BARGAIN BROTHERS

 

RETAIL:The billionaire brothers who founded giant supermarket chain Aldi, Karl and Theodore Albrecht, are 'more reclusive than the Yeti' and seem to apply the same thrifty philosophy to their personal spending as they do to their stores - when Theo was kidnapped in 1971 he even managed to write off the ransom as a legitimate business expense, writes Derek Scully

THE BREDENEY DISTRICT of Essen is so old-style West German that it hurts the eyes. Stuck in a 1970s time-warp, the streets ache with an über-German mix of modest, mean, money.

Old people totter down the street, interspersed with the occasional old-looking young person. By unspoken agreement, all wear a uniform of beige and pastel colours, no doubt bought from the store on the main street with an entire window display of beige-only clothes. A shoe shop sells shoes in any colour as long as they're brown: "footwear for correct posture".

There are occasional moments of quiet, strained luxury, such as in the window of "Brita's Exclusive Second-Hand Shop". Open just two hours a day, items on sale include Prada high heels and Donna Karan belts.

Bredeney is home to many wealthy Germans but, in public at least, no one seems to be having any fun with their money. Setting the tone in the neighbourhood are Germany's two richest men: the billionaire Aldi founders Karl and Theodore Albrecht. Not that you'll ever see them here.

The Albrecht brothers are "more reclusive than the Yeti" complained Forbes magazine a few years ago, annoyed at having to print each year the only known pictures of the brothers: fuzzy images that would look more at home on a "Wanted" poster than the magazine's "Rich List".

This year Forbes ranked Karl the world's 10th richest man, Theo was in 16th place. The two elderly men, with slim, ascetic faces and tidy, conservative grey haircuts, preside over fortunes that Forbes estimates at €18 billion and €15 billion respectively. Aldi insiders say that, when the privately held company's property is factored in, the brothers' fortunes double. And all this from selling discounted groceries.

Joining the dots of their biography with what little is known of personal and business lives, a compelling picture nevertheless emerges - of two giants of the country's post-war era, unwilling poster boys for the vanished West German era of modest indomitability.

Karl and Theo Albrecht were born with the retail business in the blood, in 1920 and 1922 respectively in Schonnebeck, a working class neighbourhood in Essen. Their father was a miner, their mother ran a small delicatessen, founded in 1913.

After leaving school, Theo worked in the store while Karl trained in a delicatessen in Bredeney. The thrift that later became Aldi's trademark was a lesson hard-learned by the brothers in their childhood, a simple matter of survival.

From behind the counter of their mother's store, they witnessed the Weimar hyper-inflation first-hand, as customers tried to buy something, anything, with wheelbarrows filled with banknotes before their money became even more worthless.

The lessons of the Weimar era, seared into the memories of that 1920s generation of children, is that wealth can evaporate overnight, being comfortable must never be taken for granted and that the best insurance against disaster is to keep moving and keep working to secure one's position.

The brothers appear to have survived the ordeal of war, serving first as young soldiers, then as prisoners-of-war. In 1948, two years after their return home, they set up their own food store as the arrival of the West German Deutschmark heralded the end of food shortages. By 1950, as the country began to pick itself up, the Albrechts had established a small chain of 13 discount stores.

In 1961, as Germany's east-west ideological divide was cemented, the Albrecht brothers agreed a more pragmatic division. After disagreeing on whether selling cigarettes was worth the trouble of the shoplifters they would attract, Theo took control of the cigarette-selling Aldi Nord (operating in northern Germany) while Karl headed the cigarette-free Aldi Süd (in the south).

The two companies continued to co-operate and, for the past 40 years, little has changed at the core of the Aldi universe, even as it expanded to become a worldwide concern with more than 8,000 stores and an estimated annual turnover of €40 billion, equivalent to the GDP of Romania. The company revolutionised retailing, with its no-frills concept, decades before Ryanair, and remains its market leader in Germany.

Dieter Brandes, a former manager turned best-selling author on the company, says that Aldi's trademark thriftiness is a true reflection of the founders' personalities. Carefully controlled company legends have filtered out over the years: Theo Albrecht liked to remind executives to write on both sides of their paper, while he shared a habit with Queen Elizabeth of prowling corridors, switching off lights.

