Aldi plans expansion in Dublin as discounter battles ‘cost tsunami’

Aldi says it’s trying to cushion a “cost tsunami,” even as the chain envisions further expansion with a focus on Dublin.

East inflation in Aldi stores is around 8 per cent, below average Irish grocery inflation of 12.4 per cent reported this week by research group Kantar but still putting “unprecedented pressure” on the market, according to Niall O’Connor , managing director of the Aldi Ireland group, says.

“Farm inputs and outputs take an absolute hit, there’s no other way to put it,” he said. “The three Fs – fuel, feed, fertilizer – affect pretty much everything.”

He blamed the ongoing impact of the pandemic, rising energy costs, transportation costs, as well as the impact of a “broken” supply chain.

“We take on all these costs, like everyone else,” he said.

Some retail prices at Aldi have risen as a result of this perfect storm, and the discounter is trying to find “that delicate balance” while suppliers face the same problems.

“We try to mitigate, then we try to absorb,” he said, adding that price increases would normally have to be staggered.

“We’re like, ‘Do we think the customer can handle that?'” he said. “If not, we say we’ll do it in stages. We think long-term and sustainably.”

“It’s not possible to make everything go away,” he said simply.

Discounters like Aldi tend to benefit from tighter living costs compared to higher-priced rivals, and the German-owned chain has increased its market share this year, but even within stores, customer habits are changing.

O’Connor says demand for Aldi’s ‘Middle Aisle’, a weekly rotating selection of mainly hardware, toys and housewares, has now fallen, particularly for higher-priced items from €50 upwards.

The inventory of non-food items will be reduced from 5,500 to 5,000 next year.

Across all chains, shoppers are reducing overall weekly spend and the number of visits they make to stores.

In response to cost pressures, O’Connor says engagement with its supplier base has increased, with weekly supplier check-ins now the norm.

“Last year alone we spent €1 billion on our Irish producers, a 20 per cent increase on the previous year,” he said.

“This year we will spend €1.1 billion on 330 Irish suppliers.”

Aldi’s initial expansion across Ireland targeted regional and smaller towns that had often been overlooked by the big chains. The focus of growth is now in Dublin, with its large concentration of customers, where “an apparent gap” in the chain’s reach has been exacerbated by rising site prices and material costs.

Aldi currently has 24 stores “within the M50 belt” and plans to add more.

“We want to do it in a prudent way, we’re not going to pay too much for land, we’re not going to build unnecessarily complex or difficult structures, because all of that ultimately has to be paid for by the customer,” he said.

“Plots of land are available but in a Dublin neighborhood it is often necessary to purchase multiple plots of land to create what we need,” he added.

He also believes the planning process has also slowed, while the cost of building materials remains an issue. Aldi plans expansion in Dublin as discounter battles ‘cost tsunami’

Fry Electronics Team

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