ALDI Delivers The Best for Less
“ALDI’s approach to retailing is: Keep it simple.”
– Joan Kavanaugh
Starting in the U.S. in 1976 in Iowa, this discount grocery chain has grown to include more than 1,100 stores operating in 31 states by selling top-quality products at rock-bottom prices.
The retail strategy of ALDI Inc., Batavia, Ill, is a study of simplicity:
- Sell 1,400 of the most frequently purchased grocery and household items at prices 50 percent below traditional supermarkets in 10,000 sq. ft. of retail space outfitted with a sparse décor and operated by a lean staff.
- Source 95 percent of merchandise mix as premium private brands that meet or exceed the quality and taste of national brands.
Keep It Simple
ALDI’s approach to retailing is: “Keep it simple,” says Joan Kavanaugh, vice president, ALDI corporate purchasing.
“One of the ways we build in efficiencies is by working with suppliers to deliver our products in display cases so it’s quick and easy for our managers to stock shelves a case at a time, rather than each product at a time; saving time for our team and passing on the savings to our shoppers in the form of lower prices.”
Quality Assurance
ALDI ensures the quality of its private brand grocery items through a rigorous product testing system. At the heart of the retailer’s quality assurance program is its test kitchen which it has operated for more than 25 years.
Says Kavanaugh: “For me you can’t talk about ALDI’s test kitchen without talking about the importance of quality. Quality has certainly been a hallmark of our private brands since we started. We work very hard to make sure the quality of our product is absolutely fantastic. So it starts with the test kitchen because we test all of our products on a regular basis in blind samplings.”
Lacura skin care products are sourced through Aldi Group South and its international buying team based in Germany.
ALDI rigorously tests each product for taste and quality at the grocer’s test kitchen in its Batavia, Ill., headquarters. Although ALDI uses the facility to test some nonfood items, outside testing labs are also used to evaluate nonfood merchandise and to provide independent testing for some food items, such as fresh meats.
ALDI performs blind sampling of all of its products against specific benchmarks it has established for each of its products. Included in the sampling program are its competitor products and the comparable national brands.
“We want to make sure that our products meet or exceed the quality of the national brand benchmark,” notes Kavanaugh. “This is a process that happens in our test kitchen five days a week. We can’t test our products enough.”
One of the challenges facing private label retailers, according to Kavanaugh, is reassuring those consumers who infer that because private label is not a brand which they recognize then the quality is not the same. “We know how important it is to ensure that the quality is 100 percent right all the time. We spend a lot of time and effort to make sure that happens,” she points out.
New Product Development
ALDI’s test kitchen also plays an important role in new product development. One of the most successful new product innovations to be developed in recent years is the retailer’s healthy food range called Fit & Active. There are currently 58 core items under the Fit & Active brand.
“One of the things that we are very proud of is that we have recently introduced GDA nutritional information on packaging for all of our Fit & Active brand items,” says Kavanaugh.
Tuscan Garden brand line represents condiments and salad fixings with an Italian accent.
GDA represents Guideline Daily Amounts. ALDI began supplying GDA information on package front in the form of Fit Facts call-outs at the end of 2008.
“We introduced Fit Facts because we are obviously sensing the trend of customers wanting to make healthier choices,” explains Kavanaugh. “So we want to make sure that the branding on that product line communicates very effectively that this is a healthier alternative for our customers.
“Fit Facts have proven helpful in taking the guesswork out of making healthier choices, allowing customers to see some of the key nutritional values, and easily spot which products are low in calories, fat, sodium, and sugar.”
Kavanaugh points out that the branding system created for the Fit & Active product lines provides customers with two important benefits.
“First of all, due to the distinct packaging design system shared by all Fit & Active products, it is easy for customers to identify the healthier alternative products in different categories throughout our stores.”
As a result of the success of its GDA system for Fit & Active, the retailer is introducing the feature to other relevant product groups. For example, ALDI cereals now carry GDA labeling.
“We are looking at a number of other product ranges on which we intend to put easy-to-see nutritional information to help consumers,” notes Kavanaugh.
Brand Renewal
Fit & Active package fronts feature Fit Facts nutritional information.
ALDI is in the midst of a private brand consolidation program. So far, it has reduced its number of private brands from 123 to 88 brand lines.
“It’s easy for our customers to understand and identify what that product category stands for. We have started to group our brands into brand families that our customers easily recognize. They know that Fit & Active stands for healthy and that Grandessa stands for premium products.”
As part of its brand consolidation program, ALDI is using its review to do a lot of rebranding in terms of packaging.
“We have refreshed a lot of our packaging including photography and information call-outs,” notes Kavanaugh. “We have worked to make sure that our product is sitting very well in line with its category in the market.”
“I think that it is important that our quality specifications are up to speed on all aspects of the product. Obviously, the actual contents of the package; but on top of that it is also important for this to be true in terms of the packaging, the substrate, the labeling, the photography, and the illustrations – all elements of that must speak to the consumer because we want that quality message to come through very clearly.”
ALDI International
Although ALDI U.S. traces its roots to the ALDI South Group, based in Mülheim, Germany, it is independently managed and operated. All U.S. profits are reinvested in the United States. ALDI U.S. is owned by a foundation or trust-like entity. The name ALDI is short for Albrecht Discount and was founded by the brothers Theo and Karl Albrecht in 1913.
ALDI U.S. collaborates with ALDI South companies and selectively works with an international buying office through which it sources such products as Moser Roth chocolates from Germany, Choceur chocolates from Austria and the internationally distributed, premium skincare line Lacura.
ALDI U.S. ranks 28th on the Top 50 U.S. Grocery Chain List by Private Label magazine which estimates its 2009 sales at $6.5 billion.
