International Marketing 7206MKT FINAL CASE STUDY – ALDI AUSTRALIA

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“IN GROCERY, at least, globalisation has met its match. Many of the most illustrious names in the business have had to retreat from disastrous forays abroad. Carrefour of France has quit 19 foreign markets in the past 20 years. Tesco of Britain lost billions on a failed attempt to make it big in America, abandoned in 2013. In 2006 Walmart of the United States, the world’s biggest retailer, gave up on its attempts to conquer Germany and South Korea.

In the past few years the big success story in food retailing has been the international expansion of Aldi and Lidl, two German chains founded in 1946 and 1973 respectively. They are now the world’s biggest “deep-discount” grocers, offering mostly their own brands of goods and almost no premium-priced products. As mainstream supermarket groups contract, in Europe especially, the German duo continue to eat up market share. So, how far can they go?

In their home market their position is strong, though far from dominant. Their combined share of sales among German food-retailing chains was just over a quarter last year, reckons Planet Retail, a research outfit. Aldi (which is divided into two legally separate but co-operating companies, Aldi Nord and Aldi Süd) had 14.8%. In Europe as a whole they are still relatively small - Aldi has a 3.3% share of sales. In Britain— where Aldi increased their sales by 22.6% and 15.1% respectively last year—their combined share is now 8.5%. Aldi, which already has 600 stores in Britain, aims to have about 1,000 outlets by 2022.

In America, Aldi has been quietly growing for decades. Aldi Süd has 1,375 stores under its own name, mainly on the east coast, but has expanded into Texas, Florida and California. Aldi Nord operates 435 shops in America under the name of Trader Joe’s. Together they have just 1.7% of the national market. But in 2013 the group announced a $3 billion expansion plan, to add 650 Aldi-branded stores.

Aldi’s performance in Australia has been impressive. The discounter opened its first store there in 2001 but already has about 10% of the grocery market on the eastern seaboard. It recently announced plans to spend A$700m ($530m) on distribution centres and outlets to expand into southern and western Australia.

Despite the impression of relentless expansion, Aldi is picky when it looks abroad. It only “seeks out countries where returns on groceries are significantly higher than global averages,” explains Paul Foley, a former head of Aldi UK. Usually this is because the local market is dominated by a few giants. Britain is one such place. In America, Aldi started out in those states and regions where market conditions were similar. Australia is another: Aldi has muscled in on a cosy near-duopoly between the Woolworths and Coles chains. As a family-owned, private company, with no need to appease outside investors, Aldi grows slowly and organically, Mr Foley explains, “to suck the profitability out of the industry in favour of the consumer.”

This is not the only way in which its strategy is self-limiting. Aldi is highly protective of its reputation as a squeaky-clean, family-owned business. This has made it uncomfortable about entering countries where corruption is endemic.It is therefore hard to see Aldi plunging into the emerging markets. In November it was reported that Aldi Süd was looking to enter China.”

Your task is…

You are the international marketing manager for Aldi. As Aldi continues to grow in Australia, you are searching for a new market to continue your international expansion. China is being considered as the next location. Is this a viable option for Aldi?

In your response, please ensure;

You analyse the company's current situation including their past experience in international markets using the secondary research (secondary data).

Conduct secondary research to assess the situation in mainland China and determine the main issues relevant to Aldi.

Apply relevant international marketing theories, concepts, principles and frameworks for both the above analyses.

Discuss the implications from both the analyses above for their marketing strategies specifically for their decisions relating to introducing the company/brand to China?

Provide a set of pragmatic, actionable recommendations.