Aldi was founded in 1946 by brothers Karl and Theo Albrecht and now has over 10,000 stores in 20 countries, with an estimated turnover of more than €50billion (£44billion). It launched its first store in the UK on April 5, 1990, and there are now 874 outlets across Britain, with plans for 1,200 by 2025, with the retailer snapping up eight percent of the UK grocery market in 2020. Tesco is well aware of the threat posed by the discount supermarkets and last week announced it will start to price match some of its products with Aldi to tighten the gap between the two.
Channel 5’s “Inside Tesco” documentary revealed how the market leader of the retail sector started taking notes on Aldi back in the Seventies, but after visiting Germany, thought there was no way it would work in the UK.
Presenter Fiona Phillips said in 2019: “In 1974 after a quarter-of-a-century of growth, company profits fell.
“Tesco really needed to do something radical to grab shoppers’ attention.
“The answer was a relaunch plan to follow the Queen’s Silver Jubilee celebrations of 1977.
“Whilst the rest of the country celebrated, the store’s staff got to work.
“Tesco was going back to its roots, slashing prices across the store.”
The series went on to detail how Operation Checkout was rolled-out by Tesco.
It added: “It was called Operation Checkout and advertised in a simple, but very effective TV campaign.
“Within two years, Tesco’s sales topped £1billion for the first time and once again, cutting prices had been at the heart of that success.
“But, Sainsbury’s was still the supermarket to beat and shoppers went there for quality rather than discount prices, so should Tesco now follow its rival and go upmarket?
“As Tesco mulled over that question, eye-catching TV ads promoted a very different kind of competitor – Kwiksave was a no-frills supermarket opening new stores in places where Tesco was having to close them.
“To try and work out the secrets of its success, Tesco called one of its rising managerial stars into head office.”
The documentary spoke to Harry Quinlan, a former regional manager, who detailed how he was sent out on a mission to learn more about German discounters.
He said: “We went into the boardroom and were met with a group of directors and they said ‘we have an issue, you and your boss are relieved of your jobs at Tesco, you’ve got a year out to go and look and assess the world outside.’
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“We looked at Aldi, in Germany, and we thought that was one of the worst.
“The lighting in the store was a light bulb on a wire hanging from the ceiling.
“There were staff living above the store and when they were needed they would phone up and the staff would come down and man a checkout.”
According to the former head of Lidl UK, Ronny Gottsclich, Tesco missed the bigger picture.
He said: “The Germans are traditionally very, very tight, they would probably drive half an hour if they could save an extra 2p.
“They really orientate themselves on the savings, how much they can keep at the end of each month.
“Really they are not so fussed about how much of a shop floor environment they get, more how much they save.”
On his return, Tesco asked Mr Quinlan to go to Liverpool to help launch its own small chain of discount stores, but that plan was soon dropped.
He added: ”We were given five stores in Liverpool to start with and we emptied all of the Tesco products out, completely refurbished them with a new range of products competitively priced.
“They felt that the discounter didn’t add anything to the image of Tesco.”
Ms Philips went on to reveal how Tesco decided to ditch the idea of rivalling the discounters.
She added: “Tesco had a big decision to make, did it go all-out for discount or did it follow Sainsbury’s and offer shoppers a more upmarket experience?
“Tesco decided the future was upmarket.”
Tesco has spent the past 18 months investing in the price and quality of its own-brand goods as it looks to offer a clearer value proposition at various price points.
Their new initiative will include both branded and own-label goods such as Tesco whole cucumbers and Warburtons Toastie sliced white bread.
Price of products will be checked twice a week, with those included in the campaign marked out with a distinctive red ‘Aldi Price Match’ bubble on the shelf edge and called out online.
Tesco says the move will offer “Tesco products at Aldi prices for simple, great value”.
Tesco’s chief customer officer Alessandra Bellini adds: “Our customers tell us they want the most competitive prices on the things they buy regularly.
“This new campaign will help time-poor and budget-savvy customers get Tesco products at Aldi prices on products that matter to them.”
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