"Giving a sign of thriftiness from the top is leading by example and encourages people to think about the cost of the small and the big things," says Brandes, author of Consequentially Simple: the Aldi Success Story.

Only people that share such values, prized by the Albrechts, have a chance of rising through the company, he says, "absorbing a lot more Aldi DNA along the way".

An interesting aspect of Aldi company culture, reflecting the personality of the founders and a steadfast tradition in post-war West Germany, is that everything in the company is bought with cash. Whether it's the Spartan stores themselves, the functional furniture in the staff rooms or offices or even the modest company cars, nothing is ever bought with credit.

Despite keeping a low profile, Theo Albrecht's fame and fortune caught up with him in November 1971 when he was kidnapped on his way home from work. His kidnappers had picked his name at random from a book called Germany's Richest People. Thrown by his shabby chain-store suit, they reportedly demanded to see Albrecht's ID card to be sure they had their man.

The kidnappers contacted Albrecht's wife Cecille with a demand for seven million Deutsche Mark and only released him after 17 days, when the ransom was handed over by a local bishop - an indication of their influence and their firm Catholic faith.

His kidnappers were later arrested and almost half the money recovered. Albrecht would later prove that the episode hadn't shaken his tough-as-nails business reputation when he launched a court case against German tax authorities for the right to set off his ransom against his taxes. The court agreed with Albrecht's argument that he was kidnapped as the boss of Aldi-Nord and the ransom was therefore a legitimate, if extraordinary, business expense.

Since the kidnap, the Albrecht families - both men are married with two children each - have been dependent on security staff to enforce their self-imposed seclusion. "They were always modest and always led secluded lives," says Brandes, "something that became a necessity after the hostage-taking."

In recent years, since standing down from day-to-day management, they have pursued their privacy with the same kind of obsessive approach that they used to keep prices down in the early years of Aldi. Anyone who tries to intrude on that privacy is usually made to reconsider.

Photographer Frank Schinski was commissioned by a German magazine five years ago to take new pictures of the Albrecht brothers. He went to their local church, St Mark's, in Bredeney and, with the local priest's permission, took a few pictures of the building and the congregation.

A few days later, a cease-and-desist letter turned up, hand-delivered, in his Hanover letter box from the Albrecht family lawyers.

"They said that if pictures appeared in which their clients could be seen, I could spend a year behind bars," he said. The pictures have never seen the light of day.

Back in Bredeney, it is soon clear that the pressure of having billionaire neighbours can be a strain.

Lutz Weiler is the owner of one Bredeney's family-owned delicatessens, where Karl Albrecht trained before the war, and where he still shops.

It's a world away from the Aldi store across town, with shelves boasting luxuries such as Roquefort cream soup, and a kilo of apples for €3.50. Elderly customers in comfortable shoes take their time picking herring and wurst, spending €60 to €70 on lunch treats, more than most Aldi shoppers spend on their weekly shopping.

Asked about the store's most famous customer and one-time employee, a flash of fear replaces the friendly gleam in Lutz Weiler's eyes. "I'm not allowed say anything on that subject," he says, declining to explain why. "It's true one of the brothers worked here before the war," he adds, beginning to sound like a lawyer's letter, "but I'm not allowed say which one. The brothers value their privacy."

Up and down the main street, the shutters come down in shopkeepers' eyes as soon as the Albrecht name is mentioned.

Those prepared talk, never giving their names, say that Theo Albrecht, now 86, has left Bredeney for an island in the North Sea. But his 88-year-old brother Karl is still here. His house can be found in the district of Brucker Holt, a rich ghetto of houses are built in the über-German "faux-modest" style.

Though individually built, the houses are so densely packed and homogenous - white walls and off-black tiled roofs - that it looks like an estate of factory-built homes.

The most common style is the economic miracle super bungalow, with double garages and few, if any, windows facing the street. Many houses are hidden from view behind heavy-duty hedges. Gardeners here know a thing or two about robust shrubbery. Security cameras are as familiar a sight as the Audis on the streets.

