Atherstone, England, March 31 - Even fast-growing German discounter Aldi is feeling the effects of the recession in Britain, with sales growth dipping below 20 percent because of weaker demand for non-food goods, its managing director said.
But Paul Foley told Reuters on Monday food sales remained strong and were comfortably outperforming rivals -- even excluding new store openings -- despite the launch by market leader Tesco of a range of discount brands.
"The food sales are growing and they're growing at the same kind of pace as they were growing through the last 15-16 months," Foley said in an interview at a store close to Aldi's British headquarters in Atherstone, central England.
"But the non-food sales are slowing. This is not an easy climate to persuade people to buy a new television, a new water butt, a new wheelbarrow. People are in the mode at the moment of thinking the old one's OK."
Aldi, the world's tenth biggest retailer with over 7,000 stores across the world, has been a rare beneficiary of the consumer downturn, with sales in Britain soaring 25 percent to 2.15 billion pounds ($3.1 billion) in 2008.
It makes just under a fifth of those revenues from "special buy" sales of non-food goods which vary with the season.
Foley said four-weekly sales data from market researchers TNS and Nielsen due on Tuesday would show total annual sales growth dipping below 20 percent.
But he said Aldi was still outperforming bigger rivals, like Asda, Sainsbury and Morrison as well as Tesco, though he declined to give a like-for-like sales figure.
Foley said Aldi's success was not just a product of the economic downturn. Rather, it stemmed from a business review in 2000 which led it to add more fresh foods, target larger stores, tailor its offer more closely to British tastes and introduce a premium "Specially Selected" range.
This drove mid-teens percentage growth in sales in 2006-07, with less than half from new stores, well before the recession.
HERE TO STAY
Foley dismissed suggestions that discounters, which have a British market share of around 6 percent, were just picking up business from the demise of predecessor Kwik Save.
About a half of Aldi's shoppers are now from the wealthier ABC1 social categories "which has traditionally been completely the territory of supermarkets," Foley said, adding it was taking custom from all its bigger rivals.
"The bigger the operator, the more vulnerable they are because they just have more to nibble at... (But) I certainly don't target one particular operator," he said.
Tesco's discount brands, launched in September in a bid to tap fast growth being enjoyed by the likes of Aldi and German rival Lidl, had not dented growth, Foley said.
"When they actually launched it they did me a very big favour because they advertised all my prices... What they basically told the consumer, I believe, is if you want to know what the benchmark for a good price is, go to Aldi."
Foley did not think discounters in Britain would ever reach the 40-percent-plus market shares they enjoy in Germany, but saw 20 percent as a long-term possibility.
Aldi, which opened in first British store in 1990 and now has 457 across Britain and Ireland, has invested 500 million pounds over the past three years. It plans to continue at that pace, opening around 40-50 stores a year, with an ultimate goal of about 1,500, Foley said.
Aldi claims to be 25 percent cheaper than rivals for a shopping basket of similar "quality" -- Foley's buzzword.
"Just because it's cheap doesn't mean to say it's low quality," he said, explaining low prices came from running a lean business, not compromising on ingredients.
Aldi sells about 1,000 products against over 20,000 at a typical supermarket, with no duplication ensuring it can meet "at least 80 percent" of a shopper's weekly needs, Foley said.
About 95 percent of its products are own brands, which it buys in bulk and transfers straight to shelves on pallets, and it also employs fewer staff -- just 12 in the Atherstone store.
"It's a model the big four (supermarket groups) just can't copy," Foley said.