Aldi is a company that I have always been fascinated by; here is a company (Aldi Sud) that has over 1,800 locations in 35 states, has a revenue projection by retail analysts just north of $11 billion in 2018, yet they largely fly under the radar. You rarely read or hear anything about them, they don’t have a “voice” in industry issues and you rarely hear about the supply community aggressively seeking to sell them.
Yet let’s assume, for a moment, that their produce sales are 9% of total revenue (they don’t release these numbers, and I’m thinking they may under-index in produce sales as a percent of total sales). This company is doing roughly a billion dollars in fresh produce. And while it may be a little more or a little less, you can be sure they are selling some produce. Regardless of the actual numbers, Aldi is truly a success story. They continue to grow store count and revenue, and I would argue that they have been one of the rare European companies that has been successful in the U.S. By studying them, you can gain insights into how any business can prosper. Here are the things Aldi is doing that I find apply to anywhere:
> Focus: Aldi knows who they are. They don’t try to be Whole Foods or Wegmans. They don’t even try to be Trader Joe’s. They don’t try to add products or services that don’t make sense to their core value proposition — price. They believe in what they do and stay focused.
> Execution: Aldi executes their plan consistently throughout their network. Granted, the merchandising scheme is basic, but they can replicate it, in scale, profitably.
> Value proposition: There are four basic consumer value propositions: value (price), convenience, health/wellness, and indulgence. Aldi clearly dominates in the value space. And they took a page out of Sam Walton’s keys to success. To paraphrase Sam, “if a company can operate for less, they can sell for less. And if you can sell for less, you will always have customers.”
> Fearless: I have always admired Aldi for their fearlessness. They don’t seem to be afraid of anyone. I have personally witnessed Aldi stores directly across the street from a Walmart store, and they don’t back down an inch. They don’t get caught up in the Amazon phenomenon. That’s not to say that they ignore opportunities to serve their customers, but they don’t compromise their core values to accomplish it.
One of the things I learned from my time at Walmart was that Sam Walton was a student of retail. We were always encouraged to spend significant time studying our competition, not to determine what they were doing wrong but to find what they were doing right. Aldi is an excellent example of how a company can enjoy success. This is not to say that every company should copy Aldi’s business model, but they can copy the focus, execution, value proposition, and fearlessness principles that can be applied to every business.
Bruce Peterson is a former produce executive with Walmart and president of Arkansas-based Peterson Insights Inc.