Former CEO, Aldi UK
Paul started his career in 1974 and has over 40 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. Read moreView Profile Page
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.