Aldi nears “tipping point” to push its fresh produce

Posted by AFN Staff Writers on 1st June 2016

SupermarketA new report from financial services company, UBS Australia, has described Aldi as a “unstoppable force” in the Australian supermarket industry.

The UBS report says that Aldi is approaching a “tipping point” and developing its fresh produce perception could see the supermarket continue to successfully grow.

In its third detailed study into Aldi Australia, UBS predicts the supermarket is now achieving $7 billion in sales annually, double the sales it was making in 2013.

The report said Aldi is winning customers at a fast rate with wealthier shoppers now choosing to go to the supermarket.

But according to UBS, its future growth depends on what it can do with fresh produce.

“The tipping point in the UK proved to be when the discounters (Aldi & Lidl) lifted share of main shops to >10 per cent,” the report said.

“Aldi is now at eight per cent in Australia. The key to lifting this will be fresh perception, which remains the number one category for improvement.”

UBS’ research also found 73 per cent of families would spend more at Aldi if it was located closer to them and that its “share of the basket” has been falling with some thinking it is good for some things but not as a main shop.

Coles putting up a good fight

UBS attributed a recent slowdown in Aldi’s growth to the strength of Coles ‘Everyday low prices’ strategy.

“Coles is doing the best job competing against Aldi, and we expect it to be least impacted over the next three years,” the report said.

Woolworths’ grim outlook

Woolworths was delivered some bad news with UBS predicting the supermarket will lose close to $500 million in sales per annum to Aldi up until the 2019 financial year.

“This is premised on a 3-5 year turnaround at Woolworths and no price war,” UBS said.

 Metcash at risk

 “Metcash remains most at risk to Aldi in our view, given its less nimble business structure and the inconsistency of offer across the network,” UBS said.

“That said we expect IGA to lose share to Aldi at a slower rate going forward, reflecting the stronger operators in South Australia and Western Australia.”