Ever since Aldi opened its first store in the UK back in 1990, it has proved itself as an ambitious company set to alter the way that millions of Brits carry out their weekly shop. Their no-frills approach to supermarkets has proved increasingly popular with UK audiences and Aldi now sit in fifth place behind the still incumbent Big Four supermarket brands. 

Troubles as of recent

Despite increased sales of up to £8.7bn to the year ending 31st December, Aldi has seen profits slip by 17% to £211.3m. Due to a weaker pound, Aldi has recognised the fact that the cost of many of its imports has gone up. As well as this, the Big Four are well aware of their need to prove more competitive to UK consumers and as such are lowering their prices. This price competition and raising costs puts extreme pressure on the supermarket chain to maintain profitability but still be ahead of its rivals.

 

A brighter horizon

Despite this drop in profits, Chief Executive Matthew Barnes has made it clear that he is still extremely happy with the way in which their plans are progressing. He has highlighted the fact that Aldi’s vision for the UK extends well into the future and they have aggressive expansion plans in place to secure a greater market share. They aim to have 1,000 stores in the UK by 2020 and, as such, much of the fall in profits would be due to the costs associated with opening the new stores. Last year, Aldi committed a whopping £450m as a means to help reach this goal and fund the further 300 stores needed within just 3 years.

It is not just more locations that the discount retailer hopes to reach, but instead, they hope to better target a wider range of UK demographics. They have recently rolled out more “luxury” style items like prosecco and finer cuts of meat as a means to target more affluent shoppers. They are also working hard to improve their product line from 1500 to 1800 items as a means to appeal to more and more people.

Possible concerns

This rapid expansion has, at least up until now, proved rather fruitful for the company and it appears that people across the UK are welcoming the arrival of a more affordable supermarket on their doorsteps. However, such aggressive expansion plans lead naturally to the concerns of cannibalising the sales of their own existing stores. The company claims to still be 12.5% cheaper on average than the nearest Big Four competitor, but that could change in coming months as Tesco, in particular, continue to roll out cheaper and cheaper offerings as a means to compete.

Aldi by JeepersMedia licensed under Creative commons 4