It’s the German grocery giant that upset Australia’s grocery duopoly but not everyone is frightened of Aldi’s pulling power.
Smart retailers are realising there’s money to be made just by parking your store right next door.
Tasman Market Fresh Meats chief Matt Swindells pulled out the barriers at the front of his stores near Aldi to ensure the discount grocer’s over-sized trolleys could easily fit through the doors.
A former Coles executive, Mr Swindells has build a network of 17 butcher shops, including three stores near Aldi outlets, which he said reaped the benefits of the cost-conscious Aldi’s crowd.
Tasman Meats’ Matt Swindells, left, changed his stores so Aldi trolleys could fit. Photo: Simon Schluter
Tasman, with its marketing hook “Why Pay Supermarket Prices”, provides a full range of high-street cuts and products and is the “perfect partner” for Aldi, with its smaller range of fresh meat product lines, according to Mr Swindells.
“We get Aldi customers coming in with their trolleys and it works well, it’s almost like a perfect partnership for us,” Mr Swindells said.
Mr Swindells said Australian shoppers were very connected with the idea of buying fresh, local produce from independent purveyors outside the major chains, which was why being close to an Aldi store worked so well for Tasman.
Grocery insiders report Aldi wants to increase its fresh-food floor space and range.
It’s forging ahead with long-term expansion plans that could see its 410-store network more than double, including up to 50 outlets in South Australia and up to 70 stores in Western Australia.
Morgan Stanley analyst Tom Kierath says Aldi’s impact on the supermarket sector is “accelerating” and he’s forecasting the new WA and South Australian stores to “overtrade” relative to the east coast outlets , given the “pent-up demand for the offer”.
“We estimate that Aldi has about 8 per cent market share within supermarkets,” Mr Kierath said.
“Share gains have generally been around 50-70 basis points annually (0.5 per cent to 0.7 per cent) however, given the accelerating new store rollout we expect share gains to rise to 120-140 basis points annually.”
Morgan Stanley claims Metcash will be the biggest loser from Aldi’s expansion, given the strength of the independent sector in WA and South Australia.
Broker UBS reported Aldi was Australia’s most profitable supermarket this week and forecast the discount grocery chain’s share of the national grocery market would rise from 7 per cent to 10 per cent by 2019-20.
Fred Harrison, CEO of Ritchies Supermarkets. Photo: Wayne Taylor
Analysts suggest Aldi’s rapid growth, including forecast sales growth of 15 per cent a year for the next three years, according to UBS is likely to embolden discount rival Lidl, which has already sought the ear of the Victorian government as well as suppliers over breaking into the Australian market.
Aldi’s plans to increase its share of the fresh food market don’t trouble Mr Swindells, who believes the success of Aldi’s format will always be its smaller range of high-demand grocery lines.
Car park tactics
This leaves plenty of the grocery pie for retailers like Tasman and Australia’s biggest independent grocery and liquor chain, Ritchies to carve up.
Ritchies chief Fred Harrison said the grocery newcomers Costco and Aldi were “massive” competition but they also represented an opportunity for its IGA-branded stores.
“In many respects we see customers go into their stores first and then top up with us, not the other way around,” Mr Harrison said.
“So we become that secondary shop, so then there’s the age-old argument, are you better off having Aldi in the car park with you or two to three kilometres away?
“While there’s no absolute, steadfast rule … if you asked me to make a decision I would prefer to have Aldi in the car park with me than down the road because at least you get the top-up shop rather than the alternative, which might be no shop.”
Mr Harrison said whenever the business considered new sites it was always looking through the lens of the likely chain-store activity in and around that location.
“The trouble with our game, once you sign a lease you’re signing for 15 years with options.
“It’s not like you can say it was good for two years, [but] Woolworths has turned up it’s a Meccano set, so let’s pack it down and move somewhere else.
“Once you’ve put the bricks and mortar in place, you’re there for 15 years,” he said.
“We’ve got to be mindful and make sure our leases and rents don’t strangle us in the advent of competition and with Aldi, it’s a case of keeping your friends close and your enemies closer.”
Ritchies’ acquisition of the 15-store Fishers IGA chain in Victoria late last year is expected to push its annual sales past the $1 billion mark this year but the competition never sleeps and Mr Harrison is keeping a close eye on the Woolworths turn-around, which he is confident will gain traction.
“Woollies will turn around, they have the best property portfolio in Australia, their sites are sensational and they get the first choice often with developers,” Mr Harrison said.
“They are a little bit off the ball but they are too good a business not to come back.”
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