Aldi’s rise in the UK supermarket hierarchy is undeniable, as it narrows its gap with Asda.
- The German discount retailer’s profits have surged, surpassing pre-tax records.
- Aldi has overtaken Morrisons, becoming the UK’s fourth largest supermarket.
- Asda faces challenges with its hold on market share and debt management.
- Analysts predict Aldi might surpass Asda by 2028, given current trajectories.
The rivalry between Aldi and Asda is intensifying. Aldi reported a significant rise in pre-tax profits to £536.7 million, a leap from the previous year’s £152.6 million. This growth is driven by a 16% increase in sales, reaching £17.9 billion, and improved operational efficiencies. Meanwhile, Asda’s sales were higher at £21.9 billion, but its market share dropped by 1.2 percentage points, a stark contrast to Aldi’s minor dip of 0.2 percentage points to 9.9%. Although Asda is bolstering its ecommerce operations, Aldi continues to expand its physical presence, investing £800 million to reach 1,500 stores nationwide.
Aldi’s relentless expansion continues. With an ambitious plan to open new stores at an accelerated pace, Aldi is set to increase its current count of over 1,020 stores by one per week until Christmas. In parallel, Asda maintains a larger footprint with 1,200 stores but is now focusing on refurbishing existing outlets rather than expanding its convenience store network. Despite this, Asda’s plans for mixed-use redevelopments, like the one in Park Royal, demonstrate its strategic pivot towards infrastructure over new builds.
Aldi’s reputation as the most affordable supermarket remains unchallenged, maintaining its position as the cheapest in August 2024. It spent nearly £100 million on price cuts over three months to uphold its low-cost model, a strategy cemented by its decision to forgo loyalty schemes. Instead, the focus remains on offering consistent value. Asda, conversely, is enhancing its loyalty programme and price-matching competitors. This bifurcation in strategies highlights their distinct market positions.
The financial strategies of both retailers diverge significantly. While Aldi doubled its investment relative to profits, channelling funds into expansion and infrastructure, Asda is concentrating on debt management and customer experience enhancements. Asda’s recent announcement of a £50 million store upgrade exemplifies its prioritisation of the in-store experience as a critical driver for customer retention.
Looking ahead, the question remains if Aldi can dethrone Asda as the UK’s third-largest supermarket. Aldi’s focus on value, coupled with its expansive growth strategy, positions it strongly. However, Asda’s strategic adjustments and emphasis on customer experience present formidable challenges. Eleanor Simpson-Gould, a GlobalData senior analyst, suggests that Asda must redefine its market positioning to stave off Aldi’s advancement.
Aldi’s aggressive growth and emphasis on value challenge Asda’s position, with potential reshuffling of the UK’s retail hierarchy by 2028.
