Aldi: Hard Discounter Business Models

To begin, Paul, could you take us through your career experience in a bit of detail?

I started my career back in the 70s with a firm called Iceland. It’s still running today. It’s a pretty powerful frozen food supermarket retailer. I cut my teeth in operational management with that firm and I’m eternally grateful for all the experience that they gave me. I stayed there 12 years from the boyhood 18 years old to around 30. At this stage, I got a chance to join a new business coming to the UK. It wasn’t a new business overall. The company was Aldi. It was planning on an assault on the UK market and it was looking for management to help it get some traction. I joined them. After some really big consideration because I had a lot of fantastic experience from Iceland. I stayed the next 24 years with them. The last ten, I spent as the CEO of the UK and Irish business. The bulk of my career has been spent with Aldi. Then let’s say the twilight of the career was to do something on my own in an advisory and board role practice. First of all, actually, for Aldi, I was still part of their organization for three more years in an advisory capacity. Since then, I’ve joined a number of boards and set up an advisory team that focuses mostly on the emerging markets and mostly in the discount space. That’s where I am today.

If we can go back in history to your words: Aldi’s assault on the UK, where you got involved at a very early stage. The earliest stage of Aldi’s presence in the UK. Can you take us through what the logic was for market entry and what makes a market particularly attractive to a hard discounter like Aldi?

I’m happy to do that. Some of the points might be a bit surprising, to be honest. When a discounter like Aldi, I have to say my knowledge is that Lidl is similar in its approach is looking for new markets. It has a number of criteria which are important for it to feel comfortable and to feel confident about that market. The first is probably obvious. They’re looking at the discount penetration. If there is none and when Aldi was looking at the UK, there was just a firm called: Quick Save that seemed to be struggling a little bit in its positioning and its success. That was it. There was no other player on the market, and they had around two and a half percent of the market. Discount penetration is a critical first factor. To give you an example. If you were a new discounter, you wouldn’t be choosing Germany as your next market to try and penetrate because there’s already 45 percent of the entire market controlled by discounters there. That’s number one.

Number two is that you’re actually looking at how rich and successful the industry is. To give you some benchmarks and examples. Across the world, on average, a good food retailer can earn five percent EBITDA and three percent net profit. If you’re anywhere above that, the industry would be considered rich. When Aldi entered the UK and was doing its market entry study, most of the good players who were dominant on the market had actually double-digit EBITDA figures, more than ten percent. Double what the global average was. What that actually means is that they had relatively high prices. They could get away with that, the customer was quite happy to pay those prices because they were good operators and because there wasn’t any alternative. The customer could afford it, too.

What that means for a discounter is it will not have to invest so much money to be significantly cheaper than the incumbent on the market. The third element is that you need a consumer who’s been by global standards, let’s talk GDP per capita, rich for a generation. What happens when you have that kind of situation is people have expectations of what they consume. They are not willing to eat things that they don’t like just to get enough calories inside them. They have enough money to be able to consume exactly the quality level and the taste profile that they’re either used to or want. Furthermore, the postman and the hedge fund manager, at the core of the diet basically eat the same things. Same cornflakes, same jam. Same milk, same beer. Same cheese. Same bread. All the core of the diet is pretty consistent irrespective of what you’re earning. It only diverges when you talk about niche products. The postman is not buying champagne every week, but that’s not the core of the diet either to be honest.

This is very important to a discounter and why? Because a discounter wants to come with one product in every particular category. Not a wide choice of product, but one product and it’s got to appeal to the majority of people in order for it to be successful. Finally, as a hope, I would say, a discounter like Aldi when entering a market would prefer that its competition is stock market listed. Stock market listed companies have programs, management incentive schemes, which means that the management is not likely to react to a new threat until the last minute. They’re whole compensation package, what is expected of them as a management team, their contracts, their job descriptions are all based on maximizing shareholder value, maximizing profits.

Taking some threat 15 years into the future and trying to cancel it out now by reducing your prices and reducing your profit, that’s just not on the agenda of a publicly run company before it has to. It buys the discounter a period of time of going under the radar. Nobody takes any notice of it until hopefully from the discounter’s perspective, it’s too late. These are the criteria that somebody like Aldi is looking for.

When Aldi is looking to enter a market, as in the UK, these conditions appear to have been met, what sort of time-frame is Aldi looking at to build the business? If you could highlight some milestones, whether it’s scaling operations, supply chain, buying, when does a discounter really start to be a threat to incumbents?

That’s a super question to be honest because that is a very key part of market entry strategy. At what stage will the discounter be able to enjoy some success? I can tell you it’s never at the beginning, never. There are two reasons for that. First of all, food retailing is a scale business. If you haven’t got scale, then you don’t have any success. The second reason is that food retailing is a local business. What I mean by that is, the diet of the Great British public is quite different from the French or German or Australian or UK. It doesn’t matter if you’ve got a big business in another country, if you try to bring the products from that other country and capitalize on that kind of supply chain, actually you’re just bringing foreign product, which will taste different, look different, smell different. It doesn’t matter, but it’s different. All of the people that are listening to this that have never travelled will know it’s very interesting to go and drink coffee in France or eat cheese in Belgium or chocolate in Belgium. It’s not what British people grew up with or vice versa. You need scale in the market you are in. The only way to get that is to build out stores. This takes time. If you want a precise time scale, it’s relatively easy to work out mathematically.

What you want to be as a discounter is, you want to be the biggest purchaser for private label product, because that’s what the business is based on, of the products you are going to sell. You simply look at the stats. You look at the market leader. You work out what kind of private label business that they actually have. That becomes your target in every single product category. Then you need to do the math. How many stores do I need to rival those guys? What that means is, you’re generally talking about ten/fifteen years. Especially for a company that’s leverage shy, which Aldi definitely is. It basically wants to grow out of its own cashflows and profitability, rather than having huge borrowings. It builds a long-term plan to build up enough stores. To build up a local management team that can one day boast that it’s got that buying power. That buying power, it feels very confidently, even arrogantly I would say, will bring it success. Whatever. That is basically the concept. When we entered the UK, it was understood that it would take ten to fifteen years for the business to be really successful. It took that long. It was an accurate estimation. Once we got the buying power that was superior to anybody else’s, there was basically no looking back.

In these early stages, how do you set up that supply base? Is it a question of calling up incumbent private label producers and tapping up marginal supply? How does that actually work? What sort of environment do you face in building up your supply?

In that, I have hundreds of interesting stories. Actually, you have to see it this way, when an industry like UK food retail industry was in the very late 80s/very early 90s is super rich. Is earning double what the worldwide industry average is. Everybody does well out of that. I don’t just talk about the retailers, but all of the suppliers are doing well out of it. All of the transport companies are doing well out of it. All of the real estate providers are doing well out of it. Everybody gets a bit of the action. The only person that doesn’t do particularly well out of it is the consumer because they have to pay more of their hard-earned cash to get their groceries and stuff that they need to run their lives. If you come as Aldi with a clear track record that you’re there to undercut all of that. To mess it all up. To ruin the party. You’re not welcome. There is no established player, never mind the competition, who wants to help you. Actually, you’re like a plague of locusts I heard it described from people in the early days. Just coming here to suck all of the profit out of our industry.

Frankly, that’s true, that’s absolutely true. First of all, what we had to do was we had to bring product from abroad, which was not a comfortable situation. It was more expensive than it should have been. It wasn’t the right taste profile, but we needed something to sell. Secondly, we had to establish relationships with small upcoming suppliers who were looking for some vehicle to grow themselves. In many cases, we actually invested money with these companies, either by way of long-term contracts or actually buying the machinery ourselves and renting it to them.

