Aldi Inc. - Optimizing Profits in Economic Recession
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Case Code: BSTR348 Case Length: 11 Pages Period: 2007-2009 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: Aldi Inc. Industry: Retail Countries: US, Germany Themes: Growth Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
"They love competition, and this economy [US economy] suits them very well. It's almost as if, the worse it gets and the more competition there is, the more likely you are to see Aldi start to spring up."
- Terrie Ellerbee, Associate Editor for the Supermarket Trade Publication, the Shelby Report, in July 2009.
"People want to stretch their dollar and want to get bang for their buck, so they're trying us. And it's certainly the quality that's bringing them back."
- Heather Tarczan, Spokesperson for Aldi, in July 2009.
Introduction
The US-based Aldi Inc, part of the Aldi Süd division of the Aldi Group (Aldi) based in Germany, was named as the 2009 Retailer of the Year by PL Buyer magazine. During the time of recession in the US, when many retailers faced losses, Aldi experienced an increase in consumer footfall in the US. Aldi's sales in the US increased by 21 percent in fiscal 2008 as compared to fiscal 2007.
Jason Hart, President of Aldi, said "Prior to the economic slowdown, we were prospering. But now we're seeing customers looking to save money, and our foot traffic has increased. There seems to be more demand for our stores, and people don't want to sacrifice quality."
Aldi had undertaken a number of strategic initiatives to maximize the benefits it got because of recession. In an effort to attract wealthy consumers, it opened its stores in affluent neighborhoods. The company also changed the layout of its new stores so that they looked bigger than its usual stores in the US.
It expanded rapidly so that it could be present in every key market in the US. Aldi also changed its product strategy and included many private label products, a strategy which had proved successful in its home market. In order to promote its image as a 'no frills discount food and grocery retailer', Aldi also increased its advertising budget in the US.
Industry experts opined that the recession in the US economy that started in December 2007 helped Aldi increase its sales. Some analysts attributed Aldi's success in the US to its ability to offer quality products at low prices. They were of the opinion that in future also the consumers would stay with the company because of the quality of the private label products it offered. According to David Livingston (Livingston), Principal of DJL Research based in Pewaukee, Wisconsin, "When the economy recovers, ALDI will still be doing well and will probably be even stronger after gaining additional customers. Why would customers not shop ALDI just because they have more money? They have excellent products at the lowest prices."...
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