Aldi boss: How we’re a British supermarket
Boss insists 77 per cent of sales are UK products (it’s just the managers’ cars that are German)
HOW does the boss of German grocery chain Aldi plan to cope with Brexit? Simple: buy British. In fact, Matthew Barnes, chief of Aldi UK, hopes to cast off the German tag altogether. Aldi UK, he claims, is the most British supermarket on the high street.
‘Our British credentials speak for themselves,’ he declares boldly. ‘We’re a hell of a lot more British than we’ve ever been. Seventy-seven per cent of sales through our tills are British products – up from a quarter a decade ago. I’m very confident that’s up there with the highest, if not the highest, in the sector.’
He warms to his theme. ‘Our lamb is British all year round – we don’t import any. That takes a huge amount of work to get to that point and it’s a great example where we’ve gone a step further than anybody to be British,’ he says. What is more, he argues, it is the focus on buying British that will help Aldi keep up the pressure on its rivals.
While other supermarket boardrooms are battling with rising prices from overseas suppliers – due to the fall in the value of the pound – Barnes says he can keep prices lower because of his commitment to British products.
‘One of our responses to Brexit is that we want to buy more than ever in sterling. In my view that is common business sense. The challenges we face as a country on Brexit also come with big opportunities for us to become more self-sufficient when it comes to food,’ he says.
It is an uncompromising challenge to his larger rivals. Barnes warns of the ‘toughest year ever’ but says he can keep up his price advantage.
‘There has been a concerted effort from big supermarkets to close the gap on us and an awful lot of rhetoric. But I can sit here in front of you now and tell you: I won’t allow anybody to challenge me, our price gap is still far higher than 15 per cent. And I will never let that price gap close,’ says Barnes, sitting in his Atherstone, Warwickshire, head office.
Barnes said he has already seen signs in the reams of data collected by his firm that the position for the ‘Big Four’ – Tesco, Sainsbury’s, Asda and Morrisons – is worsening.
‘Our price advantage over some of the larger chains is up to 30 per cent,’ he suggests.
‘I think the price gap will increase this year. I believe it already has from what we have seen over the past two months. From our internal measures and from online databases that scrape the internet every day, thousands of times. We see an awful lot of price activity at our competitors and it is in an upwards direction,’ he said.
The executive’s punchy assessment of his company’s rude health will confound predictions by some City analysts that Aldi’s growth would soon slow. But Barnes has some other advantages. Owned ultimately by a private German family, Aldi is free from the burden of City shareholders and their short-term demands.
‘If our profits have to go down to maintain that price differential, then they will and we’ll invest accordingly,’ he says.
The early effect of the Brexitrelated sterling drop is already tempting more customers than ever through the doors of his 700-strong chain – and doubtless also close rival Lidl – as shoppers scramble for ways to cut back spending.
The Big Four – and notably the traditionally low-priced Asda – continue to face the dizzying effects of Aldi’s relentless focus on quality and price.
‘I don’t think there’s a huge amount of skill just selling things at a low price. But to do it with market leading quality, that’s the skill and the challenge and that’s what we do better than anybody. We are forensic about how we do that,’ he says. Aldi buyers achieve this by focusing all their efforts and volumes on 2,500 product variants – including just 70 brands – within their 1,200 square metre stores. The product range could be 20 times as large in a hypermarket.
The chain rarely discounts, preferring to focus on everyday low prices, and contracts with suppliers tend to be designed around longterm relationships even on products like fresh fruit where other retail corporations buy seasonally.
The numbers which mark out Aldi’s ongoing success speak for themselves. Sales rose 12.4 per cent in the 12 weeks to January 29, an acceleration of growth on last year which has confounded predictions that growth at the business would begin to slow this year.
The latest surge saw Aldi finally seize the position as fifth largest food retailer in January, overtaking the Coop. It is now behind only Tesco, the UK’s largest grocer, Sainsbury’s, Asda and Morrisons.
Barnes insists there was no celebratory champagne at head office where the Spartan decor and ultraefficient warehouse provide an insight into the mindset of the firm.
Meanwhile, the 22-strong board have been at the company ‘since day one’. Barnes himself joined in 1997 as a graduate trainee with a £26,000 a year salary – now £42,000 for new graduate starters.
After a year learning the ropes in stores, he became an area manager – a role that would have taken years to attain at any other retail group.
‘We’ve had the strongest start to a year in years. We’ll see growth con- tinue in very strong double-digit terms and we are confident, particularly from what we have seen in February, that sales will only increase in pace.’
The company wants another 300 stores by 2022 – a target that looks increasingly likely to arrive early. Barnes said the board has already approved 260 of those new sites.
He adds there are 600 towns in Britain still without an Aldi store and the company’s growth in the South is still in its infancy. He says adding some stores to relieve crowded ones nearby has caused analysts to ponder the company’s store-by-store performance. But Barnes says this is essential and what he calls ‘required cannibalisation’.
Sales at stores open at least a year, a preferred method of measuring business health among retail analysts, are ‘still positive’.
How soon before Aldi’s relentless growth causes something – most likely one of his larger rivals – to break? ‘The pie is only so big and we will continue to take customers from the other supermarkets.
‘I think we’ve been a breath of fresh air. I think we’ve forced our competitors to re-evaluate the returns they’re making – there is a realignment going on and customers are benefiting,’ he says.
As for that characterisation as German, Barnes is bemused. ‘There must be a reason why the media loves to write that? But it just isn’t an accurate description,’ he says.
Though, he admits in one regard, the German parentage shows up in one area: company cars for managers tend to be Audis or Mercedes.
One of Aldi’s responses to Brexit is that we want to buy more than ever in sterling
I think we’ve been a breath of fresh air in the market and forced competitors to re-evaluate