The international operations can be grouped roughly into the entry in the neighbouring country Austria, a first wave of internationalisation into smaller adjacent markets in the 1970s, a second wave into Western Europe at the beginning of the 1990s, the entry into Southern and South Eastern Europe and Switzerland after 2000 as well as the overseas commitments in the USA and Australia. Within the scope of its foreign commitment, Aldi often established the hard discount segment in various foreign markets and therefore the individual steps have to be evaluated in connection with the share of the hard discount segment in the respective market.
In 1967, the first step towards the internationalisation of the German hard discounter was made with the takeover of the Austrian food retailer Hofer KG. By doing so, Aldi Süd promptly acquired an established network of stores. Because of the level of awareness of Hofer in the Austrian population Aldi Süd still uses the retail brand Hofer. Aldi – having been active for nearly 40 years – has successfully established the hard discount concept in Austria. The current market share of all hard discounters, apart from Hofer, but in cluding Lidl, Mono! and Penny (both Rewe) as well as Zielpunkt (Tengelmann), amounts to about 20 %, so that hard discounters rank second in Austrian food retailing, after the supermarkets. The market share of Hofer alone amounts to a turnover of about 2.5 billion EUR in 2004, thus 16 %. By the end of 2006, the branch network should rise to 400 outlets (Schuhmayer 2006, p. 31).
The main reason for this successful development lies in the extensive market experience of the hard discounter which, combined with the high price sensitivity of Austrian customers, conforms strongly to the preferences of Aus trian consumers. The market has been developing very much analogously to the German one, with its standardised assortment of about 700 products, floor space of about 900 m² and almost exclusively store brands (Ru dolph/Schröder 2006c, pp. 240 246). The arch competitor Lidl has only been operating in the Austrian market since 1998. Traditionally, Austria is regarded as an important gateway to Eastern and South Eastern Europe. Thus in December 2005, the market entry into Slovenia was organised via Hofer. Furthermore, Hofer management is currently being expanded in order to handle the planned expansion to Hungary and Greece.
Between 1975 and 1977, Aldi Nord began to internationalise with the expansion into the bordering countries of the Netherlands, Belgium and Denmark. In the Netherlands, the market share of Aldi now amounts to almost 9 %, whereas Lidl, which entered this market in 1998, covers only about 3 % of Dutch food retailing. At present, the fast organic growth within the country which was necessary for the profitable operation of the established central warehouses, has slowed down somewhat.
Until the market entry of Lidl, Aldi held an unchallenged monopoly in the hard discount segment, which also applied to domestic competitors. The strategy of price leadership is also important here. The assortment size cor responds to that of the domestic market, but there is a greater supply of fresh products (Rudolph/Schröder 2006a, p. 228). Shop design is of only limited importance for Aldi Nord.
The commitment in the Netherlands was an important stepping stone for the company’s market entry into Belgium which was made in 1976. At present, the market share of Aldi amounts to about 6 % and the hard discount concept which had been established by Aldi, developed into the second most important retail format. At first, Aldi concentrated on the border region to Germany to maximise spill over effects and because of a high level of awareness. The expansion was subsequently accelerated throughout the country in order to achieve an efficient multiplication of the standardised operations concept. Packaging and assortment size are geared to the domestic market (Rudolph/Schröder 2006b, pp. 226 227).
In Denmark Aldi Nord was apparently able to break even only ten years after its market entry in 1977. Here, too, the hard discounter grew organically bygradually developing a branch network throughout the country. Meanwhile, the market share is now about 4 %, ranking third in retailing behind Coop Danmark and Dansk Supermarked (Rudolph/Schröder 2006a, p. 252). The Danish food retail has changed structurally after Aldi’s market entry; local chains opened hard discounters themselves and the market share for this segment in the entire food retail sector currently amounts to about 10 %. At present, in Denmark, Aldi is concentrating increasingly on local needs with regard to assortment (e.g. fresh milk, fresh meat and organic food) and store design. Traditionally, France, where hypermarkets have a market share of about 35 % and represent the strongest segment of food retail, is known as a difficult terrain for foreign retailers, partly because of a very distinct food culture. Altogether, the hard discount segment established by an almost simultane ous market entry of Aldi Nord and Lidl at the end of the 1980s, has a market share of about 10 % and thus shows potential for further growth. In 2005, the growth of this retail format was stagnant for the first time (apart from the German discounters this also applied to the French hard discounters ED (Carrefour) and Leader Price (Casino)), the reason for which is seen in the price pushing reactions of the local full range providers. Yet, Aldi was ableto increase its market share marginally to 2.1 % in 2005 and ranks third in the hard discounter list behind Lidl and ED. However, Lidl is represented by 1,200 outlets which means twice as many stores compared to Aldi Nord, although the duration of market presence is almost the same. Because of a relatively bad acceptance on the part of the French consumers, Aldi has adapted its market operation more and more to local competitors in recent years. Thus, in 2005, the assortment has been enlarged by about 25 %, although Aldi is usually careful with line extensions, because they normally put a strain on the cost structure. Additionally, Aldi Nord entered the Luxembourg market in 1990, the market with the highest per capita income in Europe, and where the hard discounter currently runs about ten stores.
