Background
2024 Aldi Nord and Süd combined global sales were estimated at USD $155B, with 13,877 stores worldwide (Kantar). Globally, Aldi still has major expansion plans including:
800 new stores (USD $9B investment) by 2028 in the USA (Forbes)
30 new stores (£650M investment) in 2025 in the UK (The Grocer)
How has Aldi been able to achieve this long-term growth? Aldi does not have aggressive price promotions, e.g. 50% off, – they have EDLP. Aldi does not have better insights / more data – they don’t have loyalty cards. Aldi does not offer a better overall shopper experience – they have a limited range and don’t offer online in all markets. Aldi does not have a better category process – they do tenders. This blog suggests the on-going success of Aldi is due to a category management mindset.
Category Management Mindset
As outlined in my book, Category Management is a way of thinking, category management is built on two important factors:
Increasing power of shoppers
Manufacturers and supermarkets working collaboratively
This blog shall use these factors to highlight how Aldi continues to grow sales and share.
Increasing power of shoppers
Much has already been written about the increasing power of shoppers. My blog, Who has the power? provides more details.
Using Porters Three Generic Strategies framework Aldi focuses on cost leadership. Unfortunately, many have misinterpreted this strategy as having the lowest price. Aldi has driven sales / share growth by meeting shopper demands. Many of the successful changes have increased their CODB (cost of doing business) and general sell prices.
As explained by Xan Rice (The Aldi Effect: how one discount supermarket transformed the way Britain shops. The Guardian. 2019) Aldi Britian increased the number of SKUs ranged from 600 to over 2,000 SKUs and also the quality (product specifications) of their range. Increasing the SKU count by over 300% would have increased Aldi’s CODB. Secondly, increasing quality to benchmark brand leaders in a category would have increased their cost prices. Aldi Britian even ranged premium SKUs such as ’36-day aged Scottish Aberdeen Angus sirloin steak’ (Xan Rice). Aldi made these changes to meet shopper demands. So, Aldi’s success is driven by meeting shopper demands, not low quality products at a low price.
‘Aldi’s victory was to show there was no shame – and in fact there was satisfaction – in shopping at a discount supermarket’.
Source: Xan Rice
Logically Aldi and their P/L (private label) brands position has changed over time. As the physical product quality improved the packaging transitioned from the 1990s traditional ‘no-frills’ to more appealing packaging in 2000s. 2010s the packaging evolution continued to include a greater focus on sustainability and brand identity. This evolution in the physical product / packaging reinforces that Aldi’s brand portfolio was moving from price fighter to mainstream and/or premium depending on the category segment. Today Aldi has a ‘house of brands’ brand hierarchy. Each brand is independent, with its own identity, based on shopper demands for that category segment. Major manufacturers, such as P&G, also have a ‘house of brands’.
Interestingly Aldi has not used aggressive pricing, 50% off offers (high/low pricing), to drive sales / share. Aldi uses EDLP pricing to build trust with their shoppers. To excite their shoppers’, they offer unique ranges (Special Buys) every week. So, to increase sales of basics, such as bread and milk, Aldi has joblots of anything from drills to snow gear.
To achieve competitive retail prices Aldi has removed unnecessary costs from their supply chain. For example, the number of SKUs ranged, vs major supermarkets, is substantially less to minimise their CODB. All steps in the supply chain are analysed to remove unnecessary costs. Interestingly this means Aldi does not normally offer online retailing i.e. no click and collect or home delivery. In some markets, e.g. Aldi USA, an online offer is available. Aldi has trialled online retailing in many markets and may offer it in all stores globally in the future. The current thinking is that online retailing adds complexities and costs to the supply chain, that their shopper does not wish to pay more for. So, Aldi achieves cost leadership by minimising their CODB, whilst still delivering an experience their shoppers’ demand.
“There’s been more wealth destroyed in people trying to develop food online businesses than any other industry I can think of.”
