Updated: Aug 18, 2022
Discount Retail Chain Aldi Germany (privately owned) was able to grow strongly in the Corona year 2020, but long-term rival discounter Lidl Germany (owned by the German Schwarz Gruppe) trumped the German discount champion. Supermarkets like Rewe and Edeka are also poaching in the realm of the cheap home.
Aldi Nord celebrated something historic: at the beginning of the week, the discounter opened its 5,000th stores. The new market in Cala Millor on the holiday island of Mallorca is the 336th in Spain overall. And if the company has its way, numerous other new Aldi stores will follow, not just in Spain. "All companies in the corporate group" would rely on organic growth, according to a message from Aldi Nord. Numerous new markets are also planned in Germany. In addition, the company is systematically checking “which potential could result from acquisitions”.
That sounds like a spirit of optimism and good business with the eternal discount champion. In fact, however, the trade journal “Lebensmittelzeitung” now raises the question of how long the Essen-based group and its sister company Aldi Süd will be able to maintain their market leadership in the German food discount market. Because long-term rival Lidl is growing much faster than Aldi in its important home market.
According to the report, Aldi was able to grow significantly in 2020 due to corona and increase sales by around 1.1 billion euros (US$1.3bn) to a net 27.4 billion euros (US$33Bn) . “However, rival Lidl increased by at least two billion euros (US$2.4Bn),” writes the “Lebensmittelzeitung”. This means that Aldi is only around 2.5 billion euros (US$3Bn) above Lidl's sales in Germany. In 2016, the gap between the two top discounters is said to have been around five billion euros (US$6Bn).
If the numbers are correct, Lidl is now within striking distance of Aldi and could possibly even knock its long-term rivals from the discounter throne in the foreseeable future. Until a few years ago, that was hard to imagine. The retail group seemed too dominant, the gap to the competition on the home market, where the Aldi brothers Karl and Theo Albrecht had already started their discount concept in 1962, was too great. It wasn't until eleven years later that Dieter Schwarz opened the first Lidl store in Ludwigshafen am Rhein and over the years, together with manager Klaus Gehrig, formed a global retail trading power. On the international stage, the Schwarz Group, which includes Lidl and the large-scale discounter Kaufland, has left Aldi behind for some time. According to a survey by the market researcher Kantar, the Schwarz Group is now the third largest retailer in the world after Walmart and Amazon with sales of US$ 134 billion. Aldi follows in fourth place with US$116 billion dollars. But in Germany Aldi has so far been able to defend its lead over Lidl.
Major renovation in the Aldi empire
But now the gap is melting: Above all, Aldi Nord has been struggling with problems for some time. The south did better in 2020 as well: According to the “Lebensmittelzeitung” newspaper, net sales increased by around 4.8% and reached 15.2 billion euros (US$18.2Bn). Aldi Nord, where numerous branches had been closed in recent years, achieved an increase of 3.7%. In view of the corona-related boom in the entire food trade, these are quite manageable increases. “Shoppers who wanted to buy something special at home as a substitute for missed restaurant visits looked for and found this primarily in the supermarket,” says a GfK analysis of the corona effects. Classic supermarkets and hypermarkets were able to post an increase of 16.7% last year. For the discount segment as a whole, the GfK experts expected growth of at least 8.8%. Since the Gfk data only relate to the business with groceries and other everyday goods, they cannot be transferred one-to-one to actual sales. For example, the sale of promotional items and consumer goods also plays a role. Nevertheless, Aldi's gap to the general discount level is surprisingly high.
Why is that? In the industry there is speculation about the blurred price image of the discounter, about the effects of shop closings and the far-reaching restructuring of the group, which is tying up resources. In fact, the Aldi North and South organizations have been repositioning themselves for years. The cooperation between North and South has been strengthened, billions have been invested in the modernization of the branches, in new IT structures and more advertising. New branded items were listed, the organic portion of the range expanded and the pricing policy made more flexible. The measures are also having an effect: younger customers in particular are now buying a lot again