Woolworths’ pledge this month to “contain” Aldi could implode and see it turn from hunter to the hunted, after the German discount retailer said it would investigate targeting the crucial “middle market” customers of both Woolworths and Coles through the trial of newly refurbished and formatted stores.

In the past few months Aldi has quietly rolled out four new stores that, for the first time since the German group arrived in Australia in 2001, give a greater prominence to fresh food — the profit engine of any supermarket — as well as better store lighting, ­improved ambience, more branded groceries and the introduction of new categories, such as food-to-go and organic food.

It potentially places Woolworths and Coles in the midst of a supermarket war on two fronts, with the rapacious Aldi snatching shoppers from the ranks of middle Australia to add to its growing dominance at the lower end of the income scale.

Analysts believe the new store formats, which include moving the fresh fruit and vegetables displays from the back of the store to the entrance to attract shoppers, could be a prelude to a shift in Aldi’s strategy towards cosying up to Australia’s middle market to add to its booming success in ­winning over budget-conscious consumers.

Meanwhile, the new-format Aldi stores in Kallangur, Queensland, Chishold in the ACT, McGraths Hill in NSW and Highton in Victoria, are quickly showing a lift in sales and store traffic, with much of that revenue jump put down to a vastly improved fresh food offer.

A better fresh offering, bolstered by more branded goods and in-store bakeries will appeal to households with higher incomes.

At a Woolworths strategy day this month chief executive Grant O’Brien said the struggling supermarket group would “neutralise Coles and contain Aldi” by lowering its prices and improving ­in-store service through more staff and refurbishments.

Its strategy to contain Aldi includes creating a range of entry-level private-label groceries to go head-to-head with Aldi’s price-beating private-label range.

Aldi has already captured an 11 per cent slice of the grocery ­market on the east coast and with its planned push into South Australia and Western Australia it is threatening to peel away even more customers from Woolworths, the nation’s biggest supermarket chain, as well as from Coles and independent chains.

The new format is right out of Aldi’s British playbook where it also drifted up-market through a better fresh-food offer, branded groceries and stores with ­improved ambience, shelving and lighting.

“The trends in the UK over the past few years suggest we keep an eye out for format and category changes that may indicate a shift in Aldi’s strategy towards the ­middle market,” said Commonwealth Bank analyst Andrew McLennan. “Building on Aldi’s cost leadership to grow share by broadening its offer to the increasing number of customers the brand is appealing to.”

Mr McLennan, who has visited all the new Aldi experimental stores, said that upon entry customers were welcomed immediately by fresh produce and flower offerings.

“In older (Aldi) formats one would be met with biscuits, snack food et cetera, with fresh located opposite chilled goods. This we see as a big change and one which suggests a trend from the UK.

“Feedback indicates fresh participation (sales) has increased after the increased floor space allocation and greater prominence.”

Mr McLennan said the new- model Aldi stores also possibly reflected a realisation within Aldi it was capturing a greater number of customers and it wanted to now capture more of the “fresh wallet”. He said the new stores would need to prove tremendously successful to cause Aldi to pull forward its refurbishment program and begin rolling out the new format to its 370 existing stores across Australia.

“That is clearly beneficial to Aldi, and also probably reduces what has been a strategic weakness in their offering in the past.”

Multi-tiered fruit and vegetable displays, drop lighting and improved signage are the key additions to the new format.

It comes as Aldi kickstarted at the weekend its highly anticipated snow gear sale with the German discounter now the biggest retailer of ski and snow gear in Australia.

While fresh has often been low on the list of Aldi’s priorities in Australia, its general merchandise category has been immensely successful.

The annual snow gear sale has been particularly effective in reaching out to middle and higher income families, many of which have entered an Aldi for the first time just to check out its snow equipment and apparel.

Extracted in full from The Australian.

SHARE THIS ARTICLE: