Aldi ready for supermarket price war

ALDI’S Australian chief executive Tom Daunt has described the discount supermarket chain as being the piggy in the middle of a price war between the two majors Coles and Woolworths, with the German-based grocery discounter announcing the ramping up its marketing efforts with a new brand campaign.

ALDI YOUNG: Aldi is in the middle of a price war between the two majors Coles and Woolworths. Picture: Rebecca Hewson.

ALDI YOUNG: Aldi is in the middle of a price war between the two majors Coles and Woolworths. Picture: Rebecca Hewson.

Aldi will begin its "Good Different" multi-media brand campaign this week.

Aldi has hit back competitively by investing $75 million (annualised) in discounting its grocery and fresh food range. "Our customers are paying less today than a year ago," Daunt said.

"Price has become a noisy subject, the market is definitely competitive. That said we haven't changed fundamentally what we are doing ... as we grow we benefit more and more from scale."

The traditionally secretive Aldi has come out publicly declaring it is sitting on a near 10 per cent share of the national market and has taken 0.6 per cent market share in the first quarter of 2017, compared with the same quarter last year.

It has reached gross revenue of $7.5 billion in 2016 - the equivalent of a 12 per cent increase on the previous year.

While much of the market share gain will have come from new store openings in South Australia and Western Australia, Daunt said the eastern states were still experiencing growth.

While Daunt confesses this does not sound like a lot compared with the hundreds of millions Woolworths and Coles have boasted to have ploughed back into lower prices, he says that given the size of Aldi against Coles and Woolworths, its discounts are significant.

He also disagrees with retail analysts' reports over the past six months that argue Aldi's sales growth rate is under pressure in its mature market as new stores cannibalise sales from established stores.

Daunt says Aldi's expansion west has been successful and it now holds a 4 per cent market share in South Australia and about 3 per cent in Western Australia.

Meanwhile, Aldi won't concede that Amazon will hit the grocery market hard. Daunt says that "traditionally in grocery consumers have proven difficult to convert to online because all of us like to choose our own banana, our own tomato and steak because there is a high degree of variability ... but if and when they will get into that space our strategy is about the noise around pricing, is just to stick to our knitting".

But he contends that in the non-food retail sector Amazon is a real threat.

"We expect them to be very successful in the non-food space and definitely have an impact on non-food retailers in Australia."

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