Aldi vs Mainstream Retailers: The UK Market Today
Former CEO, Aldi UK
inpractise.com/articles/aldi-vs-mainstream-retailers
Why is this interview interesting?
- Strategic options mainstream retailers have to combat the threat posed by Aldi and Lidl (price investment, cost reductions)
Aldi vs Mainstream Retailers: The UK Market Today(May 11, 2020)
Paul Foley
Former CEO, Aldi UK
Paul started his career in 1974 and has over 45 years of experience in retail. The bulk of his career was 23 years at Aldi Süd, a privately held, German-headquartered global retailer, with operations in 10 countries covering Europe, US and Australia. During his tenure, Paul served on Aldi Süd international management board. He was the CEO for the UK and Republic of Ireland from 1999 -2009 as well as identifying and implementing new business opportunities, including entry into new geographies (including Australia). He is currently serving on the board at GIPPO Hypermarkets in Belarus, VOLI in Montenegro, BIM in Turkey and FORTENOVA in Croatia.
Interview Transcript
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.
