Budget supermarkets are performing exceptionally well in the current double dip recession, as consumers desert more expensive stores such as Waitrose and Tesco in order to stretch their cash further. Yet one budget brand is seeing their profit margins increase exponentially year on year, leading to management announcing huge expansion of the chain’s commercial property portfolio over the next decade.
Aldi has recorded profit increases of 450 per cent in the past year, due to the combination of store expansions and the introduction of new lines to the UK arm of its business. The business, which opened its first British store in 1990, last week announced that UK sales rocketed by 30 per cent last year, with profits climbing from £18.7 million to just under £103 million.
This success has continued on into 2012, with the supermarket chain playing on cash strapped consumers in order to attract more custom to its outlets. As a result, increasing numbers of customers are choosing the budget brand as their providers for the full weekly shop, rather than simply stopping in to pick up items on a sporadic basis.
As a result of Aldi’s increasing popularity, UK group joint managing director Matthew Barnes has hinted at a huge expansion plan for the UK arm of the business over the next decade. Last year, Aldi opened 29 new branches in Britain, with an investment of £181 million already in place to construct a further 40 stores by the end of 2013. All in all, this will push the chain’s property portfolio to over 500 units, with the expansion creating an estimated 4,500 jobs in the next twelve months alone.
However, should the company’s unprecedented sales continue to rise in the UK, the board of directors believes that the number of stores in this country could double to 1,000 within the next ten years.
Mr Barnes puts the group’s recent success down to the fact that the budget chain has focused on the quality of goods sold, thereby proving to customers that bargain prices do not necessarily equate to a poor shopping experience.
He says; “We are constantly looking at what we do and innovating in line with consumer demand.
“This has seen us expand our product range by 30 per cent, source the vast majority of produce from UK based companies and make changes like introducing trolleys with baby seats, baskets and more premium products such as fillet steak.
“This approach is helping us win awards and creating strong levels of brand loyalty among consumers.”
Over the last three years, Aldi has changed its methods for attracting consumers in the UK. Rather than focusing on achieving rock bottom prices, thereby compromising on quality, the chain has aimed to provide fresher produce such as fruit, vegetables and meat – a move which has contributed highly to the results posted last week.
For example, fresh meat sales have doubled in the past year, with fruit and vegetable sales hot on its heels at 48 per cent. Aldi’s bakery section, meanwhile, has continued to yield good results, with a 40 per cent growth in baked goods sales in the past year alone.
In contrast with Britain’s most popular supermarket chain, Tesco, it appears that Aldi is going from strength to strength, with an expanding customer base and a multitude of expansion plans in the pipeline. However, it remains to be seen whether the chain’s customers will remain loyal when the UK is finally released from the recession and more expensive supermarkets are within the budget of the majority of consumers once more.
Do you shop at Aldi, Lidl or any other bargain supermarket chains? Do you think they offer the same quality as more established UK brands, or do you think grocery shopping is one area in which you cannot compromise on quality, no matter how low the prices are?