Reason Australians are turning their backs on Aldi

It shook up the Australian supermarket landscape but now revenue reports show that profits have drastically slowed down.

ANALYSIS

I’m not saying Aldi is over. But we do seem to be getting over Aldi. The German supermarkets crazy run of growth in Australia seems to have petered out recently, according to the latest tax data.

It’s hard to get information on Aldi. It is a secretive private company owned by the Albrecht family. (The name Aldi comes from ALbrecht DIscount). A lot of their data on revenue and profits are not released to the public regularly.

One way we do get a glimpse of what’s going on inside is thanks to the corporate tax transparency report. It came out last week and tells us the revenues, profits and tax payable for thousands of big Aussie companies. That’s a great way to find out how Aldi Australia is going.

Until now, it has shown that Aldi is roaring upwards, taking market share from the big two, Coles and Woolworths.

The trajectory Aldi was on made it seem like we would soon be talking about a big three. Aldi was changing as well. Instead of looking bleak and having no brands, Aldi adapted to be more like its big rivals. Their supermarkets began to look a lot nicer, and you could buy Milo there instead of some weird substitute.

But then the surge stopped. As the next chart shows, Aldi’s revenues grew a lot more slowly between 2020-21 and 2021-22. You take out approximately $640 million they made from selling off their distribution centres in 2020-21 and you’re looking at about 1 per cent growth. That’s far below the 10 per cent+ growth they were managing before.

So Aussies appear to have turned our backs on Aldi that year. Did we fall out of love with Aldi? What happened? There’s three theories as to what the heck is going on.

Theory 1

Were we too fancy for Aldi in 2021-22? That was the time before inflation took off, before interest rates went crazy and when bank accounts were brimming with money from JobKeeper and JobSeeker. It’s kinda hard to remember now but for a brief glorious moment Australia felt rich.

Is that the situation? If so, we would have spent more on fancy things that year. And there’s clues that maybe 2020-21 was a good year for luxury brands.

So maybe we didn’t want to see ourselves as discount supermarket people at that time. Maybe we didn‘t need the discount on Choceur ($4 for 200g) in 2021-22 because we were buying Lindt ($5 for 100g)?

Theory 2

On the other hand, that was also a time when we discovered online shopping. Grocery trucks were pulling up in front of people’s houses all over the country and we all had that experience where you can’t open the screen door because the bloke put six bags of shopping in the way of it.

Look at the spike in the next chart, it’s right in the middle of the year were talking about 2021-22. But you can’t get delivery form Aldi.

If the Aldi setback was because they weren’t moving with the times, then Aldi is heading for bigger problems. You still can’t buy their things online. You can’t even check prices on their website. (Aldi is a slow mover, in Germany it didn’t even adopt barcode scanning until decades after its competitors. Until 2003 checkout staff were memorising over 800 codes and typing them into the registers at checkout!)

Theory 3

Theory 3 is this is an accounting anomaly. Weird things can happen in corporate finance and maybe the Aldi revenue slowdown doesn’t mean we’re spending less money there? Aldi is secretive, and they’re certainly not offering any explanation.

But it looks real

There’s reason to doubt Theory 3 and believe Aussies really are getting over Aldi.

It seems to be opening a lot fewer stores these days. For many years the company was trying to saturate the country with its outlets, but in 2023 it seems to have opened just a few stores. It has 604 stores now, it had 603 earlier this year. Growth seems to have stalled. Do they sense we’re not so keen any more?

What’s more, you can check Google Trends to see if people are searching for Aldi a lot compared to the past. If people want to see the opening hours or investigate the special buys, it’s likely they will google Aldi. People googled Aldi a lot less than usual in 2021-22 compared to some other supermarket brands.

Aldi is always searched less than Coles, but in 2021-22 the difference was greater than usual, as the next chart shows. In fact it was the lowest level of search interest for Aldi in years.

This chart goes up at the end, hinting people have come back to Aldi a bit as inflation has risen. Aldi’s sales have gone up again in the last year or so, industry sources suggest. You’d expect that given the inflation crisis. But what 2021-22 shows is Aldi aren’t bulletproof.

I’m starting to think this could be real: people are a bit over Aldi. We want more range, we want delivery, and if we’re going to a discount supermarket we want the price difference to be actually noticeable compared to supermarket home brands, not just compared to big brands.

Aldi needs a shake up. Maybe they need to offer delivery? Or maybe they need to go back to their roots and become a proper discount supermarket again instead of slowly morphing into their rivals. Get rid of Milo and bring back … NRG Maxx?!

Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.

Originally published as Reason Australians are turning their backs on Aldi