July 23, 2010
Aldi quits Greece
Flight from Mount Olympus: Aldi will exit Greece this December
This represents the first time in Aldi's long history of international expansion that it has ever abandoned a foreign market.
The wording of the low-profile, privately-run company's press release this week was characteristically terse:
"The Aldi South group is ending the business operations of its 38 stores in Greece. Talks regarding the sale and future operation of these outlets are being conducted with several interested parties."
Aldi will now "devote itself increasingly to expansion in all the other nine countries, where the company successfully runs more than 4,200 outlets".
The clear implication here is that Aldi Greece had not been running successfully although the stores always seemed to be busy.
Even more counter-intuitively, the decision to pull out was apparently not dictated by the country's current macroeconomic woes or by any fear that consumer spending power would be radically reduced in the foreseeable future.
Johann Mörwald not amused
Furthermore, sources close to the taciturn company confirm that Aldi still regards hard discount as a viable proposition in Greece. Archrival Lidl, which runs around 200 stores in the country and which continues to expand aggressively, clearly proves the point.
The plot begins to thicken when one remembers that Aldi South has invested an estimated €800m in Greece since entering the market in November 2008. Normally well-informed sources also confirm that Aldi was very gung-ho about the business potential in the country at the time of entry.
At all events, Aldi is also generally regarded as the most methodical and rationally-minded retailer in Germany and the one least likely not to have done its homework in advance.
So why the surprise exit announced this week? Given the company's secrecy, one can only speculate. Firstly, there has been an executive shuffle recently at both Aldi South's Austrian subsidiary, Hofer, which is responsible for operations in Greece, as well as at German head office in Mülheim.
Hofer CEO Johann Mörwald, who is said to have always opposed expansion in Greece, has not only assumed direct responsibility for the country. Mörwald has also been promoted to Aldi South's so-called "Koordinierungsrat", the most influential board of management within the company.
Sites and real estate
But even before any pressure Mörwald may or may not have exercised on the decision-making process, local observers had already noticed some dark signs on the Greek horizon.
For instance, after acquiring more than 80 potential sites soon after entry, Aldi Greece seemed to put the brake on local expansion at a very early stage despite an evident need to gain economies of scale rapidly.
As early as the beginning of 2009, it became evident that Aldi was unlikely to attain its original, ambitious target of opening 30 to 40 outlets per year. This was not because Aldi couldn't obtain the necessary sites, but because the company often sold the real estate soon after purchase.
Informal business practices
Informed local market observers point to another, perhaps more fundamental reason. Aldi seemed to be increasingly unhappy with the "informal business practices" that are prevalent in Greece.
In the wake of a series of scandals and legal difficulties that have affected some German retailers over the last few years, Aldi has revised its already stringent Corporate Social Responsibility guidelines this year and is known to enforce these ruthlessly.
One may sneer at this whiter-than-white approach until one remembers the food quality and personal data protection issues which have plagued some of German retailing over the last two decades, whereas Aldi's name is virtually sacrosanct with local consumers.
Obviously, such a positive reputation makes for a tremendous degree of trust among consumers. Surely, also, it represents a major reason why Aldi is one of the few German retailers who merits the name of a retail brand.
Delhaize in the running as potential buyer
Aldi's Greek stores will stay open until December this year. Parts of its head office in Thessaloniki will remain in operation until around spring 2011 in order to affect a smooth wind-down.
Trade rumour credits Alfa-Beta Vassilopoulos, the Greek subsidiary of Delhaize Group, with the best chances to takeover Aldi's Greek stores.
Delhaize CEO Pierre-Olivier Beckers has pointed to the strategic importance the Belgian group attaches to expansion in small countries, particularly in the Balkans.
And, only two years ago, Alfa-Beta Vassilopoulus purchased 33 "Plus Hellas" soft discount stores from Tengelmann for €69.5m. So Delhaize Group is obviously prepared to grow via acquisitions.
Any such move would enable the company to reach estimated annual revenues of around €1.5bn in Greece.
Concentration on largest markets
This would put the Belgians just behind Lidl, which is ranked no. 2 in Greek retailing after French group Carrefour. Lidl is also said to be interested in purchasing Aldi's warehouses and logistics infrastructure.
Whatever may have been the ultimate reason for Aldi's surprise move in Greece this week, it would also seem to be part of a trend among German discounters to reduce the complexity of their foreign engagements.
Lidl is now in 23 foreign markets after having withdrawn from Norway and the Baltic countries. The company also recently put its plans to enter the USA on ice for the second time.
Both Lidl and Aldi seem to want to concentrate on expanding in their largest foreign markets. For Lidl this means France, while Aldi is particularly interested in growing its successful operations in Australia, the United Kingdom and the US.
Read in German: Lebensmittel Zeitung, 22.07.2010, von Hans-Jürgen Schulz