CNBC, following up on last week’s announcement that Aldi will acquire Winn-Dixie and Harveys and gain a stronger foothold in the southeastern US, went to Aldi US CEO Jason Hart for an explanation of the company’s moves.
Some excerpts, with some commentary added via italics where relevant:
• “This acquisition provides us speed to market with quality retail locations, great people and a solid core business in a region of the country, the Southeast, where we’ve already had and experienced significant growth and success, but we also see much more opportunity and there’s much more consumer demand to meet.”
• “We’re currently evaluating which locations we’ll convert to the Aldi format to better support the communities that we’ve now got the opportunity to serve more closely. We’re going to convert a significant amount to the Aldi format after the transaction is closed and over the course of several years.
For those stores we do not convert, our intention is that a meaningful amount of those will continue to operate as Winn-Dixie and [Harveys] Supermarket stores.”
The implication in this last statement is that there likely will be stores that will either be closed or sold. “A meaningful amount” of stores is not the same as “all stores.”
• “We can certainly see and imagine some future synergies and learnings from each other, whether that’s consumer insights, product ideas, merchandising ideas, but at this point, we just don’t have any definitive plans to announce.”
See my FaceTime video this morning. At least from my perspective, this is such an outside-the-box acquisition that I think we can expect more unorthodox moves. Like I said, “Anything is possible.”
• “We carry a limited number of SKUs first and foremost — a couple of thousand SKUs in our stores versus our competition that may have many times that — that drives higher volume per SKU, driving scale that provides efficiency both in our business and for our suppliers. The dozens of brands and sizes and small variants of the same product — the result of that [in rival stores] is tens of thousands of products that isn’t necessarily the result of customer demand. It’s more so the brand’s demand for shelf space within those stores. And the result actually can frustrate customers by overcomplicating the shopping experience.”
This isn’t news, but it is a consideration to which more retailers ought to pay attention. Brand extensions frequently are not innovations – they’re just a different size or flavor, driven, as Hart says, more by the brand’s financial imperatives than by consumer demand. Retailers, in my view, would be better off trying to innovate around their own differentiated products, services and advantages, as opposed to just adding SKUs that may not matter.
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