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Fear of comparability
This summer, Aldi Süd announced it would include more than 50 name brands into its product range, while Aldi Nord has kept the range of name brands rather limited, although it will change that in the future according to German LebensmittelZeitung. Aldi Süd’s name brand push has apparently been so successful Aldi Nord could not stay ignore its positive effects.
Brand suppliers have not been reticent about doing business with Aldi out of fear the move might hamper their relations with other chains. On the contrary, according to LZ, it has been Aldi’s own choice to only trickle name brands into its product range over the past few years. Aldi Nord in particular has apparently been very hesitant to add name brands as that could make the chain far too comparable with other chains, giving competitors a chance to go below Aldi’s price range on a structural level. Such a move could strike the discounter right at its core.
That is why Aldi Nord refused to tag along with Aldi Süd when the latter decided to add more than 50 name brand items to its line-up. That meant that brands from companies like Ferrero, Mars, Coca-Cola or Procter & Gamble (which are also present at Aldi Nord) would get the company of plenty of new brands at Aldi Süd.
More customers come more often
Aldi Süd’s move proved to be very successful, something Aldi Nord has also admitted. LZ says that Aldi Nord admitted “that the numbers have proven our southern colleagues right”. More and younger customers were apparently attracted to Aldi Süd’s new product range, while customers visited the stores more often as well. As those were Aldi Süd’s main issues, these seem to have been rectified with the introduction of name brands.
Insiders feel this is the work of Roman Heini, Aldi Uk’s former CEO (which is part of Aldi Süd). He was the one who caused havoc among the major British service retailers when he made Aldi popular in Great Britain.
Ever since April 2015, Heini has been part of Aldi Süd’s German board, exactly the time when the company decided to add more name brands to its line-up, a move Aldi Nord will now mimic. At first, it will do so in Germany alone, but it is deemed successful, it will probably be rolled out to Aldi Nord’s other countries, including Belgium and the Netherlands.
Competitive climate is getting harsher
Service formulas will definitely feel the brunt of Aldi Nord’s change in strategy as LZ claims Aldi’s basic cost for name brand products is on a same price level as the temporarily discounted prices at service retailers. The magazine also quotes a manufacturer which states that Aldi can still operate at a profit margin similar to the margin it has on many of its “fancy” labels.
Service retailers will face an even harsher competitive climate now, especially as Lidl has already reacted in Germany by cutting its prices by quite a margin.