In 1990, Aldi entered the United Kingdom market, but has not yet been able togain ground. The company only has a marginal share of 1 % in British food retailing. The entire hard discount segment is also stagnant at 4 %, contrary to prognoses in 1992 which estimated that the market share of all hard discounters would be 20 % by 2000 (IHA GfK AG 2005, p. 77). The reasons for this poor performance are the following: the reaction of supermarkets (price reductions, introduction of store brands), the pronounced British supermarket culture, the poor image of hard discounters, and high rents. All these reasons render a low price concept at attractive sites difficult. Given this lack of acceptance, Aldi recently undertook a series of measures:
- improved fresh ranges: focus on meat and produce
- improved consumer marketing campaigns: used to emphasise the new quality store brand Especially Selected and overall value for money
- new store designs and merchandising concepts
- re locating and opening new stores in average income areas
- sale of non food items
- new product packaging to portray a premium image
- greater use of brands: Aldi is offering a limited number of leading manufacturer brands for the first time (IGD 2005, pp. 15 20).
First image successes have already been achieved. Furthermore, the hard discounter is changing its growth strategy from a slow, successive development to a more expansive strategy striving for 1,500 outlets in the long run. Based on the ten year experience in the United Kingdom, the market entryin Ireland was undertaken in 1999, but here, Aldi Süd was confronted with strong opposition from the government and lobbyists representing local food retailers. Nonetheless, the market share is already about 4 %. Following the innovations in the United Kingdom, Aldi now strives for a higher value positioning with a large number of convenience products and appealing packaging in Ireland. The newly designed and attractive shopping bags bear the slogan “We’ve never looked so good”. Aldi pursues a “site by site” growth route, probably because of the absence of any suitable retail chain to acquire.
In March 2002, Aldi became active in Spain, which is known as a classic “toe hold” for Portugal. Here, the first fifteen outlets were opened in late June 2006. In both Spain and Portugal, Aldi is active as a second mover. The German competitor Lidl has already been present in these two countries since 1993 and 1996 respectively and ranks second and first of all hard discounters there.
In December 2005, the market entry in Slovenia was made via Hofer, the Austrian subsidiary of Aldi Süd, and represents the first contact with the Eastern European region. Slovenia has the highest per capita income of all Eastern European countries and is therefore classified as a mature market. In Slovenia, an assortment of about 700 products is offered under the retail brand Hofer. National preferences have to be taken into consideration adequately in this assortment. Almost simultaneously, ten sites were established country wide and this net can be expanded further in the future.
There are also plans for market entries in Hungary, Poland and Greece. How ever, the market entry in Hungary will only take place in 2008 and thus later than initially scheduled, because, at present, only about 40 sites have been found. This is not sufficient for a rapid achievement of critical mass. Contrary to Lidl which has been planning or implementing market entries in Poland, Solvenia, Hungary, Croatia, Slovakia and the Czech Republic as well as in the Baltic States since 1996, Aldi held off operations in the (South ) Eastern European market. Amongst other reasons, this was the result of lower purchasing power, as well as of the belief that Aldi can never enter a new market “too late” (Freitag/Hirn/Rickens 2006, p. 32).
Retailing in Switzerland is dominated by the three confederate companies Migros, Coop and Denner, which have a combined market share (in food retailing) of 80 %. The announcement of Aldi Süd’s intention to become active in the high price Swiss market was accompanied by considerable media attention and “defensive activism” from the unions, for example. As in the other country markets, the operating strategy for this non EU country is non cooperative. Aldi will initially operate in the German speaking part of Switzerland and only later in the French and Italian speaking regions. In formulating the assortment, Aldi Suisse concentrates not only on the 700 products for daily use, but also on the adaptation to eating and consumption habits which are typical of the country (IHA GfK AG 2005, p. 90). Thus, for example fondue cheese is offered.
Compared to Germany, the prices of Aldi Suisse are significantly higher, caused, inter alia, by the customs surcharge and required packaging with labelling in all three national languages of Switzerland. The retailer also has to consider restrictions on site development, because, for example, the right of complaint of societies as well as strict planning restrictions (Schäfer 2006, p. 113). According to the literature, the following incentives have prompted Aldi to undertake the market entry, despite the mentioned adversities: the high Swiss purchasing power, higher margins than in almost all other European countries due to the elevated price level, as well as Switzerland as proving grounds in general.
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