Basically, we did everything out of those first 15 years to get ourselves what our goal was. Which is to match the quality level of the best-selling brands on the market. Now, some of that was easy. We could do it within four or five years. Some of it was dreadfully hard. You try making a KitKat even in a normal chocolate factory, which rivals a KitKat. It is really difficult to do. Either the chocolate mushes into the biscuit, or the biscuit is too hard and breaks your teeth. So on. It was really a journey to end up with a thousand products, which truly were rivals for the best-selling brands on the market under the private labels which the company was doing. Enormous fun. I never had a corporate lunch in 25 years because every midday, I was involved in testing product to see whether or not you could tell the difference between the Aldi version of Cornflakes and Kellogg’s. Or the Aldi version of Ketchup up and Heinz. Eventually, we got there. It was truly very difficult to tell the difference. That’s when you’ve got a business concept, which the majority of consumers will not turn their noses up at.

Looking at that business today, what share of the offering will be supplied locally now that Aldi has been in the UK for close to 30 years now?

The true answer to that question is about 50 percent. The true answer to what does the UK consume is the same. Around 50 percent. I know that everybody understands English breakfast tea, but we all know that there’s no tea grown in the UK. Adli UK imports in terms of ingredients or in terms of final product, pretty much what the average is for the market. If you ask me what the answer to that question in year one to three, it was more like 90 percent came from abroad. It wasn’t bad stuff. Actually, in some ways, it was higher quality. If you were a true confectioner and you understand chocolate, you will know that people in Switzerland and Belgium eat a much higher quality chocolate than Cadbury’s. If you don’t grow up on this much higher quality chocolate, it’s the Cadbury taste you want. No matter what you put in front of the customer, if it doesn’t taste like Cadbury’s, there will be a significant of people that will say, “Thanks very much. That’s not what I’m looking for.” Matching the local expectation becomes the goal of the product.

To situate some of the phenomena we’re talking about in historical context. As you mentioned, as part of your plan originally, you expected ten to fifteen years to hit scale, that must have happened just shortly before the financial crisis or in the few years running up to that. Paul, could you take us through how the incumbents dismissed the threat for quite a while?

In some ways, it can sound like the incumbents were sleeping at the wheel. I’ve even heard that phrase. I actually don’t think that’s fair or realistic. If I was running Sainsbury or Tesco at the same time, I’m not sure I would have done anything different, to be honest. After ten years, Aldi had a couple of percent market share. A couple of hundred stores or a bit less than a couple of hundred stores. It was growing. It was an irritation. It wasn’t really a threat. These guys are faced with historical decisions on property, on infrastructure. They’re trying to make the best out of that for the shareholders in terms of profits. Actually, they did a very good job I think from year to year.

The Aldi model is this slow, creeping juggernaut which just doesn’t stop. As it gets bigger, it increases by ten percent every year. That’s more stores every year because you’re coming off a bigger base. First ten years, nobody really took any notice of us. Other than from time to time reminding their own supply chain, if you help these guys, first of all, you’re stupid because they’re going to not only make our life difficult but they’re going to make your life difficult, too. In terms of pricing and economics. Secondly, we’re not going to be pleased with you helping something that is a competitive threat. I met a number of top managers of competition and really senior management. They were not sleeping at the wheel. They knew what was coming, but they didn’t really have the necessity or motivation to change anything there or then.

They were all bright enough to get in an airplane and go and see what Aldi was like in countries where it had been operating for 15/20/25 years. It’s not realistic to say that they didn’t know what’s coming. Middle management I think were different because they weren’t given any kind of inspiration from top management that this is going to be something that’s going to be bloody difficult to compete with in ten years’ time. Food retail is a little bit like an army. You just need to get on with what you’ve got to achieve in the next month, quarter, half year, and nothing more. From this perspective, I don’t think it’s fair to talk about sleeping ta the wheel.

