aldi-business-model

ALDI Business Model In A Nutshell

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.” With combined sales of 53 billion euros in 2010, ALDI North and South have separate operations. ALDI founders are among the wealthiest businessmen in Germany with a personal wealth of over 33 billion euros, combined. 

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 after, and run it with the motto “the best quality at the lowest price.” That motto would become the company 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 were selling the most from the shelves while removing the slow-sellers. 

By that time Theo and Karl Albrecht decided focused 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 cigarette. 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 North in numbers

aldi-north-group

Source: cr-aldinord.com

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 every day low prices.” 

aldi-north-sales-2016-2017

In 2017 ALDI North Group recorded sales for 23.4 billion euros, compared to 21.2 billion in 2016.

aldi-north-stores-and-employees

ALDI North has more than 69,000 employees.

products-and-own-brands-aldi-north

One of the secret for ALDI business model success is to keep its price low is the own brand’s portfolio, which as. you can see spans anywhere from the 73.6% in Poland, up to 96.1% in Belgium/Luxembourg.

ALDI North corporate responsibility program

ALDI North follows a corporate responsibility program, which comprise five main areas:

  • Employee appreciation
  • Supply chain responsibility
  • Resource conservation 
  • Social commitment 
  • Dialogue promotion 

Materiality-matrix-2017-ALDI-North-Group

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 quarters results. Also, ALDI can keep its number relatively secret from its competition.

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Gennaro Cuofano

Creator of FourWeekMBA.com | Head of Business Development at WordLift.io | International MBA

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