A few months ago Channel Five screened a documentary on the German supermarket giant (‘Inside Aldi: Britain’s Biggest Budget Supermarket’). The doco was laced liberally with interviews of Aldi senior managers, all waxing lyrical about their ‘enlightened’ employer and the company’s “win-win” virtues for everybody, which made the program feel uncomfortably like a commercial promotional video at times. Nonetheless, the doco did unearth an interesting back story, that of the supermarket emporium’s evolution and it’s founder-brothers who emerged out of the ruins of war-time Germany to steer their fledgling company to it’s eventual lofty perch as an much envied international discount supermarket chain.
🔺 an early Albrecht store displaying Karl’s name with plenty of Spirituosen (alcohol) and Lebensmittel (food) in the display windows (Photo: www.news.com.au)
The seed of Aldi as we know it today has it’s roots in Essen, Western Germany, in 1913. Anna Albrecht, the wife of a miner, started a small grocery store in the suburb of Schonnebeck as a sideline. After serving in the German Wehrmacht in WWII, Karl and Theo Albrecht, Anna’s sons, took over their mother’s business, which they initially named Albrecht KG. During the formative first years, Karl for a time operated some stores solo (under the name “Karl Albrecht Lebensmittel”).
The Albrecht brothers concentrated on the Ruhr area of Germany at first, and then expanded rapidly across West Germany over the next 15 years. By 1960 Albrecht KG had amassed 300 shops in the Bundesrepublik and had a yearly cash flow of DM90 million. A factor contributing to the Albrecht stores’ early popularity and success was it’s novel approach to tax rebates from purchases. Instead of following the business norm of making customers collect stamps before they qualified for the 3% rebate, the brothers subtracted the tax from the price before sale, a radical idea and an ingeniously simple one which undercut their rivals’ bottom price. Aldi, as it was soon to be known, was on it’s way to revolutionising the low-cost grocery trade.
🔻 Theo (L), Karl (R)
(Source: www.broadview.tv)
Sibling rivalry: Splitting of the ‘atom’ in two
1960 was a momentous year in the history of Aldi. The two brothers fell out, apparently over whether or not to sell cigarettes in Albrecht Discounts, and decided to divide the company into two separate entities➊. With a new, shorter, snappy name, ‘Aldi’, derived from the first two letters of their family name and the ‘Di’ from Diskont (Discounts), the company split into two – Aldi Nord (North) and Aldi Süd (South). At this time, as Aldi was an intra-West Germany operation only, the division was between the north (Theo’s domain) and the south (Karl’s domain) of the country. The geographical border separating Aldi Nord and Süd is known as the Aldi-Aquator (‘equator’). Aldi, after the schism, continued to grow, the brothers’ insistence on stocking only popular items, cut down inefficiencies and proved profitable.
🔺 Aldi’s first German store (in the “North sector”)
A store displaying both names, Albrecht and Aldi 🔻 (Photo: Getty)
By 1967 the first international growth steps were taken with the acquisition of Austrian grocer Hofer by Aldi South. As Aldi expanded elsewhere the arrangement between the brothers divied up the world thus (with a few later variations): Aldi South’s jurisdiction would entail Austria and the English-speaking countries, whereas Aldi North would operate in Germany and the rest of Europe. Netherlands followed in 1973, and in 1976 Aldi South made its first incursions into the US. The US became the only market penetrated by both arms of the Aldi empire when Aldi North acquired the US Trader Joe’s chain. Britain came into the Aldi South fold in 1990. Aldi South has been particularly aggressive in it’s drive for store expansion in both the US and Britain. The retailer has upward of 2,000 stores in 36 states across the US and in 2017 announced plans to add 900 more by 2022➋.
🔻 Trader Joe’s, Amherst, NY
Aldi found the highly-competitive (and crowded) UK grocery field initially hard to penetrate, coming up against well-established market leaders Tesco, Asda, Sainsbury’s and Morrisons. By the 2010s however it was making exponential inroads into the Brits’ grocery market…by October 2013 it had 300 stores and doubled that by 2016, with new stores opening at the rate of one a week! Aldi South’s stated goal is to reach the 1,000 mark by 2022. At this rate it is looming as a genuine threat to the above “Big Four” Supermarket chains.
🔻 Aldi Long Eaton store (int) in Derbyshire (Photo: www.nottinghampost.com) 
Aldi global expansion intensified after the collapse of the Eastern Bloc system in 1989 and has experienced rapid growth in the 21st century. Since the 1990s Aldi has moved into Australia, Belgium, Denmark, France, Hungary, Ireland, Portugal, Slovenia, Spain and Switzerland. In 2019 it made another market quantum leap, opening two pilot stores in Shanghai, China➌.
🔺 The Albrecht brothers‘ carve-up of the world map (Theo plays black, Karl orange)
Counting the combined Aldi stores operating in Germany by both Nord and Süd (about 4,100 stores), there are over 8,000 stores in Europe as a whole (more counting the Hofer chain). All up, the reach of the Aldi retail tentacle worldwide accounts for 10,000 to 12,000 stores, with revenue (2010) of €53 billion. An international supermarket success story with nary a blot on it’s copybook – with one exception. In 2008 Aldi South invested an estimated €800 million in Greece but after only two years operating, it had to pull the plug on it’s 38 stores in the ancient land of the Olympiad. Nothing substantial divulged as to motive (par for the course for Aldi), but apparently the Aldi board of management was frightened off by the “informal business practices” prevalent in Greece (transparently code for government/business corruption)➍.
