Aldi has invested more than £3 billion in opening 225 new sites over the past five years. Photo: Christopher Furlong/Getty Images Europe
When David Potts prematurely stepped down as Morrisons chief executive last week, retail insiders were quick to explain why.
'It was probably because of Aldi' , says one of the supermarket managers. “I can only see it as a reaction.”
Days before Morrisons announced the news, the German discounter had hit record sales of £15.5 billion in 2022, continuing its rapid growth on British soil.
Aldi has been putting grocers on the defensive for some time as its lower-price offerings drive away struggling shoppers at traditional supermarkets.
Its success saw it become the UK's fourth-largest grocer last summer , and has since gained another million customers after opening a number of new stores.
The ambition behind its costly expansion is clear, with Aldi having invested more than £3 billion in opening 225 new sites over the past five years.
However, despite the costs, Aldi has vowed not to slow down its growth strategy in the UK soon.
>Just last week the company said it wanted to open 500 new stores in the UK, with local chief executive Giles Hurley lamenting that “a third of UK consumers can't shop with us, and around nine out of every ten pounds spent in the UK doesn't uses our box office.”
“There are clear opportunities across the country,” he said.
Aldi chief executive Giles Hurley says the discounter is no longer a non-essential store for households. Photo: Andrew Fox
But the bet on growth is raising questions among industry experts, who wonder whether Britain's love affair with the German discounter is already coming to an end.
Kantar data last month showed how cracks in Aldi's market share began to show for the first time, as the company's annual sales growth slowed from 21.2% in August to 17.1% in September.
Shore Capital analyst Clive Black says Aldi still has room to grow, but the pace of growth is likely to slow. “They had exactly the right offering at the right time when family budgets were tight,” he says.
But as pressure on the cost of living eases, “some of these unnatural businesses will start to decline a little bit.”
At the same time, store openings that have long fueled Aldi's rapid growth are becoming increasingly difficult to come by.
“In a relatively mature industry, most of the UK's top supermarkets have already closed,” says Black. “The next 500 stores probably won't be as easy as the first 1,000 for Aldi.”
Part of this could mean expanding into areas less receptive to Aldi's discount offers, further diverting the company's attention away from working-class areas and focusing more on the middle class.
Aldi currently has a higher share of stores in the north-west of England, where incomes tend to be lower than in the south-east and London.
Aldi opened its 1,000th store earlier this month, with long-term plans to open 1,500 stores in the UK. Photo: Christopher Furlong
Paul Foley, Aldi's former UK and Ireland boss, says moving into middle-class areas is not new territory for the discounter. “The opportunities for them to open in lower-income areas disappeared by 2015 or 2016, so they have been gravitating toward higher-income areas for some time.”
However, he says there are clearly places where shoppers don't have discount stores nearby, and that's what has led to Aldi's long-standing goal of reaching 1,500 stores by an unspecified date.
“Even before Aldi opened the first store and the plan was for the store to be accessible to everyone in the UK, or at least somewhere that everyone could get to,” says Foley. “If you count, take a card and put pins on it, you will end up with 1,500 pins.”
This will inevitably mean that more expensive sites will be left until the end, he says. Foley: “They will go for the cheaper pieces of land first.”
However, Aldi is not shying away from the need to spend more and recently said it would invest £1.4 billion across the UK over the next two years up from £1.3 billion from the end of 2021.
However, expansion may prove to be a slower process than before, particularly due to planning constraints.
UK boss Hurley last week called on planning authorities to act faster when approving projects.
Have you pulled out of the project? is your first choice at the supermarket Aldi?
“The process has become much longer,” says one insider. The rules mean that “it's actually much easier to open a convenience store quickly than a larger store, which Aldi would like to look at.” “The bottom line is that all this means is that Aldi is taking a lot longer to get things done.”
While this threatens to slow Aldi's progress in the UK, Foley says there is no doubt the discounter will reach the 1,500 unit mark. celebrate and get more clients. “It's not a wish, it's a stated goal and I can't believe it won't happen.”
Foley expects Aldi to hit the target in about seven years, despite rival discounter Lidl pursuing similar goal.
He predicts that by 2030 the pair will account for about 25% of the market, which is significantly higher than the current 17.7% of the market.
At this point, in his opinion, it would be fair Britain is said to have reached peak discounting. “Once they have 1,500 stores, they'll start spending their money elsewhere,” he says.
But even traditional competitors won't be able to relax, he says, because customers will continue to hold their own. are important, as is getting them.
Foley says Aldi and Lidl will “keep everyone on their toes” for some time.
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