Archie Norman, Chairman Marks & Spencer, Forbes, April 2025
Interestingly unlike others, Aldi has not focused on using IT to simplyify the shopper experience. For example, Aldi trolleys today still require a coin. In comparison in 2020 Amazon USA launched their Dash Cart so shoppers could skip the checkout line. Also, Woolworths Australia first offered self scan checkouts in 2008, Aldi Australia 2021. These are all examples of how Aldi minimises their CODB whilst still meeting shopper demands. The key point here is that Aldi focuses on their shopper demands, not what their competitors are doing.
The thinking Aldi has adopted has numerous names such as customer centric, customer led, customer obsessed and shopper 1st. To enable this thinking many businesses have invested in ‘big data’. To minimise their CODB Aldi has not invested in big data. For example, they don’t offer loyalty cards to shoppers. So, Aldi is achieving customer loyalty with less data. This is achieved by ensuring shopper satisfaction is the focus of business decisions – not internal metrics such as margin / sales / share. Personally, I describe this thinking as ‘shoppers not spreadsheets’.
In addition to increasing sales / share in many markets there are numerous reports highlighting shopper satisfaction with Aldi. For example, Canstar Blue research in Australia (Supermarket Satisfaction Ratings 2024) highlights that Aldi Australia has won the Canstar Blue award for ‘most satisfied shoppers’ 12 out of 14 years to 2024.
‘These customer obsessed organizations see customer experience as a source of commercial value: not just a differentiator versus competition (although it certainly is that) but a mechanism for superior profitability. The net result? Customer obsession results in a sustainable source of financial value for shareholders and owners.’
Source: KPMG
Customer first. Customer obsessed. Global Customer Experience Excellence Report, 2019.
In summation, a key factor in Aldi’s on-going sales / share success is that they have developed an offer that meets their shoppers’ demands. The offer is not just price driven, it is shopper demand driven. Aldi Australia describes this offer as ‘good different’.
Manufacturer and supermarket relationship
Aldi (and other supermarkets) still predominantly sell physical products. For Aldi to achieve cost leadership they have had to partner with manufacturers to create the range shoppers’ demand. There are numerous articles highlighting the importance of collaboration between manufacturers and supermarkets. My blog, Want to be competitive … collaborate, provides more details.
In their book, The Machine that changed the World, Womack, Jones and Roos describe lean production as ‘collectively to analyze and focus a value stream so that it does everything involved in supplying a good or service (from development and production to sales and maintenance) in a way that provides maximum value to the consumer’. I suggest this is a useful explanation of how Aldi manages their supply chain. Manufacturers and Aldi work collaboratively to maximise shopper satisfaction, e.g. increased SKU count and product quality, whilst still minimising their CODB, i.e. remove unnecessary costs. There are numerous other manufacturing paradigms, such as JIT and ECR, that also focus on managing the supply chain to meet shopper demands.
“We are not looking to cut costs by taking your margin, we are looking to cut costs by working alongside you to become more efficient,”
Joan Kavanaugh, vice president of national buying at Aldi USA.
Rapidly growing Aldi aims to strengthen supplier ties. Grocery Dive, May 2024
Full-service supermarkets can have numerous brands and manufacturers for a category segment. This means if brand / supplier A does not grow the category then potentially brand / supplier B, C or D etc could grow the category. Interestingly, by Aldi having a limited range (i.e. 1 private label brand) for a category segment Aldi relies more on the manufacturer for their sales / share. This relationship dynamic means Aldi has to trust their suppliers more. Psychological factors, such as trust, are important in all manufacturer and supermarket relationships. Also, the manufacturer has to trust Aldi to sell the stock i.e. they cannot sell the Aldi private label stock to any other customer. So, it could be argued by having a limited range Aldi is able to build a higher level of trust with their manufacturers.
‘Trust results in greater openness between suppliers and retailers and thus greater knowledge and appreciation for each other’s contribution to the relationship. Consistent with this reasoning, several studies find positive associations between trust and economic performance (e.g. Geyskens, Steenkamp, and Kumar 1998; Zaheer, McEvily, and Perrone 1998) as well as between trust and distributive justice (e.g., Kumar, Scheer, and Steenkamp 1995).’
