GERMANY, Essen | Mühlheim. Aldi hesitated for a long time. Now the discounter is forced to raise store prices in the face of numerous price increases by manufacturers. This week, the discounter is raising more prices than it has in years.
Now Aldi Süd and Aldi Nord are passing on numerous price increases from manufacturers to the end consumer. The increases apply to almost all product groups and are in some cases very significant. According to research by the Lebensmittel Zeitung (dfv Mediengruppe), customers will have to pay more for a total of around 400 items, including variants. If you exclude the variants, there are still about 160 articles. That is still almost 10% of the discount range.
The price jumps at Aldi
vary depending on the product. Sometimes it goes around ten cent, other articles again become immediately around a euro more expensive. Competitor Lidl was one of the first to react and quickly followed suit. The latest price round also marks the end of a price war that has remained unchanged for more than a decade. The entry-level mineral water now costs 25 cents instead of 19 cents. After the introduction of the mandatory deposit for disposable bottles, Aldi and Lidl had engaged in a price war in 2003 until the price of 19 cents was cemented for many years. The price of the Coca-Cola discount bottle is also rising slightly again, following an increase last year. It rises from € 1.19 to 1.25.
The jumps are particularly noticeable for coffee. The Amaroy Unser Bester variety now costs € 4.59, an increase of 60 cents. For organic coffee, the price has gone up by a whole euro. In addition, various drugstore items, baked goods, detergents, salty snacks and frozen products have also become more expensive. This is a continuation of what was already apparent in February, even though many shoppers have long opposed any increase. But it is becoming more and more apparent that the market has changed fundamentally. Buyers risk running out of product if they don't buy at higher prices. "In the last ten years, we had a market where buyers determined. That has completely turned around. Now the suppliers have a stronger position," admits one retail buyer candidly.
Suppliers also no longer shy away
Aldi, where great efforts have recently been made in Essen and Mülheim to achieve better prices through bundled purchasing, is now also experiencing this. In a market with scarce raw materials, however, a good price is at least as important as a secure supply of goods. And suppliers are no longer afraid to stop supplying in the face of skyrocketing prices for raw materials, packaging, energy and transport. "I can't deliver if it's a losing proposition for me," emphasizes one manufacturer.
That Aldi is now raising prices comes as no surprise to insiders. After all, the margins are extremely limited both in Essen and in Mülheim. In better times, the discounter would have waived margins once in order to sharpen its price image. But now, cash is tight and price increases are also exceptionally high. So purchasing is currently less about top prices than about damage limitation in an exceptional situation. Aldi needs every penny to keep its business results within tolerable limits.
The balance sheets of Aldi South and North in recent years show just how badly the German business has suffered. The balance sheets of the southern regional companies show that personnel costs in the store sector rose by around € 200 million from 2017 to 2020. During this period, sales were just € 700 million higher. The North even posted losses in 2018 and 2019 before returning to profit in 2020.
Further burdens are added
The South was always in the black, but earnings there have also been at an unusually low level since 2017. In 2020, things picked up somewhat, but the regions' after-tax profits in 2020 also only made up less than half of the 2017 level. Aldi in Germany therefore needs to take countermeasures, especially as further burdens are now being added in the form of energy and fuel. There is no way around cost measures.
Because the path via better margins seems largely exhausted. In 2020, Aldi Süd operated for the first time with a gross margin of over 23%. Not much more is possible if the discounter does not want to jeopardize its reputation as a price leader. And with Lidl, there is a competitor just waiting to show off its rival.
The Neckarsulm-based competition is benefiting from the fact that Aldi has allowed itself a higher margin. With more efficient structures, this offers the opportunity to build up financial leeway that can be used to attack competitors if necessary. "Lidl can invest in prices. Aldi is somewhat lacking the strength for this at the moment," analyzes a retail manager. Therefore, the upcoming Easter business is looked forward to with excitement.
Source: lebensmittelzeitung.net, fleischwirtschaft.de / dfv Mediengruppe