Getting behind the Aldi label

 

IRISH SUPERMARKETS are so secretive you’d be forgiven for thinking they were all members of the Illuminati. They’re not though, they just like making money and would prefer we didn’t know just how much of it they are making from Irish consumers.

Ask about their profit margins in the Republic and you’ll be told the information is “commercially sensitive”. Try to find out what hoops suppliers have to jump through to get on to the supermarket shelves and you will be told the information is “commercially sensitive”. And inquire into how they set their prices in this jurisdiction and why things cost so much more in Dundalk than in Newry and you will be told it is “commercially sensitive”.

Given the cloak of secrecy which shrouds the sector, you can imagine our surprise when Aldi invited PriceWatch to have a look at its headquarters, take part in a taste testing session and talk business. We could hardly say no.

The company has its Irish headquarters in Naas, just across the road from a large Lidl, a fact which probably annoys both companies in equal measure.

It is a low-key, low-rise place made up of a small office complex and a 3,065 sq m warehouse where everything from axle-grinders to zuppa di minestrone is dispatched each day to its 84 stores across the Republic with Germanic efficiency.

On the warehouse floor Aldi-designed fork-lifts whirr gently as they move stock from the arrival bay to the departure bay. Upstairs in the offices, five men with their ties tucked into their shirts are staring intently at pieces of meat.

Each working day from Monday to Friday, these men gather in a small kitchen to taste food. Sometimes Aldi stock goes up against the retailer’s main rivals, on other occasions the men are trying to decide whether to take on a new supplier.

When PriceWatch stopped by, they were testing 16 different products including fresh burgers, fillet steak, cooked ham, potatoes and bread. It was exhausting. And very, very filling. By the time we got half-way around a table groaning with food, we were groaning with fullness and in need of a nap. It was then we realised that the Aldi tasters don’t swallow the food, but discreetly spit it into plastic cups after a few chews. It’s what keeps them so lean.

The testing process is taken incredibly seriously. First up were rooster potatoes. While the five Aldi tasters ranked their own spuds on top, PriceWatch put them in second place with the Tesco Value potato coming first.

Aldi’s Specially Selected steaks, which recently won a gold medal at the British Great Taste Awards, fared better and all the tasters, including PriceWatch, gave it top marks. Its relish and sliced white bread also finished on top when compared with rivals’ products, while Aldi’s ham was somewhat off the pace.

It was like doing 16 weeks of PriceWatch product reviews in an hour and during the process we learned that bread from Northern Ireland tastes different from bread from the Republic, watery tomatoes are bad, and the biggest and most amazing-looking strawberries are frequently the most tasteless.

The company which supplies Aldi’s steaks and its fresh burgers is AIBP Meats. The same company supplies meat to Londis, Tesco and Superquinn.

Premium fillet steaks in Superquinn cost €9.99, or €49.95 a kilo. In Aldi, the same fillets from the same animals cost €13.99 for 400g, or €34.97 per kg.

Aldi’s Snackrite Okey Dokeys Crinkle Cut Crisps cost €1.99 for twelve 25g packets. The crisps are made by Largo Foods, better known as the makers of Hunky Dorys crisps. A six-pack of identically-sized Hunky Dorys was selling last week in another major supermarket for €2.15 – or over 100 per cent more expensive.

Well-known relish and jam makers from Cork, and artisan producers of yoghurts and bread also make products for Aldi which sell for less than their own branded products. This begs the question why more Irish people are not hunting out these supermarket-branded products.

One reason is we are in love with our big brands. Nearly two-thirds of all Irish shopping is made up of branded products. In Germany, that number is less than 25 per cent.

While some companies are perfectly happy to be identified as suppliers to Aldi, others insist that the company keeps their identity secret. One baker has even gone so far as to warn the company that if its identity becomes known, it will end the relationship.

There are 107 Irish producers making food for Aldi. It wasn’t always like this. When the company opened in Ireland more than 10 years ago, it was greeted with suspicion by both consumers and suppliers.

Niall O’Connor, Aldi’s director of buying, recalls that in the early days Aldi was considered “a threat” by a lot of suppliers and people were reluctant to do business with it. “A lot of guys felt they couldn’t come to us, that we would shoo them away. We brought them in and were quite open with them, showed them what we did and how straightforward we were to do business with. Since then we have grown our supply base.”

Eddie Quilty of AIBP Meats has worked with Aldi for five of the seven years his company has been supplying the retailer with beef. He says in all that time he has never had to wait for payment. “The cheque arrives on the agreed day, never a day before or never a day late.”

AIBP’s meat sales through Aldi have increased tenfold over the past five years.

“There was a time when people would have been reluctant to buy their meat there but that time has long gone and it is now a viable place for a trolley shop as opposed to a basket shop. They have gone from being the poor relation and the devil incarnate even to being a blue-chip customer,” Quilty says.

Heatherfield in Co Carlow makes cakes for Aldi. It is one of 22 Irish suppliers who also supply to more than 400 shops in the UK. Sales manager Brian Seery is full of praise for Aldi and how it does business.

“In the early days, they were considered taboo by many suppliers and I don’t think they were taken very seriously by the other retailers but it has been very important for our business,” says Seery.

A frequent complaint about Aldi is that, while it might be great for some things, you couldn’t do your weekly shop there. It has about 1,000 products on its shelves compared with 15,000 in a big Tesco.

Unsurprisingly, O’Connor is having none of it. “Do I do my weekly shop in Aldi? The answer is yes I do.”

Another complaint concerns the price discrepancies between Ireland and the UK. Like other retailers, Aldi faces charges that it is making more money out of Irish shoppers than their British cousins, with identical products costing as much as 30 per cent more in Louth than in London.

When asked why, O’Connor is not particularly convincing. “There are influencing factors such as the cost of land, the cost of leases, the cost of utilities. We are an island, so you have to ship things further and wage costs are much higher.”

All this is true but repeated studies have shown that such factors account for maybe 10 per cent of the price differential. What about the rest? “We offer a big discount to the market,” is all he says. But how much do Aldi make in Ireland compared with the UK or Germany? We don’t know. Such information is not available. Like all the big retailers who do business here, profit margins are guarded.

Talk about Aldi to most people and it won’t take long for its “specials” to come up. It has around 60 specials each week and everything from (deadly looking) cement mixers to (horrible looking) long johns are likely to find their way onto its shelves.

O’Connor says the specials were “one of the first things to catch people’s attention when we came in and they became a unique selling point”. But how many of us have gone into Aldi looking for potatoes only to come out out with a boiler suit and a foot spa? Too many, says PriceWatch. Surely such spontaneity is out of step with the new, broke Ireland.

“There is very little spontaneity in recent times,” claims O’Connor. “Most purchases are very considered and people buy them because they need them.”

We believe a lot of what you say, Aldi, but that might be pushing it.