In discounter war, will Aldi’s Coke rush fall flat?

Mon Jul 7, 2014 5:44am EDT
 
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By Emma Thomasson

BERLIN (Reuters) - Aldi and Lidl have a new weapon in their battle to be Germany’s discount grocery number one: Coca-Cola.

Both chains have for years used own-brand goods and low prices to woo customers from global giants like Carrefour, Tesco and Metro. Both are still expanding abroad – particularly in Britain and the United States.

At home, though, they have hit saturation point. There are now six times as many Aldi or Lidl stores per person in Germany as there are Wal-Marts per person in the United States. That’s one reason Aldi decided in October 2012 to stock Coca-Cola, to add to a limited range of other big name brands it has introduced in recent years such as Nivea and Nutella.

The move reversed a key tenet of Aldi’s strategy, and underscores the challenges companies face as they eke out growth in mature markets.

Aldi is the world's biggest discount store operator by sales, and had flourished for more than 40 years without stocking major brands. Lidl, on the other hand, has offered a slightly more varied range of products including Pepsi-Cola, which it bottles in Germany, and Coca-Cola. Gradually, it had been winning market share.

Aldi’s radical move with Coke did lift its market share, though Lidl’s also rose in 2013. The biggest benefit for Aldi was that it wrong-footed its rival. Lidl’s initial response was confused, the company lost executives, and it recently postponed a planned international expansion.

Longer term, though, will abandoning the philosophy that made Aldi successful backfire?

Dieter Brandes, a former managing director at Aldi, worries that a new generation of managers may be steering the firm in the wrong direction.   Continued...

 
A can of Coca-Cola is seen in front of the logo of German multinational supermarket chain Lidl - shown on an LCD display behind - in this photo illustration taken in Sarajevo July 1, 2014. REUTERS/Dado Ruvic