What I do think is that the financial crisis accelerated things. What actually happened in reality was the newspapers started talking about matters of confidence. Consumer confidence I’m talking about. Before the consumer actually had less money in their pocket, giving tips and just trying to be able to sell their newspapers with helpful and useful tips on how you might save money if life became tougher. One of the things that they talked about is why don’t you try these new discount stores that are popping up everywhere. We’ve tried them and actually, we’re rather surprised at the quality level that you can get from them. If that financial crisis had happened ten years earlier, they wouldn’t have come to that conclusion. They would have said, “We’ve tried them, and a lot of the products taste a bit funny. A bit different to what you are normally used to.” It just happened to come at the point where the Aldi - and Lidl for that matter - offer was maturing and they had enough scale and buying power to be able to purchase exactly the products they want. There was a bit of luck involved in that. The financial crisis definitely helped propel the business into the consumer’s mind. Of course, it works a little bit like word-of-mouth momentum after that. If the majority of people are quite satisfied with this new concept which they tried during that time, then they tend to tell that to other people the whole thing mushrooms from there.

In the early stages, very hard to establish your supply base. You’re fighting for marginal capacity. You’re investing in your suppliers. As you grow and scale, the world starts opening up to the point where we are talking about the mid-2000s now into the post financial crisis world. What do those supply relationships look like as they evolve, Paul? What do suppliers like about working with discounters that makes life easier than perhaps working with mainstream retailers?

When you talk about discounters. I’d like to be particular about Aldi in this because that’s where I have my history and my knowledge. One feature of the Aldi philosophy is you have to recognize how important your supplier partners are. What does scale really mean?

Scale means purchasing power with an individual supplier. You can’t have hundreds of suppliers all making one product and just selling it in different places. You actually have very few to start with one, maybe two or three in the future who are producing enormous scale. If you lost one of those, it’s an absolute catastrophe. First of all, it won’t be possible for the other suppliers, even if you have a dual supply, to make up another 50 percent overnight. Secondly, you run the risk that the quality is not the same.

Thirdly, you have the situation where your reputation is put at risk with companies that would have to make serious investment decisions to be able to make your private label to the same quality as brands. We were always incredibly protective over the suppliers. Quite actually forgiving when mistakes were made, so long as they weren’t made on a constant basis. Tried to be more than fair with that supply base. What does more than fair mean? To be people who agreed things on handshakes and don’t need 50-page contracts to endorse it. Secondly, to pay on time. The biggest single question every supplier will have about its retail partner is: Am I going to get the money for the product that I’ve put all the investment into and delivered to their warehouse 15/20/25/30 days, whatever the contract actually says, later. I will tell you, you’d have got fired in Aldi if you paid one day late. A CEO would get fired if he deliberately paid one day late a supplier.

A high integrity approach to dealing and working with your suppliers in other words.

Yes, but necessary. It wasn’t out of some kind of charity. It’s a nice thing to be able to tell your management, that’s how we behave. Most young managers like me who joined were dead impressed with that philosophy because it’s always been there. As you get into the business, you realize, actually, it’s fundamentally necessary because you’re looking for the very lowest price possible. You want to give all the guarantees that help you get to that point.

Paul, as we fast-forward now to these later stages where the discounters are now a major force in the UK market. Specifically, Aldi and Lidl, let’s take those businesses. The industry profit pool has been substantially diminished over the last 20 years. I think some estimates are around half or by around half. If we look at the strategic options available to incumbents today, is this a question of simply managing this juggernaut? We’ve seen from Tesco and all of the major players, price rebasing, price investment. They’re taking cost out of their supply chain. In terms of the principles by which this movie plays out, as you mentioned, this has happened in so many countries. In the UK, is this simply a threat to manage? How would you describe that?

