Business

Aldi supermarket chain posts big rise in pre-tax profit

Aldi shopfront Image copyright PA

Aldi, the discount supermarket chain, has posted a big rise in full-year profits as its share of the British grocery market continues to grow.

The company said pre-tax profits rose 65.2% to £260.9m for the year to 31 December 2013.

Group turnover rose 35.7% to £5.27bn over the period.

Its market share grew from 3.1% to 4% in 2013, according to Kantar Worldpanel, and is now 4.8% after a continued strong performance in 2014.

"We keep prices constantly low while keeping product quality consistently high, which is exactly what shoppers want," said Roman Heini, Aldi's UK group managing director.

"They had become used to thinking you have to pay more for better products. We've shown them this doesn't have to be the case."

Aldi's low-price strategy has won market share from all of the UK's big four grocers - Tesco, Wal-Mart's Asda, Sainsbury's and Morrisons - forcing them to cut their own prices.

Fellow discounter Lidl has also seen its market share rising strongly to 3.5%, making it the eighth largest supermarket in the UK by sales.

"Consumers are currently benefiting from intense price competition between the grocers. For the first time ever, we've seen the average basket of everyday goods bought today costing exactly the same as it did a year ago," said Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.

The prices of some staple groceries, such as vegetables, milk and bread, have even been falling as supermarkets fight for market share.

Profit margins

Aldi said operational cost savings were used to keep prices low rather than boost profit margins - a philosophy that is proving increasingly popular with customers and encouraging the firm to expand further.

It opened 42 new stores in 2013 and is due to open 54 this year, with another 60 to 65 planned for next year. This would take the total number of UK stores to more than 600, the company said.

Matthew Barnes, Aldi group managing director, said: "We're investing over £600m in our operations over the next two years to support this growth."

Mr Barnes also said that growth in the first half of 2014 had been stronger than in the same period last year.

Aldi's bullish results and comments come in stark contrast to the fortunes of rival Tesco, currently reeling from an accounting scandal and recent boardroom resignations.

While Tesco remains the clear market leader, sales have been falling and its share of the UK grocery market is now down to 28.8%, says Kantar.

Asda performed best in the 12-week period to 14 September, increasing market share to 17.4%.

UK grocery market *
* For the 12 weeks to September 2014
Supermarket Percentage market share
Tesco 28.8
Asda 17.4
Sainsbury's 16.2
Morrisons 10.9
Co-operative 6.4
Waitrose 5.1
Aldi 4.8
Lidl 3.5
Iceland 1.9
Farmfoods 0.7
Others 2.1

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