AU: Aldi supermarket chain reaches ‘critical mass’
The report quotes senior Aldi executives who argue that while discounters initially struggle as country-by-country tastes differ and building scale takes time, “once the discounter reaches critical mass there is no stopping it”.
Much like Australia is now seeing, the UK supermarket industry had a golden run dominated by the likes of Tesco and Sainsbury’s. Australia is a “golden opportunity as there are no hard discounters”, the executive says.
“The Aldi format works best when there is a 20 per cent-plus differential in pricing to national brands at the full-line supermarkets. At this point consumers are prepared to trade off choice for price,” write the report’s authors. “Given the high fixed cost nature of supermarkets, if [Woolworths, Wesfarmers and Metcash] volumes decline, margins would decline rapidly too.”
It adds that Aldi’s cost-to-sales ratio is two thirds that of the major supermarkets and works better in countries with high labour cost like Australia.
Click here for the full article from news.com.au.
