How Aldi rose through the ranks to become one of the UK’s biggest grocers

Aldi

For the first time, Aldi this week overtook the Co-op to become the UK’s fifth biggest supermarket, cementing its status as a mainstream retailer after years of being labelled simply ‘a discounter’.

Its rise through the ranks has been aggressive – in 2006 it was only the 10th biggest supermarket in the UK – and well-honed marketing has been among one of the key drivers for its success.

However, it’s no coincidence that Aldi’s success has come during a tumultuous economic period. Where its rivals went heavy on price-promotions, offers and introducing an array of other services into their superstore environments, Aldi understood the strength of their position as a challenger brand. It concentrated on a ‘back to basics strategy’ and the ‘price versus quality balance’ that left the more dominant players scrambling.

And this has been reflected in its no-frills marketing to great effect for a number of years. The ‘Like brands, only cheaper’ adverts gave a humorous slant on people from all walks of life comparing their favourite branded products to Aldi’s own. After running for three years, Aldi was crowned the UK's most memorable advertiser by as a direct result of that work, according to Ebiquity and TNS.

And when it moved on to a campaign dubbed ‘Everyday Amazing’, it continued to combine humour with a refreshing frankness about what it was offering – a stark comparison to the Big Four.

Even its all important Christmas campaign last year seemed to outperform the market thanks to the long-tail media strategy behind it.

“It's been a master in communicating their brand and this has unquestionably been a major contributor to their success," said Nathan Watts, creative director at Fitch, an agency specialising in retail.

"It's funny, irreverent and straight to the point. ‘Aldi, like brands, only cheaper’ first launched as a challenge to Pampers nappies in 2013 – this was an exceptionally clever message that helped to establish the all-important position of their own label and the fact is, it hasn't looked back since.”

This openness about what shopping at Aldi means has also helped it overcome the stark in-store experience. Its underlying message was that it doesn’t spend on sprawling superstores, fancy bakeries or in-store butchers because that costs money and it would rather put that into low prices for customers.

“It understood what customers are willing to accept,” continued Watts. “They took some experience features such as a bakery section from these mainstream grocers, but rather than going so far as to create authenticity, they’ve just incorporated the essence of these, such as the photography and basic material references. For many customers, this is enough to suggest the appropriate atmosphere and justify the decision to shop there.”

Likewise, Sarah Todd, chief executive at Geometry points out that with convenience a major differentiator in the grocery category, Aldi matches shopper need for speed with easy store navigation.

“It claims the average shop can be done in 27 minutes thanks to its smaller stores,” she said. “It has captured the changing mood and behaviour of shoppers.”

This pared-back approach saw it crowned the top global brand in Siegel+Gale's Global Brand Simplicity Index study, beating Google, Netflix and Ikea. That survey also found that 64% of consumers are willing to pay more for simpler experiences and 61% of consumers are more likely to recommend a brand because it’s simple.

So, although it took time, Tesco, Morrisons and Sainsbury's have all taken notice of the fact that an Aldi-esque, simplistic experience is what people want which has seen the shuttering of some large out-of-time formats which had become increasingly unprofitable. And so it faces a challenge in retaining those customers it converted long ago.

But, the real threat to Aldi’s ongoing success has always been attracting new shoppers. And while its marketing and investment into premium ranges has opened it up to the middle-class shopper that threat nonetheless still exists as its rivals improve their price offering.

According to brand tracking data from YouGov, Tesco is the most improved brand in YouGov’s BrandIndex Buzz Rankings, while Morrisons is the fourth most improved. Tesco’s Buzz score has grown by 12 points in the last year, while Morrisons has seen a rise of six points.

“This improvement has also been reflected in other metrics – indicating that the recovery is not just in the press, but in underlying consumer perception. This is shown in their respective Impression scores. On this front, Tesco’s has improved by nine points compared to this time last year, while Morrison has jumped by seven points,” explained Michael Stacey, director at YouGov BrandIndex.

But far from Aldi’s offering turning stale Indeed, its Purchase Consideration score (whether you’d consider shopping with a brand) continues to rise steadily.

What’s more, for the third year in a row, Aldi and Lidl filled the top two positions in the YouGov Brand Rankings.

“The two retailers have moved away from their position as disrupters and are now taking on their longer-established rivals in terms of quality – and their clear and effective ad campaigns have underlined this shift in emphasis,” he continued.

However, there are still challenges for all supermarket brands. Inflation is rising and may hit consumers, while the slump in the pound will impact both suppliers and retailers causing import costs rises.

With Brexit imminent, grocery retailers will focus increasingly on British produce – Aldi is again well positioned – its buying team is based in Britain and 77% of all its products are sourced from British suppliers.

But they still have a long way to go before they can match the Big Four.

“I suspect they’d need to develop a range of formats beyond their current mid-size in order to resonate with more customers,” suggested Watts.

“With an aggressive roll-out programme they will undoubtedly continue to increase their market share, but I suspect a more sophisticated approach will be needed to truly challenge their existing numbers. However, like Brexit, they seem to be hiding a tide of national sentiment that I suspect still has some way to go.”

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