I think the story is not done yet. I told you, the first ten years, the company was insignificant in terms of impact on the market. Second ten years, they were an ever-growing irritation. At 2008 when the financial crisis occurred, it was a kind of explosion for the discounters and Aldi in particular. The following ten years were just pain after pain after pain for the rest of the industry as the momentum really kicked in. The number of new stores grew drastically each year. The penetration and the sales per square meter of the old stores just got stronger and stronger as the business was recognized for what it really stood for with the consumer. The story is not over because it’s pretty well-known that the discounters have a belief that they can put 1,500 stores each, that’s Aldi and Lidl, in the UK. If you look at where they are today, they have around two thirds of that. A little bit less than two thirds of it. There’s another third, minimum to come. That’s more buying power and more ability to innovate. As well as just more selling space. This will disrupt some of the weaker players even further. The story is not over. Albeit, that it’s probably peaked in terms of the rest of the industry knowing what’s coming next. How do you handle that? Now we should go back to the first ten years.

If you’re a privately owned business, which was owning a big market share. You probably would have handled it differently. You probably would have understood that actually what these guys, the discounters want is a price gap. They want that their product is significantly cheaper than first of all, the private label option of the other retailers. Secondly, the branded products that they were copying. It’s up to you as an incumbent whether you let them have that. There’s a price of not letting them have it. You’ve got to cut your profits. You’ve got to cut your prices and cut your profits. If you starve them of the oxygen of that price gap, they will just grow much slower. They could even divert their energy to other markets where it’s a bit tougher. Aldi and Lidl do not go to countries where the profit margins are a half of what the industry average across the world is, because it’s just too tough there. They would just have to invest too much money to have the appropriate price gap to get any kind of starting scale. There’s the first thing. You can stop a discounter when it’s in its early stages by starving it of the oxygen of being able to have any kind of price gap.The second thing that you do is, you have to look at your own costs.

In this regard, I think the Tesco story is a pretty positive one. Through a complete restructuring of their organization they have been easily the leader, particularly in the last seven or eight years of taking cost out of their business, which allows them to compete better with the discounters. This is a key point, but it’s culturally very difficult to do. Normally, you need a new management team to be that dramatic. You need a revolution within the company. That’s what happened at Tesco. I think they’ve done a pretty reasonable job, given where they were six or seven years ago in hammering their costs and being able to lower prices without catastrophically ruining profits. I agree with you, the profit pool is half. The market leader is very much part of that. There was zero chance of returning back to the days of eight/nine percent EBITDA or even double digits, which they were in the late 80s. Now they’re back on par with worldwide averages and cost-cutting has been a key part of that.

Just to go into a bit of detail on a really important part of the discounter model being the control that a business like Aldi would have on its operating cost base. It’s overheads, store operating costs, logistics, head office costs. Could you bring that to life for us a little bit? If you have any benchmarks off the top of your head, that’s really interesting. Or just for a feel of how tight cost management is and what sort of cultural philosophy underpins that?

I would say that in a discounter, costs are of the highest importance. Actually, even higher than sales. That’s really quite a dramatic statement for anybody that calls themselves a retailer. It’s costs first is the mantra. What that means is that the business has to find a way to bring its management into the industry in a very specific way so that costs mean something. The Aldi philosophy which was incredibly successful was actually to forgo experience but just get extremely bright people. It went to the universities. It focused on the universities with the highest entry requirements in terms of educational results. It looked for the math, business studies, or anything commercial type topics and looked for the very best candidates. Now, these candidates were also the targets for most of the merchant banks and for some of the really big worldwide businesses. Like, Procter and Gamble or Mars. You’re in tight competition for these people. The key when you’re starting is sheer economics. You actually have to make an offer that is better than Goldman Sachs would offer. This is the philosophy of the business. It pays double the starting rate. I mean double. Not a few percent more. A hundred percent more as a starting rate for a graduate leaving with excellent results.

It has all kinds of guarantees about early responsibility, which is also a very big attractor to these kinds of people. Then you put them through a very professional, tough but very professional program where they learn what costs really means. You’ve got to remember that Aldi is a very specific business. It does basically one thing, it runs Aldi stores.

