Aldi China, once hailed as the 'originator of hard discount', is now anxious. It once insisted on cost control and avoided marketing, but now it has set up a marketing department, invited 'Aunt Xue' to appear in offline ads, and even mocked Sam's Club for 'packaging too big'. It has raised the banner of 'private label' and joined the low-price battle with its 9.9-yuan series. Even its domestic market positioning was changed in October last year from 'International Quality, Community Price' to 'Good Quality, Low Price', to downplay its international and community boutique supermarket attributes and signal 'quality at low prices'... In fact, every move Aldi China has made recently indicates that it is deviating from the business philosophy of its German parent ALDI (hereafter 'ALDI' refers to German stores, 'Aldi China' to Chinese stores). In terms of business model, ALDI is known as the world's best 'poor man's supermarket', with its most notable feature being 'stinginess'. Its 'hard discount' model dictates that it must pursue extreme cost control (simple decoration, minimal staff, no marketing). But Aldi China seems to be shifting towards 'soft discount', whether it's the exquisite and trendy store decoration, the addition of new staff positions, or the frequent marketing campaigns like large-scale ads, its cost control is not 'hard' enough. In terms of brand positioning, ALDI is a 'poor man's supermarket' for communities, located in low-rent areas, targeting low- and middle-income people. Aldi China initially positioned itself as an 'imported community boutique supermarket' in Shanghai, choosing locations near community commercial centers, residential areas, and metro stations, but also favoring shopping malls, targeting young white-collar workers and the middle class. These two points determine that Aldi China has taken a different development path from German ALDI—evolving from a 'boutique supermarket' that didn't match its original intention to a 'trendy supermarket/check-in spot' that better caters to domestic consumption preferences. Even though Aldi China is now playing the 'private label' card to 'return to low prices' and trying to embrace ALDI's 'hard discount' logic, with private labels accounting for over 90% of its products, Aldi China still faces significant internal and external pressures: first, its domestic store scale has not yet achieved economies of scale, preventing it from leveraging supply chain advantages, making it difficult to practice ALDI's 'hard discount'; second, head players like Hema and Sam's Club are squeezing Aldi China's living space with more flexible market strategies. So, can this 'chaotic punch' from Aldi China break its 'panic'? Perhaps before shouting the slogan 'Demystify big brands, elevate private labels', Aldi China needs to first 'add charm' to its private labels.
German ALDI ≠ Aldi China Throughout ALDI's development, the core is 'removing a series of unnecessary costs'. Internally, it splits production and sales into four links, building '4 ones', meaning purchase cost, operating cost, tax cost, and corporate profit are each 1 yuan. Being 'stingy' to the extreme is the biggest contributor to ALDI's strict cost control, and it has forged this 'hard discount originator' with over a century of history. But Aldi China finds it difficult to adapt its unique business philosophy. On the store operation side, ALDI almost abandons store decoration, even using cardboard boxes for display instead of shelves, saving shelf costs and labor costs for organizing shelves.
Image: German ALDI store
In contrast, Aldi China places great emphasis on store style, not only adding shelves but also inviting young artists to paint in stores, which is closely related to its brand positioning targeting high-income, highly educated customers. Image: Aldi China store
Additionally, ALDI minimizes staff numbers, with only 4-6 employees in stores of several hundred square meters. Each employee is a 'jack-of-all-trades', and early employees could memorize all product prices, saving the cost of price tags. But Aldi China has dedicated Customer Experience Experts (CEE) whose job is to introduce product features, recruit members, and enhance customer loyalty, focusing on the shopping experience. On the product side, ALDI focuses on daily necessities like personal care, rice, flour, and oil (about 50%), with fresh produce as a supplement (about 36%). But Aldi China's fresh and ready-to-eat categories account for nearly 50%, pushing up fresh produce share, which not only increases warehousing and logistics costs but also leads to higher spoilage rates, further impacting operating costs. The most 'rebellious' aspect is marketing: ALDI almost never advertises, believing that ads indirectly increase product prices. However, Aldi China not only invites 'Aunt Xue' to appear but also uses provocative marketing, advertising buses, milk carton dolls, and other marketing tactics to strengthen brand awareness. Source: Internet
Aldi China, with its emphasis on decoration, experience, and marketing, has transformed from a 'plain' hard discount supermarket into a 'petit bourgeois' boutique supermarket. This is why industry insiders describe Aldi China as a 'hard discount' supermarket 'wearing ALDI's coat'.
