Sabotage by supermarket rivals slows Aldi’s British invasion
Sabotage by supermarket rivals risks stopping Aldi hitting its target of having 1,200 stores across the UK by 2025, its chief executive has said.
Giles Hurley, chief executive of Aldi UK and Ireland, said a campaign of planning objections by rival supermarkets had delayed its expansion plans.
Mr Hurley suggested the objections were cynically motivated by a desire to “prevent” customers from switching to Aldi.
He told The Telegraph: “We're receiving more objections from our competition than we used to.
“If you look at the price gap between Aldi and the more expensive traditional supermarkets it's been very consistent for years and I guess one of the ways to try to prevent customers from taking advantage of that is to slow down or stop openings.”
In October 2018, Mr Hurley set a target of Aldi growing to 1,200 stores across the UK by 2025. At the time, the retailer had 775 branches.
The goal required Aldi to open 60 new supermarkets a year on average. The company is currently running behind schedule, with Aldi on course to open 40 locations this year. Its 1,000th UK branch will open in the next few weeks.
Mr Hurley admitted the discounter may not succeed in opening 200 extra stores within the next two years after progress was “slowed by events outside of our control”.
Figures compiled by the Grocery Gazette in December suggested that just under 40 Aldi stores had either been blocked or were on hold because of rivals logging objections or legal challenges.
Aldi recently had permission denied for one location in Aberdeenshire after Tesco took the local authority to court to force it to reverse a decision to green-light the store.
Some councils have batted off planning complaints from rivals. One councillor on Knowsley Council’s Planning Committee said Tesco had “a little bit of a cheek” to log an objection.
Tesco maintains that it does not object to the vast majority of planning applications submitted by its competitors and only objects where there are material planning considerations, not because of a potential loss of trade.
Mr Hurley said: “We roll with it, because it will slow us down, but it won’t stop us. We’re going to keep opening stores, and we will bring a store within easy reach of every customer in the UK no matter what.”
He said Aldi would be “relentless” in finding new locations.
“No frills” supermarket Aldi opened its first branch in the UK in 1990 but has grown rapidly over the last few years as the cost of living crisis has prompted more shoppers to seek out value.
The German supermarket overtook Morrisons to become Britain’s fourth largest supermarket last year and now accounts for almost 10pc of the market.
Its success has prompted a rearguard action from established supermarkets as they fight to keep hold of customers. Both Tesco and Sainsbury’s have committed to price matching Aldi on certain items.
Mr Hurley said planning complaints were part of a wider pushback by rivals against the discounter.
As well as objections from rivals, Mr Hurley said Aldi’s new openings were being slowed down by planning red tape and shortages of building materials.
Interview: ‘Bitter rivals won’t stop us taking over Britain’
Aldi will continue its “relentless” expansion in Britain despite efforts by rivals to scuttle its growth, the supermarket's chief executive has said.
Giles Hurley, chief executive of Aldi UK and Ireland, said rival supermarkets could not stop the discounter from opening new stores despite a series of recent planning objections and legal challenges.
“We are going to bring stores within easy reach of every customer in the UK no matter what,” Mr Hurley said.
The determination comes despite rival supermarkets lodging objections to many of the German discounter’s planned stores.
Rivals have lodged planning objects to almost 40 planned new shops across the UK, slowing and in some cases blocking its planned expansion.
Mr Hurley believes traditional supermarkets are using the planning disputes to slow Aldi’s growth.
He said: “If you look at the price gap between Aldi and the more expensive traditional supermarkets, it has been very consistent for years and I guess one of the ways to try to prevent customers from taking advantage of that is to slow down or stop openings.”
Mr Hurley said legal challenges against Aldi’s products were also motivated by a desire to slow it down.
He cited a recent row over Aldi’s caterpillar-shaped chocolate cake, which Marks & Spencer claimed copied its Colin the Caterpillar product. M&S sued, with the two supermarkets ultimately agreeing to a settlement.
“As far as I know, everyone in the market sells a cake in the shape of a caterpillar,” Mr Hurley said. “But probably what this comes down to is something similar to what we’re seeing with planning objections.
“It doesn't matter what segment of the market you're serving or believing you serve, you feel threatened by the quality and value that we now offer.”
Aldi has consistently been ranked the cheapest supermarket in Britain by Which, which tracks prices in the sector. Its reputation for value is so entrenched that Tesco and Sainsbury’s have both vowed to explicitly price match against the German discounter.
