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Germany: Aldi plans mega-merger

Updated: Apr 12

Discount Retail Chain Aldi Süd and Aldi Nord (both German family owned) are working on a merger. The two discounters thus have a total turnover of 115 billion euros and would turn the entire retail trade upside down. The newsmagazine FOCUS online mentions five advantages for customers through this merger.

For many years there have been rumors about a possible "Aldi Germany" colossus. In fact, the reports have not come true so far. The press offices of the two discounter giants always commented that Aldi Nord and Aldi Süd were two independently managed companies that were only "family-related". This is also the case this time.

However, the "Manager Magazin" reports that the two companies are to grow together step by step. Apparently, Aldi Nord and Aldi Süd are then to be merged into a holding company. Both sides should have equal participation and be represented on a supervisory board. According to "Manager Magazin", this supervisory board will also include external members. Although both companies deny the speculation, the editors claim to have learned that both companies have already paved the way for tax and legal matters. The basic structures of the holding company are already in place, and the migration is being prepared. Aldi Süd and Aldi Nord have been operating as a holding company since the beginning of the year. From the environment of the two families, it is said that there is even an assessment of the cartel office. Accordingly, the authority would agree to such a merger.

The result would be a discounter empire with 11,000 stores on four continents and over 240,000 employees. Currently, Aldi Süd has almost 6,520 stores and Aldi Nord about 5,110 stores. In addition, there are more than 540 stores of the Aldi brand "Trader Joe's" in the USA, which are owned by Aldi Nord.

Why are there Aldi Süd and Aldi Nord in Germany? Since 1961, the Aldi empire has been separated. The background to this was a dispute between the two Albrecht brothers, about which there are various theories. The most persistent is that the two merchants could not agree on the sale of cigarettes in the stores. However, when asked, economic experts and historians speculate that the two brothers displayed different leadership styles and that there was always friction on simple issues. Be that as it may. Theo Albrecht took over the northern stores 62 years ago, Karl Albrecht the southern ones. This separation has persisted ever since.

What would be the benefits of a merger for consumers? 1. Uniform assortment There are major differences in individual promotional offers in the non-food sector and also in branded products. Private labels have already been aligned since the end of 2020. At that time, Aldi Nord and Aldi Süd had standardized their product range. "By the end of 2020, the majority of private labels in the standard range and in promotional items will be identical," the companies emphasized in a press release at the time. An Aldi Nord manager at the time emphasized that the future uniform packaging and joint marketing measures would lead to cost advantages.

2. Cheaper prices for Aldi customers Aldi Süd and Aldi Nord generally pass on these benefits to customers. So far, this has been very clear in the seasonal development of milk, meat, fruit, vegetables and fish. A uniform assortment could further reduce prices, as Aldi Süd and Aldi Nord would buy significantly more goods from manufacturers, as they would then be available in twice as many stores. This would further fuel competition in the retail sector, which would benefit customers.

3. More organic, more sustainability - nationwide Just recently, Aldi Süd introduced a sustainable private label. With "Nur Nur Natur", the discounter stands out from other retailers and, for example, sells non-homogenised milk for the first time. This type of milk, in which the cream settles on the surface, was previously not available at the discounter. Aldi is thus setting a clear organic focus and at the same time appealing to the classic organic market clientele. At Aldi Nord, however, there is no such thing as the "Nur Nur Natur" brand. The organic mess would be ended by a merger.

4. More innovation and technology The merger of the two companies could lead not only to a stronger market presence, but also to higher investments in research and development. The shared pool of resources could drive new technologies and innovations to provide customers with an even better shopping experience.

This could lead to new products, improved shopping processes, and new services such as food delivery or a larger online marketplace. So far, innovations have failed because both companies first have to coordinate.

Often, the plans are even put on hold. Aldi Süd, for example, had already introduced digital price tags in many stores. Aldi Nord will first test from 2024, as the "Lebensmittel Zeitung" reported. "We have some catching up to do when it comes to digitization," Felix Rottmann, head of Aldi Nord in Germany, is said to have written to his employees on the intranet.

5. Aldi with customer loyalty program A customer loyalty program could also be more easily implemented through a merger. So far, both discounters have shied away from it, as the costs are significantly higher due to the two-brand principle. A digital app, such as the one Lidl currently operates with its Plus program, can only be implemented with great effort and high costs for Aldi Süd and Aldi Nord due to the different product ranges. Such an app is important so that Aldi can better respond to customer needs per store.

Experts believe that a customer loyalty program from Aldi could increase the pressure on Payback, Lidl Plus or Deutschland Card in particular. "The customer loyalty programs of major retailers are in a state of upheaval. For Aldi, the coming year would be the ideal time to start such a program," said an Edeka merchant to FOCUS online. The background to this is that REWE is getting out of Payback, for example, and Edeka is replacing the Deutschland Card with Payback.

Source: Manager Magazine, Focus online, Linkedin, RetailDetailPlus

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