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Aldi astounds all with China move

20 Nov 2014

Discounter Aldi Süd is examining market conditions for a potential launch in China. The German business monthly Manager Magazin quotes from recent notes of the Aldi-Unternehmensausschuss (AUA, Aldi Company Committee), the body in which Aldi Süd and sister company Aldi Nord regularly discuss common topics, including market entries. The protocol from its meeting on 8 May this year refers to a general resolution back in February 2013 which empowered Aldi Süd with the realisation of a market entry. Details about the ifs and whens have been left unclear. In return, Aldi Nord may pick its next two countries to expand into autonomously. Traditionally the two fraternised companies have divided their foreign markets between one another.

Moving to China would add a fourth continent to Aldi’s network of operations, after Europe, America and Australia. “Deciding on an emerging market like China is a first for the 100-year-old German discount operator,” says Matthias Queck, Research Director at Planet Retail. So far, Aldi has stuck to industrialised nations. The move is understood to be part of the wider strategy change at the world’s leading discount store operator. This includes opening up to a more supermarket-like way of thinking, such as the listing of selected brands and more promotional and marketing activities, among others.

China will not only have been picked because of its size and growth outlook but also the business friendly government and its credible fight against corruption. “As a conservative, family trust-owned retailer, Aldi puts particular emphasis on a stable and reliable economic environment,” Queck adds. “Aldi thinks in decades rather than years, so the general conditions and the long-term outlook with higher single-digit growth rates in real terms look promising.” It is likely that Aldi will first enter the major conurbations of cities where per capita spending is several times higher than the national average.

However, in China, discounters still have not taken off yet, remarks Yujun Qiu, Planet Retail’s Analyst for China. Largest in the sector is domestic retailer Shanghai Nonggongshang, followed by Spanish grocer Dia (formerly part of French Carrefour). Both are price-aggressive neighbourhood supermarkets rather than Aldi-like hard discounters. “The big challenge will be how Chinese consumers will react to Aldi's private label-focused ranges," Qiu adds. Chinese consumers still are sceptical when it comes to retailers’ own brands and prefer the well-known manufacturer brands instead. Importing Aldi’s private labels could also prove quite costly.

Should Aldi really go ahead with its plans, Planet Retail does not expect it to start operations in China before 2018 at the earliest. Next year Aldi Süd is scheduled to make its debut in California, where it is currently building a warehouse in the greater Los Angeles Area. There are no known plans for new market entries for Aldi Nord, which, in line with the AUA agreement, would be next to pick new markets.

 

--ENDS--

 

Matthias is available for further comment and can be contacted on +49 (0) 69 96 21 75 81 or via e-mail at Matthias.queck@planetretail.net

 

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