By the end of World War II, Theo and Karl Albrecht took over the small grocery store of their mother to make it become one of the most successful discount supermarket chains in the world. ALDI operates according to the motto “the best quality at the lowest price.” The company generated €24.2 billion in revenues in 2020.
The ALDI origin story: the low-cost business model
In 1913, Frau Anna opened a small grocery store in the suburb of Essen, Germany. By the end of World War II, Karl and Theo, Anna’s soon took over their mother’s business, and run it with the motto “the best quality at the lowest price.” That motto would become the company’s vision for decades to come.
By 1948, opening the two brothers had opened four stores in the local area. They managed to keep prices extremely low by only stocking non-perishable items and by selecting the things that sold the most from the shelves while removing the slow-sellers.
By that time Theo and Karl Albrecht decided to focus on developing a chain of small stores. In 1954, the brothers opened Germany’s first self-service store. By 1960, Theo and Karl Albrecht owned 300 stores with an annual turnover of millions of dollars.
The split over a cigarette
In the 1950s the brothers split the chain into two separate groups, presumably over a dispute about whether to sell cigarettes. Theo headed Albrecht-Diskont Nord, which sold cigarettes. Karl instead became the CEO of Albrecht-Diskont Süd, which did not sell cigarettes.
Albrecht-Diskont store became ALDI
In 1962, despite the disagreement kept working together and changed the name of the. group to Aldi Nord and Aldi Süd. The taken from the first two letters of Albrecht and Diskont. The two businesses became financially and legally separate in 1966. By this time, there were 200 Aldi Süd stores in Germany.
The Trader’s Joes acquisition by Aldi Nord
In 1979, a trust headed by Aldi Nord’s Theo Albrecht bought the chain Trader Joe’s, which now operates 475 stores in the US.
How does Aldi keep its prices low?
Aldi uses a set of strategies to keep its prices low while maintaining a high quality:
- Aldi lists 1,300 items in each store every day, which is very limited compared to other supermarket chains. That keeps waste to a minimum
- Aldi also stocks a lot of their own brands, with some becoming successful, which lowers the sales and marketing cost
- 90% of the products are Aldi-exclusive brands, which makes it easy for the chain to market them, with more flexibility on. price and distribution
- ALDI in a way retains a. self-service attitude, where customers bring their own bags or can buy reusable bags at the store. Also, they must bag their own groceries. This lower the costs of serving clients for the company compared to other chains
- Limiting store hours and keeping their stores small (about 15,000-20,000 square feet)
ALDI Mission and Core Values
As the company highlights:
ALDI Nord is an internationally successful discounter. We provide broad groups of consumers in nine countries with high-quality products at consistently low prices. “Simplicity, responsibility and reliability” – these values guide our actions and have been codified in our “Simply ALDI” mission statement. The mission statement provides a clear sense of direction for more than 69,000 ALDI employees.
Back in 2017, the company announced its restructuring of the stores, according to the ALDI Nord Instore Konzept (ANIKo) program, aimed as it explained, at creating:
An atmosphere that makes our customers feel right at home – that is the goal at the heart of our new stores. The renovation is the largest project to date in the history of the ALDI North Group. A majority of the 4,700 stores are slated for an update in the next two to three years. Many changes immediately stick out, while others are being made unseen behind the scenes. Our virtual tour reveals all that awaits ALDI North customers in the freshly renovated stores. But that’s not all: it also shows where we are making our product range increasingly sustainable – both in brand-new and already existing stores. Because whether already modernised or not, customers will find a bigger selection, greater freshness and more sustainable products at the proven ALDI price at all of our stores.
As reported by ALDI North official report:
The ALDI North Group is represented in nine European countries with companies as independent legal entities. In Germany, the ALDI North Group as a group of subsidiaries is comprised of legally independent regional companies, in each case with the legal form of a GmbH & Co. KG, which means that the managing directors of the independent regional companies have equal status in casting votes at regular board meetings. ALDI Einkauf GmbH & Co. oHG is engaged by these regional companies to provide various services. This company is also the licensor of the ALDI brand for the legally independent foreign companies of the ALDI North Group operating in the ALDI North Group countries. This arrangement ensures a uniform market profile.
The motto remains “offering high-quality groceries at everyday low prices.”
In 2020 ALDI North Group recorded sales for 24.2 billion euros, compared to 22.8 billion in 2019.
ALDI North has more than 54,000 employees.
ALDI North corporate responsibility program
ALDI North follows a corporate responsibility program, which comprises five main areas:
- Employee appreciation.
- Supply chain responsibility.
- Resource conservation.
- Social commitment.
- Dialogue promotion.
ALDI’s founders are among the wealthiest businessmen in Germany
As reported on thelocal.de the top ten richest Germans are:
1. Karl Albrecht and family (Aldi Süd) €17.20 billion
2. Berthold and Theo Albrecht junior and family (Aldi Nord) €16 billion
3. Dieter Schwarz (Lidl, Kaufland) €11.50 billion
4. Otto family (Otto mail order) €9.00 billion
5. Susanne Klatten (BMW, Altana) €8.90 billion
6. Reimann family (Reckitt Benckiser, Coty) €8 billion
7. Reinhold family Würth (Würth) €7.20 billion
8. Günter and Daniela Herz (Germanischer Lloyd) €7 billion
8. Oetker family (Oetker) €7 billion
10. Rethmann family (Remondis) €6 billion
This makes the total personal wealth from ALDI founders at over 33 billion euros (about $38 billion at current rate).
ALDI as a private company
Aldi might well be among the largest private companies in the world. As a private company, ALDI has total control over its strategy without focusing on quarter results. Also, ALDI can keep its number relatively secret from its competition.