"All this money and no good taste, nowhere in Essen," mutters Martina, a Czech ballerina-turned-taxi-driver who sometimes chauffeurs around the millionaire's wives on shopping trips. "No matter when the money was earned, in the industrial revolution or the economic miracle, it's all new money and bad taste here."

The only person to be seen is a middle-aged Polish maid walking a golden retriever in the drizzle. "Bruno loves the rain," she says in halting German. Asked if she knows her wealthy neighbour, she shakes her head vigorously with an expression revealing confusion and fear and trots away.

Karl Albrecht's house is one of the least ostentatious in the neighbourhood, a modest A-frame house on four levels with a small terrace and a satellite dish on the roof. Three wheely bins stand empty at the side and an elderly red Volkswagen Golf convertible can sometimes be seen in the driveway. It replaced, in the early 1990s, an even more elderly Volkswagen beetle.

Two doors down from the house is a squat building that could be a garage if it wasn't for the one-way glass window facing the street and the distinct feeling of being watched.

Across the road from the house is a tennis club with clay courts. The Albrecht brothers prefer golf. Essen has traditionally been home to extreme, tense approach to wealth since the days of industrial revolution magnate Alfred Krupp. His unmatched engineering wizardry was as famous as his fanatical frugality: to save money, Krupp built his family home so close to a company steelworks that his children suffered from life-long ill health.

Karl Albrecht carries on the Essen tradition. He owns a five-star hotel in the Black Forest. What looks like an extravagant bauble is, reportedly, thanks to the Aldi distribution centre next door, a five-star tax write-off.

Theo Albrecht's only extravagance, says Aldi expert Dieter Brandes, is an apartment in Nice. "Not a villa, an apartment. A small apartment," he says, pausing for emphasis. "He's no Onassis."

So why do billionaires such as Theo and Karl Albrecht live these lives of obsessive modesty?

German Vanity Fair columnist Alexander von Schönburn says that most of Germany's most wealthy drift by default towards understatement, living modestly in houses "that could belong to well-off dentists but not billionaires".

"The Albrecht brothers are an extreme example of understated eccentricity," he says. "I can imagine that they get the same kick from not spending their money as Russian oligarchs get from spending theirs."

Prof Ernst Ulrich Huster, a wealth researcher in Bochum, says that Germany is a society with a "wealth taboo". Interestingly, the development curve of this taboo mirrors the biography of the Albrecht brothers, starting in the memory of rampant, economy-destroying inflation of the Weimar era and the total physical and financial destruction of the lost second World War. Most wealthy people share an abstract fear of poverty. For German billionaires such as the Albrechts, that fear has been proven anything but abstract at least twice during their lifetime.

Perhaps the reason why German wealth appears so drab has to do with the country's complicated history. In just three decades, from the end of the Kaiser era to the foundation of West Germany, three radically different social elites, who nevertheless shared a love of show and pomp, ended up on the scrap heap of history.

"The elites were so mixed up in the transition from one era to the next, that questions of good style or protocol are, even today in Germany, far from clear," said Prof Huster.

For wealthy West Germans over the age of 60, there was no longer a need for wealth and style to be at odds with comfortable and practical. The Albrecht brothers would feel right at home at Queen Elizabeth's Tupperware-filled breakfast table, or at dinner with Florida billionaires who refuse to wear anything but shorts and flip-flops.

But nothing is forever, not even Aldi. The Albrechts' lifetime obsession with thrift and modesty is fading away - in German public life and even in their own empire, where computers, package holidays and mobile phones clutter the product range's once ascetic aesthetic.

"The Albrecht culture will live on in Aldi but with time even that will be watered down," says Dieter Brandes. "The new generation of managers is not so discipline, control and responsibility-oriented as before."

In the aisles of a recently-renovated Aldi store in Essen Bredeney, only the staff recognise the elderly man who regularly glides through the aisles as company co-founder Karl Albrecht.

"Yes, he stops by often," says one employee, unpacking computers from a pallet. "He's very polite and is still extremely fit for his age."

The employee doesn't know whether the founder has any favourite products. Asked if the elderly company founder ever wears beige, a smile flickers and vanishes. And does he ever ask for an employee discount. The wide-eyed answer: "No, why?"

Why indeed.