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October 15, 2021
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Aldi has a huge cult following thanks to its no-frills shopping experience, narrow selection of products and low prices. It’s one of the world’s largest and most valuable grocery store chains with more than $80 billion in estimated annual revenues and 10,000 locations around the world, including about 1,600 in the U.S. (plus nearly 500 Trader Joe’s stores in America).
It’s an empire that has made its founding family multibillionaires.
Yet Aldi had truly humble beginnings: It started as just a tiny shop in a German suburb run by two reclusive brothers with a knack for thriftiness.
Brothers Karl and Theo Albrecht officially founded the German grocery chain Aldi in 1946 in the aftermath of World War II. They reportedly inherited their first store from their mother, who had opened the small grocery store in 1913 in a suburb of the German city of Essen. Both brothers were conscripted to fight for Nazi Germany during World War II (Karl was wounded in action and Theo was captured by the Allies in Italy), but they returned home after the war and took over the shop, which had survived the bombs dropped on the city.
Looking to reduce waste and costs amid the ruins of post-war Germany, the brothers established a no-frills model at their discount store, selling only non-perishable goods at cheap prices from the small, nondescript shop. The brothers refused to spend money on advertising or in-store decorations, and they ruthlessly removed poor-selling items from their inventory.
By keeping its prices lower than competitors the discount store earned a strong following in post-World War II Germany, where the economy had been nearly destroyed, and the Albrecht brothers managed to open four new stores around Essen by 1948.
By 1955, the chain had more than 100 stores throughout Germany and the brothers’ thriftiness had become a part of the store’s DNA — they even refused to pay for telephones in their stores at the time, telling branch managers to use nearby pay phones, according to Forbes. Meanwhile, the stores’ prices were often 20 percent below that of their competitors.
In 1961 the brothers changed the name to Aldi, which is short for Albrecht Discount, and the business continued to grow. But that wasn’t enough to keep the siblings from squabbling. In the early 1960s, Theo and Karl had a disagreement over whether or not the stores should sell cigarettes (Karl reportedly believed tobacco products would attract shoplifters). As a result, the brothers amicably split the business — Karl led a (cigarette-free) division called Aldi Sud that controlled the stores located in the southern half of Germany, and Theo took the stores in the country’s northern half under Aldi Nord.
After expanding internationally across mainland Europe, the first Aldi store opened in the US, in Iowa, in 1976, with Karl’s Aldi Sud expanding throughout the Midwest and Eastern regions of the U.S. over the subsequent decades. In 1979, Theo’s Aldi Nord bought a small California grocery chain called Trader Joe’s reportedly because liked the chain’s commitment to low prices and the stores’ loyal customer base, according to Fortune.
Today, Aldi’s popularity has exploded in the U.S., with the number of locations roughly doubling over the past decade. Much of that growth came after the company saw an opportunity to lure in frugal shoppers after the 2008 financial crisis and subsequent economic recession forced American shoppers to seek out better deals.
Aldi now sells fresh produce and meats, but cheap prices are still a big part of the draw. Aldi has said in the past that it offers double-digit discounts compared to many of its local competitors, and CNBC Make It reported recently that many Aldi products are cheaper compared to prices at Walmart, including everything from peanut butter to long grain rice.
The original no-frills sensibility is also still evident at Aldi: The typical Aldi store still displays food items in the cardboard boxes in which they were shipped to the store, stacked on wooden pallets (rather than tidily organized on shelves like at most large grocery chains). And Aldi shoppers are encouraged to bring their own shopping bags (Aldi charges at least 10 cents per plastic shopping bag) and they have to deposit a quarter to use an Aldi shopping cart (they get the quarter back when the cart is returned).
Aldi Nord still operates as Trader Joe’s in the U.S., with more than 465 stores that bring in an estimated annual revenue of $13 billion. Its nationwide customer base that flocks to stores for low prices on popular Trader Joe’s-branded items like mini avocados and frozen orange chicken.
The Aldi global empire, which has more than $80 billion in estimated annual revenues, has big plans to keep expanding in America. The company has said it aims to be the third-largest grocery chain here by 2022, behind Walmart and Kroger, with 2,500 stores. Its success has forced large chains like Whole Foods, and even Walmart, to lower their prices to compete.
Theo and Karl Albrecht died in 2010 and 2014, respectively, leaving behind a fortune worth an estimated $38.8 billion.
But even after the Albrecht brothers became very rich men, they reportedly eschewed any showy spending of their massive wealth and remaining frugal to the core. Famously, after Theo was kidnapped for 17 days in 1971, he successfully petitioned the German government to be able to claim the 7 million deutsche marks ransom (about $4 million US today) as tax deductible. And when Theo died, his obituary in The Guardian noted that “he always wore cheap, ill-fitting suits and used pencils down to the stub” even though he could easily afford the best of everything.
The brothers also lived most of their lives in relative anonymity, generally declining to speak to the press, and the Albrecht’s heirs are still reluctant to step into the public eye today. However the family has been making headlines recently due to a fight over the massive fortune the Aldi founders left behind.
Theo’s late-wife, Cacilie Albrecht (who sat on the board of the Markus Foundation, a holding company that holds roughly 61% of the shares in the Aldi Nord, reportedly worth over $21 billion) cut her daughter-in-law and five of her grandchildren out of the family business, according to The Guardian.
The move reportedly sparked an ongoing legal battle in which billions of dollars could be stake. Cacilie accused her daughter-in-law and grandchildren of the one thing not typically associated with the Albrecht family — “lavish spending,” according to The Guardian, which reports that daughter-in-law Babette Albrecht has been shunned by the family for spending money on items like expensive artwork and vintage autos.
IMAGE SOURCE: PIXABAY
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MSBM - UK
The course explores the role, procedure and related dynamics of the purchasing function in the food and beverages sector.
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