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In the second half of last year, Aldi China changed its brand positioning from 'boutique supermarket' to 'affordable community supermarket', reflecting its localization adaptation based on the domestic market environment. The so-called 'adaptation' means 'adapting to the trend'. When Aldi China first entered China, it coincided with the '100 million new middle class' becoming the 'hot potato' for retail enterprises. Seizing the moment, Aldi China chose to elevate its status, opening stores in communities to meet the middle class's demand for quality products in community boutique supermarkets. The deeper reason for Aldi China's 'focus on the middle class' is that it has not yet formed an absolute price advantage in China. ALDI's overseas expansion relies on the halo of the world's best 'poor man's supermarket', but there are different survival conditions at home and abroad. Having only been in Shanghai for five years, Aldi China, whether in terms of store scale, brand mindshare, or local supply chain strength, finds it hard to compete with retail enterprises like Hema and Dingdong Maicai that are deeply rooted in Shanghai. Even with its global supply chain capabilities, due to higher procurement and transportation costs, it is not an overnight task to 'remove a series of unnecessary costs' in China. This is also the underlying reason for Aldi China's shift towards 'soft discount' in its development in China. Now, Aldi China, which frequently gains attention through marketing, cannot hide its development anxiety. Since 2023, 'quality-price ratio' has become a new consumption trend. Head retail players like Hema are turning to discounting, building vertical supply chains and other upstream actions to 'squeeze water' across the entire chain, continuously lowering terminal prices. It is undeniable that Hema is currently more like ALDI than Aldi China in terms of products. Facing fierce competitors, Aldi China can only make a 'decision that betrays its ancestors', using marketing to test the waters and 'save face' through hype.
Demystifying Big Brands, Elevating Private Labels: A True or False Proposition? Localization adaptation is Aldi China's 'solution' during its rooting phase in the domestic market, but the previous path no longer applies. Under the 'quality-price ratio' trend, sticking to 'boutique supermarket' will only leave Aldi China in a situation of 'if you don't advance, you retreat'. How to remain invincible? After much deliberation, Aldi China played the 'private label' card, cooperating with local suppliers to develop own-brand products, controlling costs from the production end, and launching multiple private label product lines including the 'Super Value' series, covering daily necessities like fresh produce, bakery, snacks, and daily chemicals. When Aldi China's 'private labels' debuted, they were tied to the slogan 'Good Quality, Low Price'. Take the recently popular 500ml strong-flavored liquor as an example: it has traditional solid-state fermentation and 52% alcohol content. Since its launch on June 5, Aldi China's liquor has sold out and is currently being restocked. The liquor sells for 9.9 yuan per bottle, with the OEM being Qinyuanchun Distillery. The author found that the same distillery's identical liquor (52%, 500ml, strong-flavored) sells for 188 yuan on Taobao.
Image source: Left: Taobao, Right: Xiaohongshu
It can be seen that Aldi China has pushed the price of solid-state fermented liquor to a new low. Qinyuanchun Distillery staff explained the price reduction to the media: by shortening the fermentation time to 30 days and using lower-grade hierarchical storage, production costs were effectively reduced. Although this liquor has become a representative product of Aldi China's 'private label' high quality and low price, not all Aldi China products have both quality and price competitiveness like the 9.9-yuan liquor. Take Aldi China's 9.9-yuan facial cleanser as an example: consumers found that it claims to contain amino acids, but in fact, the ingredients are still soap-based. Other platforms in the same price range also have genuine amino acid cleansers. Additionally, the product competitiveness of Aldi China's dishwashing liquid is also questionable; consumers found that its OEM is a small enterprise with a total risk count of 27.
Image source: Xiaohongshu
More importantly, on social media, consumers discovered that Aldi China's 'Multigrain Cranberry Whole Wheat Toast Bread' contains sodium dehydroacetate in its ingredient list. This ingredient is a preservative, and multiple studies have shown that long-term intake can cause liver and kidney damage. Currently, the US, EU, and other countries have abandoned this ingredient, and since 2021, China has also been gradually implementing a ban on sodium dehydroacetate. A well-known supermarket from the EU, yet it adds an EU-banned ingredient to products produced domestically. Aldi China's so-called 'good quality' seems to warrant a big question mark.
Image source: Xiaohongshu
Private labels are undoubtedly a lever for ALDI to strengthen its price competitiveness, but its overall presentation is of high-quality and affordable products. However, when Aldi China promotes its 'private labels', it not only emphasizes high quality and low price but also 'touches' big brands, shouting the slogan 'Demystify big brands, elevate private labels'. This marketing tactic of belittling 'big brands' may inadvertently damage the trust relationship between Aldi China and 'big brands', losing opportunities for brand partnerships. The author found that on the shelves of Aldi China's own dairy brand 'Youbai', there is a blatant sign saying 'Not inferior to the neighbor, come try it!', and next to Youbai is the popular Meiji milk. One is a 'self-promoting' private label, the other is a globally renowned brand. When compared, consumers will naturally 'vote with their feet'.
