ALDI boss dismisses Kaufland fears

May 6, 2019
By Alana House

ALDI Australia chief executive Tom Daunt says he isn’t worried about the arrival of Kaufland in Australia.

“Whether it’s a new large-format hypermarket format like Kaufland or an online player like Amazon, generally competition is good for customers and results in better quality products and more affordable prices,” he told The Sydney Morning Herald.

His remarks follow senior strategist with Retail Oasis Jessica Sinclair telling the New Daily that ALDI was the retailer most at risk from Kaufland’s entry into the Australian market.

“I definitely see that initially ALDI customers are the most ripe for poaching because they are more price-conscious, and they have shown themselves to be more willing to try something new and experience something different,” she said.

“And I think this German offering of no-frills value would definitely appeal to that ALDI shopper, that value-oriented part of the market.”

But Daunt told the SMH that ALDI’s market position and efficient model that allowed it to offer low prices meant it was secure.

“I don’t see any big adaptations for our business,” he said.

Kaufland prepares to enter Queensland market

It was revealed last week that Kaufland is hunting for a location to build a super-sized distribution centre in south-east Queensland after winning planning approval in March for its first three supermarkets and a new distribution centre in Victoria.

An Ipswich City Council spokesman confirmed to the Courier Mail that it had met with representatives from Kaufland.

Kaufland is preparing to enter the Australian market.
Kaufland is preparing to enter the Australian market.

“Kaufland gave a presentation to council on its global operations,” the spokesman said.

“Council welcomes any opportunity to work with businesses interested in investing in the Ipswich region.”

ALDI reveals its impact on Australia

Daunt’s comments follow the release of a PwC report that shows ALDI customers save about $2.2 billion a year by buying its private label products compared to shopping at Coles, Woolworths or IGAs.

ALDI employees
ALDI employees

The report titled ‘Making a Good Difference: how ALDI contributes to the Australian Economy’ also notes that shoppers at other major supermarkets saved $450 million a year from price cuts prompted by competition from ALDI.

PwC estimated that ALDI contributed about $3.2 billion, directly and indirectly, to Australia’s gross domestic product last year, with $1.5 billion of that coming through suppliers who produce ALDI’s products.

“Our focus on providing an improved customer experience, strong company values, a long-term approach to profitable supplier relationships, and a high bar for the quality of our exclusive branded products, has enabled us to grow to a network of 526 stores, 12,565 employees, and a local supplier base of more than 1000 individual businesses,” the report said.

“Through our supply chain, we indirectly support several thousand more Australian jobs, from growers, bakers and winemakers, to transport and logistics providers.”

Daunt said one of Aldi’s most significant impacts was to motivate Coles and Woolworths to improve their own home brand products, driving growth in private label from 4% of all Australian grocery sales to just under 25%.

Keeping prices down

Daunt told ABC News he was seeing evidence of fallout from the real estate correction in Sydney and Melbourne, with shoppers becoming become more cautious about tighter household budgets.

“I think Australians particularly really feel their wealth when house prices rise or fall,” he said. “People are more willing to try other things, and they’re more interested in obtaining value when they can find it.”

Daunt said there had been modest decreases in ALDI’s shelf prices over the past four years, but that had reversed slightly in the past six months with inflation running at 0.5% due to the drought pushing up fresh food prices, and other rising costs such as power and labour.

ALDI had partly passed on cost increases to customers, while absorbing some into its profit margins.

As for the future of ALDI in Australia, Daunt said: “I think you will see some more growth from us but our objectives are not really growth oriented; they are about the ongoing improvement of our range, further extending the quality advantage we have and further improving the price.

“I accept it sounds odd coming from a CEO but growth is kind of secondary.”

Daunt revealed that ALDI recorded $9.2 billion in sales last year, giving it a 10.6% market share of Australia’s grocery market.

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