, as Aldi is nowadays a real global company. 

Aldi, for those who don't know, experience tremendous success in the United States thanks to their chain "Trader Joe's". Aldi is not the company that advertize the most about its corporate governance nor its results. But if you Add up sales of both entities, you have a retail giant of over 70 billion €, which would rank him about the same rank than Carrefour.

Of course, Aldi's business is far from sexy: they are a hardcore discount retailer, that has not evolved much from the original concept (aside from the Trader Joe's experience). But what people may not know either is that Aldi Sud for example has a 7,8% growth rate, when Aldi Nord has 2,9%, which for large retailers like they are is great. For instance, in the UK, Aldi is one of the toughest competitor of Tesco, and one of the main reason why they have struggled these past 2 years, forcing Tesco to change their strategy. I remember in Terry Leahy's book (Ex CEO of Tesco) recognizing that its toughest competition came from Aldi.

Obviously, the article is questionning a potential merger between both entities, especially as Aldi Nord is more exposed to mature declining market than Aldi Sud which invested great countries with a lot of growth, but in my opinion, it is not what I will keep from this article.

What is important is to emphasize that Aldi is one of the top performing retailer in the world, and despite a concept that may be old and out to date, Aldi has a strong clear concept, providing real added value to customers, and therefore has created a kind of "blue ocean" where it will be tough to get it.