“The perception of value is more important to traditional supermarkets than the substance of value,” Mr Hurley said. “There are more price locking and price matching campaigns than ever. But all of the market data would say that our price gap to the competition is as healthy as it’s ever been.”
Data from Which suggests that the price of an average basket of 43 items at Aldi costs £74.81, whereas it hovers around £85 at Tesco and Sainsbury’s. At Morrisons, it stands at around £89, while it is more than £95 at Waitrose.
Speaking to The Telegraph at Aldi's Warwickshire headquarters, Mr Hurley took a swipe at Tesco, which increasingly offers discounted prices only to members of its Clubcard loyalty programme.
“They know that when they come to do their shopping at Aldi, they don't have to join a club. There's no gimmick, and there's no smoke and mirrors. It’s just honest, straightforward value.”
Allegations of backhanded tactics used by its rivals come amid a bitter battle for customers in the supermarket sector.
Pressure on household budgets has prompted more people to hunt out the cheapest prices, triggering a price war to keep hold of business.
Aldi and fellow German discounter Lidl have been the big winners of the cost of living squeeze, with Aldi leapfrogging Morrisons to become Britain’s fourth largest supermarket last summer.
Today, nearly £1 in every £10 spent in supermarkets now goes into the German company’s tills.
Aldi claims to have won more than £300m of business from rivals over the last 12 weeks alone, citing Kantar data. The largest chunk of spending has come from Tesco and Asda shoppers, although Mr Hurley said Aldi is “winning customers from every supermarket and every discounter”.
Mr Hurley said Aldi has won £20m of spending from fellow German grocer Lidl, for example.
While the race to offer lower prices among UK supermarkets is good news for customers, it is causing a huge headache for suppliers.
For months, farmers have been warning that the prices they are getting from supermarkets are pushing many to simply give up. Supermarkets are pressuring them to lower prices just at a time when the cost of everything from feed to fertiliser is rapidly rising.
The National Farmers Union late last year said Britain risked “sleepwalking” into a food crisis, as “all of the cost, all of the risk [is] sitting on the primary producer”.
Strains are already evident. Official figures show that farmers in England and Wales are producing the lowest number of eggs on record in the last three months of 2022, down almost 20pc year on year.
All supermarkets drive a hard bargain and Aldi is no different. Industry insiders said the company is “ruthless” in negotiations.
Mr Hurley admitted that there is a “real challenge” in the supply market.
“It’s not just this increase in energy costs. You also see some of the challenges around the labour force, and the Ukraine war.”
However, he denied that Aldi is squeezing farmers too hard.
“Our prices are driven ultimately by our unique business model. We just run a really lean and efficient business and that's what allows us to charge the lowest prices in the market,” he said.
There are fewer staff in an Aldi store compared to rivals, meaning lower overheads. The range of products stocked is smaller than a Tesco or Sainsbury’s, allowing Aldi to buy in bulk and command lower prices per item.
Ninety per cent of its products are also its own brands, meaning it is not paying a mark up to big companies.
Hurley said: “I'm very aware of the challenges that exist, but I don't think we can be held accountable for the negotiations and practices of the more expensive supermarkets, which are perhaps looking to match our retail prices but with a cost base that doesn't facilitate that.”
Mr Hurley said he was “obsessive about on-shelf availability”.
With eggs, for example, there are “unfortunately still shortages which you see in every supermarket and in some of ours as well”.
“But what the facts and figures are telling us is that we are very visibly growing our share of the egg market and that we have more eggs than the competition,” Mr Hurley said.
Good availability, combined with a focus on price, have helped Aldi sales grow 25pc, more than three times the rates the largest traditional supermarkets are experiencing.
Despite the setbacks on expansion, the grocer is planning to open its 1,000th store in Britain in the coming weeks. The Woking branch is one of 40 it is planning this year.
Even with these openings, Mr Hurley said Aldi is likely to miss its target of having 1,200 branches across Britain by 2025. While it is still targeting this number, objections from competitors, the slow planning process and difficulty finding building materials mean it will now be reached later than planned.
Could Aldi one day become Britain’s largest supermarket?
“We’ve always said what will be will be,” Mr Hurley said. “And it’s our view that it’s a marathon and not a sprint. So let’s see when we get there.”
Even though Aldi is now one of the four largest supermarkets in Britain, Mr Hurley doesn’t believe his supermarket is part of the Big Four club.
“They stand for big shop floors, big brands and big prices,” he said. “That’s a club we never want to be part of.”