🔺 Theo in 1971, following his misadventure (Photo: Getty)
Endnote: The saga of the reclusive co-founders (“the brothers frugal”)
Theo and big brother Karl were never your stereotypical, über-rich CEOs, bobbing up everywhere, constantly in the media spotlight, being snapped for glossy mags gratuitously showing off their latest flashy, expensive car or girlfriend. That was not the brothers’ ‘bag’ – for in business and in personal lifestyles their thriftiness was legendary. But after 1971 the Albrechts’ customary muted behaviour reached a whole new level. That year, the brothers’ extraordinary wealth came back to haunt them➎. Theo was kidnapped at gunpoint and held hostage for seventeen days. The younger brother was released on the payment of a ransom – after Theo had haggled with his captors over the amount demanded! Theo later tried to claim the nearly US$3 million Aldi North had to fork out for his release as a tax deduction business expense! Theo’s ordeal profoundly affected both brothers, they became even more reclusive and secretive in their personal lives and movements (no interviews or public statements, hardly any photos of them together or separately after 1971 exist). Eternally vigilant thereafter, both brothers reportedly would drive home from work, separately, by different routes each day. The brothers Albrecht, having profoundly changed “German food culture and consumption mentality” forever, semi-retired to a remote island in the North Sea in their eighties to pursue the hobbies of golf, orchid-growing and collecting old typewriters (very old school typical of them).
🔺 Island of Föhr off the Holstein Coast, where the supermarket entrepreneur brothers beavered away on their personal hobbies during much of their twilight years (Photo: www.tourism.de)
∈ওওওওওওওওওওওওওওওওওওওওওওওওওওওওওওওও∋
➊ although the separation wasn’t legally finalised until 1966
➋ German supermarket retail discounter Lidl—a copycat competitor to Aldi utilising the Aldi business model as a lodestar to chart it’s own course to retail riches —followed its path into the US market in 2017
➌ with concessions made for Chinese consumer buying-preferences based on online testing via Alibaba’s Tmall
➍ no doubt to Aldi’s chagrin, Lidl stores in Greece by comparison are apparently thriving
➎ they were reputed to be the richest men in Germany
❖ ❖ ❖ ❖ ❖ ❖ ❖ ❖ ❖
Articles and sites referred to:
‘The History of Aldi: The Tale of Two Corporations with the Same Name’, (Team S4RB), 13-Jun-2017, www.blog.s4rb.com
‘Inside ALDI’s first two pilot stores in China’, (10-Jun-2019), Shanghai’s.ist
‘Aldi founder became recluse after family kidnapping’, Albrecht obituary,
‘Aldi’, Wikipedia, http://en.m.Wikipedia.org
‘Aldi quits Greece’, German Retail Blog, 23-Jul-2010, www.german-retail-blog.com
‘Grocery chain Aldi to open another 900 stores in U.S.’, (Zlati Meyer), USA Today, 13-Jun-2017, www.usatoday.com
‘The Aldi Story – Karl and Theo Albrecht’, (2014 documentary), www.broadview.tv
‘Secrets of store success: Why Aldi is winning the retail battle’, (Alison Kirker), Sunday Post, 19-Feb-2018, www.sundaypost.com
Aldi’s control of it’s “own brand”—which makes up a whopping 90 to 95% of what it sells—is interesting. First there’s the design, it deliberately makes the packaging on its food items look much the same as the leading manufacturers’ equivalent brands. Next, it tries to replicate the taste of these popular brands. Then Aldi invents a brand name for the product which often sounds vaguely like the well-known brand. And it apparently works – even on luxury items. To take a UK example: Many British consumers who once shopped at the upmarket Sainsbury’s and Waitrose supermarkets have been enticed by Aldi’s “Specially-Selected” luxury items – and the reason is twofold, obviously price (much cheaper than Sainsbury’s), but also because they now feel they are getting a similar-quality product (retail expert Julie McColl, Glasgow Caledonian University). As well as a recent product expansion to include luxury treats for it’s shoppers, Aldi’s move into ‘fresh’, the fruit and veg lines, has broadened it’s appeal.
Another key to Aldi being so spectacularly successfully in the supermarket game is it’s relationship to suppliers. Because of their runaway retail success they have many primary producers and manufacturers lining up to do business with them, but Aldi is well-known for driving a hard bargain with suppliers (sort of a case of “my way or the highway”). They are also clever at judging what will be efficacious – by sourcing local suppliers and advertising in the UK they have softened the German outsider element and fostered an impression among British shoppers of the big discount ‘invader’ being home-based.
The above factors, outlined, are apparently the ‘secrets’ to Aldi’s stellar success and it’s ability to offer and maintain retail prices at rock bottom in markets across the world. In part II I will tell the story of Aldi’s rise from a single grocer’s store in provincial Germany to international retail empire, and of the two publicity-shy and increasingly reclusive brothers who spearheaded the company’s seemingly unstoppable growth and expansion.