Do Suppliers Benefit from Collaborative Relationships with Large Retailers? An Empirical Investigation of Efficient Consumer Response Adoption Daniel Corsten & Nirmalya Kumar. Journal of Marketing 69 (July 2005), 80–94
To minimise their CODB Aldi has simpler negotiations with manufacturers for ranging decisions. Aldi will complete a tender process to award a new supply contract, normally for a 1 to 2 year period. During the Aldi tender process, manufacturers are asked to supply product samples and pricing for a SKU / category segment. During this process manufacturers can make recommendations for new SKUs to Aldi. An internal review is completed and a supply contract awarded. Once a supply contract is awarded the manufacturer delivers the agreed product at agreed price / volume etc for the contract period. Some categories, such as fresh produce, are different and price / volume can vary. Logically this process is simpler for the manufacturer and Aldi because of their limited SKU count per category segment vs full-service supermarkets.
Full-service supermarkets have a different process – a category review. Manufacturers present potential ranges, pricing (including promotions), suggested planograms, additional investments in activations / marketing plus other potential recommendations. The supermarket then agrees a category plan with numerous manufacturers. This process is more complex than the Aldi tender process due to the greater number of SKUs, brands and plan factors (e.g. slotting board for promotions, marketing campaigns) that need to be considered. Also, the entire category is reviewed whereas Aldi may only be awarding a supply contract for a SKU or segment within a category. All manufacturers and supermarkets have a different category review process but a well-used model is TPG 8 step (below).
So, Aldi does not have a better process (or more data) for ranging decisions / managing the category – they have a simpler process to minimise their CODB. This simpler process / relationship with manufacturers can lead to strong relationships with suppliers, including psychological factors such as trust.
Publicly available surveys highlight manufacturers’ strong relationships with Aldi. For example, Aldi UK topped the Groceries Code Adjudicator’s (GCA) annual supplier survey for 8 years in a row to 2022 (The Retail Bulletin, Aldi has notched up a record eighth year as the UK’s leading supermarket, June 2022). Also, the Australian Food and Grocery Code Independent Reviewer, Supplier Survey, Annual Report 2023-24 noted ‘Across all results in the survey for 2023–24, Aldi has performed the best’. Private surveys, such as Advantage Report, also generally suggest Aldi has strong relationships with manufacturers.
In summation, a key factor in Aldi’s on-going sales / share success are the mutually beneficial relationships they have with manufacturers. Obviously, when Aldi’s sales grow so do their manufacturers i.e. mutually beneficial. Importantly supporting these financial results is a simple relationship that helps build important psychological factors, such as trust, in the relationship.
Ownership structure
Aldi is a private (family owned) business. Many full-service supermarkets are public or owned by private equity. An advantage of being family owned is that the shareholders can support business decisions that deliver long-term results to a business. For supermarkets, this may include investing in new warehouses or new stores or working on lower margins. In the short term these investment decisions may decrease margin. If supermarkets are public or owned by private equity there is normally a shareholder expectation of increasing margin / sales / share every year.
An example of this thinking is Aldi UK. Aldi UK are prepared to operate on profit margins of 2 – 3% vs 7% for major British supermarkets. Ex Aldi UK CEO Paul Foley is quoted as saying they were ‘sucking the profitability out of the industry’ (Xan Rice). This supports Aldi cost leadership position with shoppers. It has also helped Aldi grow to be the 3rd largest supermarket chain for food and drink in the UK (Grocery Gazette, Aldi surpasses Asda on food and drinks sales, April 2025). Aldi UK market share has grown from 2% in 2009 to 10.6% in 2025.
Summation
Disruption is the new normal in supermarkets. Much research has already highlighted the continuing growth of hard discounters, such as Aldi. This simple blog suggests that this is due to Aldi adopting a category management mindset. They have clearly defined what their shoppers want and partnered with manufacturers to develop the offer (more SKUs, improved product quality etc) to meet the shopper demand. Importantly, this thinking is supported by management i.e. part of their strategy, not just a merchandising plan.
AI was not used in the creation of this blog post.