AUSTRALIA: Aldi More Profitable Than Big Two – Report

A new report has claimed that Aldi Australia is now more profitable than Coles and Woolworths Ltd., and is in the best position to win a price war in the country.

The report by UBS said Aldi is winning new shoppers at an accelerating rate, noting: “We believe Aldi is winning sales from all retailers, driven by roll-out and a broadening customer base”.

The report said Aldi is expected to rob Woolworths of A$476m in sales annually over the next three years, while Coles was expected to lose sales at the rate of A$332m a year.  It added that Metcash is most at risk from the German chain’s growth in terms of market share loss, while Coles is not expected to be hurt as much as Woolworths.

However, UBS also said Aldi needs to improve shopper’s perception around its fresh offering to speed up its growth.  It noted: “We believe Aldi’s like-for-like growth has slowed over the past 12 months, driven by Coles’ Every Day Value strategy.”

UBS estimates Aldi to have more than A$7bn in sales, and forecasts it to grow to A$10.6bn in fiscal 2019, with 10% of the national grocery market share by fiscal 2020.

NAM Implications:
  • Aldi was always about efficiencies and growth, allowing them to operate on lower gross margins ( i.e. 15% vs major retailers 25%), thus having bought at similar prices to the mults, using some of the gain to lower retail prices and dropping the surplus into the bottom line…simple…!