Origins and Business Model:
- ALDI was founded by Theo and Karl Albrecht, who took over their mother’s grocery store after World War II.
- Motto: “The best quality at the lowest price.”
- Started with a focus on non-perishable items and fast-moving products.
- Introduced self-service in 1954 and expanded to own hundreds of stores with significant annual turnover.
Low Price Strategies:
- Limited selection with around 1,300 items to reduce waste.
- Strong emphasis on own brands, with about 90% of products being Aldi-exclusive.
- Self-service approach, where customers bring their own bags and bag their groceries.
- Smaller store sizes and limited store hours.
Corporate Values and Initiatives:
- Guided by values such as simplicity, responsibility, and reliability.
- Introduced the ALDI Nord Instore Konzept (ANIKo) program in 2017 for store updates and sustainability.
- Focus on offering a wider product range, freshness, and sustainability.
Financial Performance and Wealth:
- ALDI North Group achieved €24.2 billion in sales in 2020.
- ALDI’s founders, the Albrecht family, are among the richest Germans.
Private Company Status:
- Operates as one of the largest private companies globally, enabling greater strategic control.
- Keeps company information confidential.
Corporate Responsibility Program:
- ALDI follows a comprehensive corporate responsibility program encompassing employee appreciation, supply chain responsibility, resource conservation, social commitment, and dialogue promotion.
Business Model Recap
|Value Proposition||Aldi offers a range of value propositions for its customers: – Low Prices: Aldi is known for its commitment to offering everyday low prices on a wide range of products, providing value to budget-conscious consumers. – Quality Products: Aldi emphasizes quality and carefully sources its products to ensure they meet customer expectations. – Exclusive Brands: Aldi offers exclusive private-label brands, including “Specially Selected” and “Simply Nature,” providing unique and high-quality options. – Efficient Shopping: Aldi stores are designed for efficiency, with a no-frills shopping experience that helps customers save time. – Fresh and Organic Choices: Aldi offers fresh produce and organic options, catering to health-conscious consumers. – Environmentally Friendly Practices: Aldi is committed to sustainability, with eco-friendly initiatives like reducing plastic waste and promoting reusable bags.|
|Core Products/Services||Aldi’s core products and services include: – Groceries: Aldi primarily focuses on selling groceries, including fresh produce, dairy, meat, bakery items, canned goods, and more. – Private-Label Brands: Aldi offers a variety of private-label brands, such as “Specially Selected,” “Simply Nature,” and “Friendly Farms,” providing quality and affordability. – Limited Assortment: Aldi stores have a limited assortment of products, emphasizing essential items to keep prices low. – Store Brands: The company sells products under its store brand labels, often comparable in quality to national brands but at lower prices. – Special Buys: Aldi offers “Special Buys” each week, featuring discounted items like electronics, home goods, and seasonal products. – Aldi Finds: The “Aldi Finds” program offers limited-time, unique products that create excitement among customers.|
|Customer Segments||Aldi’s customer segments include: – Budget Shoppers: Price-conscious consumers and families looking to save money on groceries and everyday essentials. – Health-Conscious Shoppers: Customers seeking fresh produce, organic options, and healthier food choices. – Private-Label Enthusiasts: Shoppers who appreciate private-label brands and value the quality and affordability they offer. – Efficient Shoppers: Individuals and families looking for a quick and efficient shopping experience. – Environmentally Conscious Consumers: Those interested in eco-friendly practices and reducing their environmental impact. – Weekly Shoppers: Regular shoppers who visit Aldi for their groceries, including “Aldi Finds” enthusiasts.|
|Revenue Streams||Aldi generates revenue through several revenue streams: – Product Sales: The primary source of revenue comes from the sale of groceries and other products in its stores. – Private-Label Sales: Revenue is earned through the sale of Aldi’s private-label brands, offering quality and affordability. – Special Buys and Aldi Finds: Sales of discounted and limited-time “Special Buys” and “Aldi Finds” contribute to revenue. – Store Expansion: Aldi’s revenue grows as it expands its store network and reaches new markets. – Efficiency and Cost Control: The company’s focus on efficiency and cost control helps maintain healthy profit margins. – Sustainability Efforts: Aldi’s sustainability initiatives may lead to cost savings and increased revenue through eco-friendly practices.|
|Distribution Strategy||Aldi’s distribution strategy is designed for efficiency and cost savings: – Limited Assortment: Aldi offers a limited assortment of products to streamline inventory management and reduce operational costs. – Private-Label Brands: The company emphasizes private-label brands, which are often more cost-effective than stocking national brands. – Store Layout: Aldi stores are designed with efficiency in mind, featuring no-frills layouts and a focus on quick and convenient shopping. – Weekly Specials: The “Special Buys” and “Aldi Finds” programs create excitement and drive traffic to stores. – Supply Chain Efficiency: Aldi’s supply chain is optimized for efficiency and cost control to offer low prices to customers. – Sustainability Initiatives: Aldi’s commitment to sustainability includes reducing waste, promoting reusable bags, and minimizing plastic use, aligning with eco-friendly practices and cost savings.|
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What is Aldi's business model?
With the motto “the best quality at the lowest price” ALDI operates a low-cost business model, where it stocks a relatively small list of items available in its store every day, thus keeping waste at a minimum, while also prioritizing on its own brands, which can get distributed with more flexibility in terms of price and distribution.
What is Aldi's business culture?
Aldi’s core purpose is to “provide value and quality to customers by being fair and efficient in all it does.” And it follows three core values: consistency, simplicity, and responsibility. According to Aldi consistency leads to reliability. Simplicity creates efficiency. And responsibility stands for its commitment towards people, customers, partners, and the environment.