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How did Aldi crack Tesco’s hold on the market?

Penny Brooks

22nd July 2014

Some news in the same week as Philip Clarke's high profile departure from Tesco, is that Karl Albrecht, who founded German discount supermarket chain Aldi with his brother Theo, has died. The success and growth of Aldi (an abbreviation of Albrecht discount) is one of the thorns in the side of Tesco, and one reason for the profits warning that they announced yesterday, along with several other problems that Clarke inherited when he took over from Sir Terry Leahy three years ago. There is plenty to analyse in the criticism of Tesco's strategy, but also worth considering what it is that has enabled Aldi to break into the market, and how they have moved to a position of having 19% of those in the AB socio-economic catergory shopping in their stores.

The Independent has a profile of the Albrecht brothers who returned from the war to take over the family grocery store in Essen in the 1940's, and leave an empire with a global turnover of around €57bn and a claim that 87 per cent of Germans shop at Aldi on a regular basis. The story involves secretive, reclusive owners who have masterminded this global expansion and built secret tunnels to their own golf course. It features a kidnapping and release of Theo Albrecht, after payment of a ransom sum which he had bargained over for days. He demanded tax relief on the payment, claiming it was a business expense.

This item gives five ways that Aldi have cracked the supermarkets, and makes a great contrast to the Tesco story - but it is worth noting the end of the Independent's profile, which warns that in Germany Aldi is embroiled in a furious price cutting war with its discount competitors, Lidl, Penny, Rewe and Edeka, and that Karl Albrecht's death leaves a power vacuum at the top of the organisation - perhaps the effect of poor succession planning.

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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