Image source: Xiaohongshu
After all, behind big brands is not just 'big' fame, but also the absolute control over quality and taste. Judging from the above products, using small factories with potential risks and using preservatives abandoned by the mainstream, how can Aldi China tell the story of 'elevating private labels'? To remove the 'filter' of big brands, Aldi China needs to first ensure internally that its private labels have quality and price advantages. Moreover, Aldi China's 'private label power' also faces the 'differentiation' battlefield. Developing private labels relies on supply chain advantages to produce lower-cost, more distinctive products, using 'exclusivity' to bring differentiated competitiveness to private labels. However, the 'China Private Label Development Research Report (2021)' points out that each supplier serves an average of 4.65 channels, and private label products developed by various retailers often come from the same supplier, which is one reason for insufficient innovation in private labels. Take Aldi China's sea salt soda crackers as an example: the same size and taste are sold by Sam's Club and Metro's private labels. When many competitors and Aldi China produce similar products, Aldi China's 'private label power' is weakened. Retail enterprises making private labels often choose products with categories but no brands. While the industry has not yet escaped the quagmire of homogeneous competition, Aldi China faces an even more thorny issue. Public data shows that Aldi China (publicly disclosed data) has private labels accounting for over 90%, while Sam's Club's figure is 30%-40%. The ultra-high private label ratio superficially indicates that Aldi China has full-category production capabilities, full-category supply chain resources, and maximum price advantages. But when a retail enterprise's private labels almost occupy all shelves, is its positioning a brand or a channel? Compared to the cost reduction brought by private labels, high quality, differentiation, focusing on precision rather than quantity, wide SPU, narrow SKU (only 1-3 product choices per category), are the optimal solutions that meet current consumer demand.
Aldi China No Longer 'Only Herds One Sheep' In the second half of 2023, Aldi China adjusted its positioning and gradually accelerated its layout in China. At that time, Roman Rasinger, Managing Director of Aldi China, revealed that it would continue to increase investment in the Chinese market and keep opening stores. Aldi China's 'change of tune' seems somewhat 'forced'. During the same period, Hema fired the first shot in 'discounting', and Sam's Club also accelerated its store layout in Shanghai. Aldi China, deeply rooted in Shanghai, is forced to face more intense competition, and its competitors are not to be underestimated. Hence, Aldi China's marketing offensive and private label hype are a 'defensive battle'. Unable to 'only herd one sheep', Aldi China is eager to unleash the 'flywheel effect' in the domestic market.
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The focus and simplicity of 'only herding one sheep' is ALDI's magic weapon to overcome 'complexity'. From ALDI's success, one can also glimpse Aldi China's predicament. After ALDI made 'low price' the decision factor for the entire chain, it cut all links, even modifying the windshield angle of delivery trucks to reduce wind resistance and fuel consumption. Image source: Internet
Under the 'price first' philosophy, ALDI streamlined SKUs, expanded stores to increase scale advantages, obtained lower prices from suppliers, attracted more customers with lower prices, generated higher sales, and then fed back to increase ALDI's bargaining power. A 'flywheel' with low price at its core thus releases commercial effects. But Aldi China has not implemented ALDI's philosophy since entering China. When it positioned itself as a 'boutique supermarket', it meant that price was no longer its 'first principle', and when necessary, price could give way to exquisite style.
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Aldi China wanted to 'adapt' for localization but ended up with a 'fish out of water', and the space for it to break through is getting narrower. At present, domestic retail enterprises, on the basis of tracing and learning ALDI's 'hard discount' philosophy, are exploring 'hard discount' models more suitable for the Chinese market. For example, Pangdonglai's private labels now cover all categories, with equally simple packaging, combining price and quality. More importantly, as a retail enterprise born from Chinese soil, Pangdonglai's private label development considers product taste and categories that better suit Chinese consumer preferences. It is worth mentioning that Hema's private label products not only have fast new product launches, high quality, and strong price competitiveness, but have also embarked on an overseas path, winning multiple 'sales champions' in US supermarkets, bringing 'shock' to overseas markets from Chinese retail enterprises. Domestic retail enterprises have undergone a transformation from learning to imitating to surpassing, and have gradually gained the qualification and strength to 'wrestle' with global retail giants like ALDI. Clearly, the time for Aldi China to become ALDI is running out.