Germany Aldi Süd Makes U-Turn in Bakery

Matthias Queck (Research Director)
06 February 2018
"Meine Backwelt" - "My Bakery World" is Aldi Süd's new, more emotional approach to offering fresh bakery goods instore, replacing the old, unattractive vending machines.
Unternehmensgruppe Aldi Süd
"Meine Backwelt" - "My Bakery World" is Aldi Süd's new, more emotional approach to offering fresh bakery goods instore, replacing the old, unattractive vending machines.
Aldi Süd is finally changing its strategy for bakery. The discounter is replacing the untempting automated baking ovens in all its German stores with self-service counters. With the "Meine Backwelt" concept, Aldi Süd has decided to pursue a process that all its discount competitors rely on, including Aldi Nord and Lidl, which means manual baking by the store staff and transparent product presentation rather than fully automated preparation behind a wooden wall.

This will allow Aldi Süd to offer up to 40 fresh baked goods at a self-service counter in all its stores, up from some 15 currently. Aldi Süd in Germany had 1,890 stores at the end of 2017, with gross sales of EUR16.6bn according to preliminary LZ Retailytics data. With average sales of EUR9,100 per square metre, it is the most productive retail banner in Germany (one-store banners aside).
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Matthias Queck (Research Director)
Matthias Queck (Research Director)

Opinion Pretzel ex Machina

06 February 2018
Aldi Süd is finally giving in. It was the only discount operator to have developed a fully automated instore bakery (the fact that it was a real baking process was temporarily disputed by bakers’ lobbyists) – quite the old-school Aldi way: Efficient, cost-effective, hygienic, easy-to-handle, low personnel expenditure, few write-offs, limited offer.

Huge, orange-ish and later black boxes where the shopper could not see but only guess what happened inside; and buttons which when pressed told (yes, there was a voice!) the excited customer that she/he may have to wait 18 more minutes for the sunflower bread to be ready-baked. Plus, other shoppers turning around at the sound with sympathetic glances, pressing another button instead (just like laboratory rats that have learned their lesson) hoping that they’d win the jackpot – a bread or roll coming out of the ‘woodwork’, ready-baked and still warm.

The bread was good though, and I think one of the best pretzels I had over the past ten years or so came out of this wondrous machine - pretzel ex machina. - Aldi Süd had known about the issues with perception for many years. LZ reported as long ago as 2015 that it was trialling conventional concepts. Around a year ago the decision was made to change the system. So, why did it take so long?

What went wrong? Aldi Süd must have fallen hopelessly in love with its supreme technology, its surely impressive, fully-automated machine and, more so, the massive cost savings versus manual bakeries. The efficiency machine in perfection. After all, the roll-out now means nothing else than – at least – one additional staff member per store, adding new costs in addition to all the store refurbishments and new supermarketisation elements such as broader ranges and brand promotions.

What Aldi Süd obviously misjudged was that it was no longer in a position to make shoppers compromise on variety and transparency (no fresh product was visible to shoppers) for presumably good quality and a decent price. It misjudged that the times had passed when a customer would “make every concession” if he only could save, the mantra of founder Karl Albrecht. (Equal savings are now available at other discount stores and even some supermarkets.)

Reacting to Lidl by establishing an offer that remains behind the benchmark set by the rivals, at least in a customer’s view, surely wasn’t the perfect way to progress forwards. Sister company Aldi Nord, in this case, benefited from the last-mover advantage, watching how it all went and then betting on a conventional system.

Aldi doesn’t like instore bakeries, and we understand why – because they are expensive to run, in every regard. But they have become a standard now in discount stores, and competition is too strong for Aldi, no longer in the exceptional position it once was, to diverge from the norm. A new study in Austria just showed that the discounters have outstripped the supermarkets in shoppers' assessment of bakery goods. In the US, though, Aldi Süd has only just started some instore bakery tests (again), a few months after Lidl’s launch in the market.

But in Germany, Aldi Süd has another trump card to roll out together with the new Meine Backwelt concept – its Coolbox, separate shelves for convenience and food-to-go that it has already established in most its Austrian stores (alongside the Backbox manual bakery system). Similar shelves can also be found in the UK.

It’s not only about fresh bread for Aldi. It is about some fresh air as well. Aldi’s foreign operations, once again, are the ones that are showing the ability to provide solutions for the issues faced in its home market.
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