Aldi stores are around the world. Pretty much identical in size. Pretty much identical in terms of what it costs to build the building. Pretty much identical in what sales per square meter it’s expecting. Pretty much identical in terms of what costs it’s doing. The whole thing is run on a league table type basis. It’s hugely competitive. When you get your results as a business manager within the company, they are compared with everybody else doing a very similar job in a very similar environment. You do not want to be in the bottom 25 percent. You just don’t. The kind of people are very competitive. The whole company is setup on that kind of basis. You want to be in the top 25 percent of performers. Costs are measured first. This is the philosophy. After only a few years, most Aldi management can tell you exactly how long it will take to clean a store in minutes. How long it will take to merchandise a pallet. How long it will take to unload a truck. How long it will take to process a hundred customers through the cash registers. There are prizes given for people who can invent a small change to the business process that can quicken something up even if it’s only a few seconds because that few seconds is multiplied by thousands of stores and hundreds of days per year.

The final bill for this super, little idea is often worth an astronomic amount of money in terms of cost reduction. That’s the philosophy for which the business is built on. A nice little example. If you pick up a product, I don’t have one in front of me, but if you pick up a product and you show it to a normal food retailer, he will look at the colors. He will look at the messages that the product has on it. He will look at how beautiful this item is. He’s thinking how many of those I can sell. I’ll tell you, you put this product in front of any Aldi operating manager and the first thing he’ll look at is, how big is the barcode? If that doesn’t scan with one sweep of the arm across the cash register, that’s going to cost me money. That’s just one of a thousand examples I could give you of how this cost mentality is built in from day one.

Paul, in terms of what that translates to in terms of benchmarking for logistics costs or operating costs versus a mainstream retailer, are there some patterns that have emerged with any degree of consistency that you could share with us?

On average, if you just take the store operational expense, which is pretty much the biggest expense any food retail has, it’s half. As a percentage of sales, it’s half what a general supermarket would be. A well-run general supermarket. A well-run general supermarket needs eight percent of its sales to run its business at a store level and an Aldi level can run at four. That’s four-percentage difference. There’s a whole host of other differences across the business, but that’s the biggest single one. The labor productivity. That comes from a culture of understanding how long every single task takes. Are you meeting those targets? How can you improve, so that you are even further ahead of the competition in the future?

Paul, in the few moments we have left. That’s been a fantastically rich picture of the mechanics of the model. I think we’ve covered a lot of ground there. To explore a dimension of this story that involves your leadership experience and your role as a leader of an organization like Aldi in the UK specifically, could you talk to us first of all in terms of the leadership culture that you grew into over the time that you were at the business? What those leadership principles really involved? Where they were centered on? Maybe I’ll get into some slightly more detailed questions of what that means in practice. For now, in terms of leadership philosophy and leadership culture, what would you say your experience was at Aldi?

I had a number of fantastic mentors. The company is just full of people with a lot of experience. I described to you the way in which management is recruited. It’s not some of the management is recruited like that. All of the management is recruited. They all join somewhere in their mid-20s. There are no people 45 years of age with a huge experience of other businesses who join Aldi. If you meet somebody who’s 50 years’ old, you can pretty much guarantee they’ve got 25 years’ experience.

I had a number of mentors who had that kind of experience when I first joint. What they taught me was two things, really. In the industry that we are in, the food retail industry, what you have to do is be very clear about the vision that the company has. Now, that sounds a bit of a buzz word, but what I mean is, what are we actually trying to do? At Aldi, we were actually trying to sell very good products, benchmark to the brand leaders for much less. The way we did it was to have much lower costs. That message was explained in four or four different ways but constantly. With never a break in clarity. Number one is, you have to make it very clear what exactly are we here to do? Why are we doing everything that we’re doing? What’s the purpose? The second thing is, you have to find ways in which to turn that vision into a form of personal pride of the people that are actually doing it.

