Aldi profits jump by 500% as cash-strapped shoppers opt for cheaper groceries
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UPDATED:
11:46 GMT, 1 October 2012
Aldi profits have shot up by more than 500 per cent over the past year, as cash-strapped shoppers look to save money on their weekly shop.
The German low-cost supermarket chain unveiled multimillion pound plans to open 40 new stores by the end of 2014, taking its total number of UK stores to more than 500.
Middle-class shoppers facing shrinking budgets were behind a 30 per cent rise in group turnover in the year to December 31 to 2.8 billion and a 450 per cent leap in operating profits to 102.9 million.
Looking for bargains: Hundreds of thousands of shoppers are turning to low-cost supermarkets to save money on their groceries
The budget grocer – which has increased market share by 54.1 per cent year on year – has benefited from the squeeze on consumer power as high inflation and low wages forced shoppers to reconsider their shopping habits.
This, combined with rising food prices, mean millions of consumers now opt for cheaper products to save money.
A recent study revealed that a third of higher earners admit they have switched to cheaper supermarkets to help make ends meet.
As many as 32 per cent of middle class people in their 50s and 60s who are mortgage-free and have a high disposable income are looking to lower-cost supermarkets, such as Lidl and Aldi for their grocery to save the pennies, according to the Axa Big Money Index.
Graph showing the trend in share of spend going
on food and drink in low income and all UK households, from 2003-04 to
2010 (Source: Defra)
Aldi's meteoric rise is in sharp contrast to Britain's biggest supermarket, Tesco, which is battling to turnaround its fortunes in the UK amid falling like-for-like sales and under-pressure profits.
The company said the strong performance was down to a change in its offering over the last three years, such as greater focus on fresh food, as well as an increase in customers doing a full weekly shop at the stores.
Fresh meat sales have doubled, fruit and vegetable sales grew 48 per cent and bakery sales are up 40 per cent, the retailer said.
UK joint group managing director Matthew Barnes said: 'We're constantly looking at what we do and innovating in line with consumer demand.
They also like Aldi: Many shoppers are looking for cheaper alternatives to save the pennies (Picture from an Aldi TV advert)
'This has seen us expand our product range by 30 per cent, source the vast majority of produce from UK-based companies and make changes like introducing trolleys with baby seats, baskets and more premium products such as fillet steak.
'This approach is helping us win awards and creating strong levels of brand loyalty among consumers.'
The group added that it was seeing similar growth in 2012 in terms of sales volumes and turnover, as well as footfall.
According to the latest Nielsen Key Performance Indicators survey for the four weeks to June 23, Aldi holds 4.1 per cent of the UK grocery market.
Tesco will report its half-year results on Wednesday, when it is expected to reveal pre-tax profits of 1.5billion for the six months to August 25, a drop of 12 per cent on the same half last year.
The UK's biggest retailer issued its first profit warning in 20 years in January and most recently reported a 1.5 per cent fall in underlying sales in the 13 weeks to May 26.
But Tesco insists its 1billion turnaround, which has seen it revamp 100 stores and recruit 4,300 extra staff, is beginning to gain traction as it competes more convincingly with rivals.