Aldi to open 80 new stores and step up supermarket war
The Australian
September 01, 2015
German discounter Aldi will escalate the supermarket war, with plans to open as many as 80 new stores across Australia next year, its biggest store rollout in a single calendar year since first arriving in the country in 2001.
The aggressive move is set to squeeze rival Woolworths and No 2 player Coles even harder for the share of the $90 billion food and grocery market.
In a letter to suppliers, the usually secretive Aldi has revealed plans to open up an additional 40 more stores across the eastern seaboard over the next year to match its previously disclosed push into South Australia and Western Australia with 40 stores across the two states.
The sudden ramp-up will see Australia emerge as one of Aldi’s most important markets outside its native Germany, with the region having more stores than Aldi’s mature European markets such as Denmark, Spain, Belgium and Austria.
The move is likely to add further pressure on Woolworths, which is likely to face a period of uncertainty as it searches for a new chief executive.
Woolworths is already reacting to slowing sales by cutting prices. Analysts believe the risk of a new and more damaging price war has increased as Coles responds to the tougher market.
A letter sent by Aldi buying director Jordan Lack to suppliers, and obtained by The Australian, reveals the extent of its store opening plans for 2016, advising grocery suppliers to prepare for the anticipated 20 per cent-plus jump in demand for their goods as the stores are opened.
“This is not only unprecedented growth, but one which provides access to virgin catchments and therefore presents a significant opportunity,” Mr Lack said in the letter.
“This presents great opportunities for us as a retailer, you as a supplier and a growing number of customers who now will have access to our great value range of products.”
While 80 new stores in 12 months is viewed inside Aldi as a “highly aspirational” target, the discounter believes a realistic range is 25-30 new stores in Victoria, NSW and Queensland, and 30-40 new stores in SA and WA — meaning 55-70 new stores is likely.
The pace will be determined by the availability of preferred property sites, access to capital, signing a deal with the land owners and then the construction phase.
Aldi management, which is in the midst of its 10-year plan deliberations, believes it will hit 65 new stores in Australia next year, against its record 40 store openings in 2013.
Aldi believes WA has enough of a population to support ultimately 60-70 stores, while SA could eventually be home to 40-50 stores.
The ambitious plans for 2016 will include Aldi moving into new territories in key eastern states, giving shoppers in those catchment areas their first taste of the discounter’s eclectic mix of cut-price groceries, private label products and large array of general merchandise from motorbike helmets to fridges and frying pans.
The highly aggressive store openings schedule, also obtained by The Australian, will see Aldi’s total store count in Australia jump from 396 by the end of 2015 to 476 by the end of 2016 if it hits the top end of the store rollout range. Coles has 776 supermarkets across the nation, while market leader Woolworths has 961.
The 20.2 per cent rise in Aldi’s store network in a single year is unrivalled in Aldi’s short involvement in Australia’s grocery market.
According to Aldi’s store opening schedule, which has been shared with its suppliers, the German discounter could open 17 stores in the first quarter and third quarter of 2016, with the second quarter tipped to be the busiest period with as many as 25 stores opened.
“Could I please ask that you respond … with confirmation you have capacity and capabilities to support an anticipated 20 per cent-plus uplift in demand generated by the aforementioned store network growth by COB (close of business) Thursday 3rd September?” Mr Lack wrote to suppliers.
Aldi’s decision to ramp up its footprint comes at an increasingly tough time for Woolworths, which is facing declining sales driven by the perception that it is the most expensive on food and grocery prices, and the other key players in the sector that are all facing a mounting threat from Aldi.
Woolworths, Coles and the supermarket independents supplied by wholesaler Metcash have all ceded market share to Aldi since it launched in Australia nearly 15 years ago.
Aldi now controls about 10 per cent of the eastern states grocery market and eyes grabbing a similar slice across central and Western Australia.
A recent supermarket industry report from UBS labelled the rapacious Aldi “unstoppable’’, with its increasingly rusted-on customers more loyal to it than any other supermarket chain.
The report expects Aldi and Coles to maintain their growth momentum, while Woolworths’ sales are tipped to slow in coming years.
Underlining its competitive threat, the typically secretive Aldi provided a glimpse of its local accounts in a submission to the current Senate inquiry into corporate tax avoidance and minimisation, to reveal a booming Australian business that had doubled sales and pre-tax profit since 2010.
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