That comes in a lot of different ways. I’ll give you an example. When I first started with Aldi, our till system, our cash register system was to key in by hand the prices on a keyboard. A little bit like you would find somebody who works in an accounting office. They don’t look at the calculator. It’s all done differently these days. In those days, they don’t look at the calculator, they look at a stream of figures and they key them in on a keyboard. It’s why by the way every five has some little knob on it here, so that when you’re not looking at it, you automatically know your middle finger is on the five and the four is to the left of it and the six is on the right. We could key in prices four times faster than a scanner. Not only that, we were more accurate than a scanner, which relies on people putting the right prices on the shelf and having the right prices in an IT system. Which in the 80s and early 90s was not a foolproof system? The reason I’m explaining all of this is, hundreds of customers going through would say to our cashiers, “How do you do that? That’s incredible.” They would check them to see whether or not they were right. Then when they recognized they were right, they would say, “That’s amazing.”

No matter what we paid our cashiers, there was nothing quite like the drug of people telling you: You do something I couldn’t do. Actually, it was simpler to do than the customer recognized. The pride that these people had of being told every day: That’s amazing. That was really something. That was actually my biggest fear when we changed to scanning. How would we repeat that pride factor that we were getting from the customers every day? We found other ways of doing it when we changed to a scanning system. It taught me, find ways in which you can make your staff proud. Funnily enough, through this Covid-19 situation, a similar thing has occurred through the whole industry. That I think the people serving on the frontline feel rather proud that they are somehow doing some kind of service for their customers and getting applause for it.

Paul, take the example of a young manager, whether it’s a store manager or regional manager, how do I come in and instill that degree of pride? What actions can I take to drive that attitude and inspire frontline staff in this kind of industry?

First of all, someone’s got to explain it to you that it’s important. You have to have company programs which explain in a statistical way why people have longer service than the industry average. Why people are prepared to work harder for the package that they get? You’re looking for people in a management sense who have some basic leadership qualities which they learned at school, university, or maybe they have by characteristic. I don’t mind admitting, we stole some leadership tests for management joining the company from the army who were looking for characteristics and traits similar to what we were of people who have some natural leadership and charisma abilities. On top of that, you also need brainpower because not everybody ends up in a pure leadership role. They can end up buying products, they can end up purchasing property. The core individual that joined the company all went through this basic training program of understanding what the vision of the company was and how is it that you make sure that people feel proud of the work that they are doing. I think these points were absolutely invaluable over the next five/ten years of these individuals’ career paths.

Paul, thank you. Just to circle back and recap one dimension of this story. It’s come up in a number of ways around private ownership and a business like Aldi and its close peer Lidl being under private ownership, competing with incumbents that are very often in markets like the UK or the U.S. that are listed that have incentive that maybe limit the time horizon by which they’re looking at things. Could you recap for us in its most important forms the advantage that a company like Aldi has had in being privately owned and competing with publicly listed competitors?

First of all, Will, it’s not the only model. There are many models of success. Nevertheless, it works for Aldi and it works extremely well. If you’re privately owned, you can normally afford to be one, very consistent even when times are difficult. Two, you are able to invest to create new markets for the future. Probably for longer and with more patients than with a business that has shareholders who can pick and choose whether or not they invest in company A. Or they leave and invest in company B and are looking for quicker returns on their investment decisions. These facts are clear. You’ve also got to have a good concept because you need to make enough money to be able to stand that.

If I look at Aldi or Lidl’s investment program in big, new countries that they go into. If you add all of the property investments that they make, all the investments in the supply base that they will need to make in the first ten years, and the negative EBITDA they will make to begin with, I’m pretty confident that half a billion U.S. dollars is the war chest you need to go and make it in a new country over the first ten years. If you haven’t got that kind of money, you’re going to have to borrow it and pay that back to someone else. You’ve got to have a pretty successful business behind you and a lot of confidence to go and invest that money before you see the real returns that particular market can deliver. Aldi certainly has that confidence and it has that financial power to be able to do it. That’s a story since back in the 50s that the business has been built on some very clear principles and has been built in a very successful way. Even with a few mistakes along the way, it’s always stuck to its basic principles.

I think that’s a wonderful note on which we can conclude.