Aldi Investing $1.8B in UK Growth, Despite Industry-Wide Challenges
At a time when many grocers in the United Kingdom are in crisis mode, looking to weather the labor and supply chain shortages to keep business running, Aldi is taking a different tack. The Germany-based discount grocery giant is investing 1.3 billion pounds (about $1.8 billion) in expanding its U.K. presence, gaining share from the country’s top grocers.
Part of the goal of this push is to seize the loyalty of brick-and-mortar grocery shoppers amid challenges from eCommerce players.
“Around 88% of British consumers want to shop in stores ... There’s no doubt that bricks and mortar is the focus for our business,” Giles Hurley, CEO of Aldi UK, said in a Reuters report.
Included in this expansion plan is the opening of 100 new stores and the creation of 2,000 new jobs, at a time when grocers across the industry are struggling against labor shortages.
These announcements come after a strong year in the United Kingdom and Ireland for Aldi, with the grocer’s sales in the region up 10.2% in 2020, despite a modest decrease in operating profit.
Addressing the widespread supply chain shortages that have been making headlines, Hurley downplayed concerns.
“It’s difficult to believe that anyone could be immune from the supply challenges we are seeing, but our business is pretty unique and ultimately well positioned to deal with these issues because of our reduced number of suppliers and smaller range,” Hurley said, according to PA Media.
By the Numbers
To Hurley’s point, online grocery has been on the decline in the United Kingdom. Recent Kantar research shows that average online basket size is down about 17 pounds (around $23) from its early-pandemic high point, and online grocery’s share of the total industry, 12%, has hit its lowest point since May 2020.
The Context
As grocers in many countries struggle with difficult labor conditions, as headwinds picked up during the pandemic, accelerating trends that were already threatening the industry, the United Kingdom has been especially hard hit. Brexit red tape has reduced the labor pool, and the truck driver shortage has been making it difficult for grocers to stay fully stocked. Now, grocers are warning that there may be major shortages of Christmas favorites in the 2021 holiday season.
Read more: Grocery Roundup: In The UK, Labor Shortage Compromises Christmas Dinner
Even before the pandemic, the United Kingdom grocery market was tricky for many in the industry. In February of 2020, after two decades of owning supermarket and supercenter chain Asda, the third largest grocer in the U.K., Walmart announced it was looking for new investor to take over. In February of 2021, the company closed a sale of its majority stake to private equity firm TDR Capital and convenience store moguls Zuber and Mohsin Issa.
See also: Walmart To Sell UK Asda Supermarket Chain For $7.9B