ALDI Group: A Marketing Communications Plan, Essay Example

Introduction

ALDI Group, a global retail grocery conglomerate based in Germany offers consumers exceptional products at modest prices on high value products made possible through agreement with local suppliers in the Company’s varied national markets (ALDI USA 2010). In 2008, ALDI Group’s revenues reached an estimated $65,700.0 million in tendered sales, with distribution across all markets. Adequate analysis of the Group’s channel marketing strategy requires industry data on the overall picture of the various market regions, and also product segmentation analysis and customers response.

Definition of Marketing

Prior to globalization, grocery marketing was relatively direct, in that advertisers and marketers merely sought synthesis between consumers and product line. Since the 1950s, national brands presented through multi-marketing channels on television, press and public advertising offered marketing professionals a platform for traditional research methods. Instruments such as household surveys were considered effective enough, and consumer market segmentation was treated as a dependent variable, whereby the product and its magical qualities would fulfill demand if only it was transmitted right to the consumer. Contemporary marketing analysts now interface those more traditional approaches with new methodologies of data collection (i.e. internet) and dissemination that include consumer preference, psychology and global aggregates on trends in consumption as the formative basis for research and development of products.

Introduction of Product/Service

A global retail grocery conglomerate, ALDI Group extends its reach through partnership with winemakers and brewers around the world in order to bring consumers ‘exceptional beers and wines at remarkably modest prices’ (ALDI USA 2010) The Company’s selection of wines are purchased from many of the world’s best wine producing regions: Germany, France, Spain, California, Argentina, and Australia. National market coverage varies, and some ALDI’s supermarkets carry select brand labels, while others carry wines and spirits native to the region more intensively. In economies of scale where there is a broad stratification of cultural and ethnic diversity, not to mention income segmentation, like the United States, all products are exclusives to ALDI’s in order to sustain effective competitive edge through ‘honest to goodness savings’ in a national market with a large wine industry of its own unencumbered by volume discount.

Situation Analysis  

Growth regions in the United Kingdom and the United States offer a converse picture, with a high degree of response from the parallel segment, as middle class consumers seek quality at deep discounts. For instance, the Group’s planned U.S. expansion is linked to direct competition with Wal-Mart. ALDI has stiff competition, but the density of consumer purchasing in the country reveals that the retail grocery industry in the U.S. is comprised of about 65,000 supermarkets and other grocery stores with combined annual revenue of about $465 billion, of which seventy percent of those sales are generated by fifty of the largest companies (Hoovers Industry Report 2010). Since its entrance into the United States in 1976, 10% of ALDI Group’s total global share is now an estimated $5.8 billion annually.

For producers and distributors of wine and spirits products, there are multiple retail channels selling products through a number of different channels, and seemingly unlimited consumer and price information furthers the density of availability and knowledge through online communications. An international conglomerate, ALDI Group has been exceptionally effective in meeting the flexible influences in global market demands, and recognizes the inherent volatility of the grocery market in general, as less than half of all buying decisions are made before the shopper goes into the store as shoppers are keeping their options open later into the decision process. ALDI Group’s market research mission is responsive to those shifts within the market, and promises to continue to be a leading provider of actionable, revenue-producing, differentiated shopper-centric solutions. As a result, targeted expansion of the Group’s retail wine product lines is dependent upon differentiated and integrated data.

ALDI Group and its wine manufacturer and distribution suppliers acknowledge that diversity of the retail grocer conglomerate’s consumer base is if not adequately addressed by product differentiation within the wine category(s), is ready for new product segmentation at present. As suppliers, wine manufacturers specialize first and foremost in the viticulture of their product; leaving consumer selection to the auspices of their distributors and supplier sales agents. ALDI Group recognizes that value added by new varietals or price points in the wine industry may vary according to crop year, and also to shifts within global tastes in consumer demand. Deep understanding of the market and the Group’s customers is in direct correlation with marketing efforts and in consumer decision often as localized as the site of purchase.

Marketing Strategy: Target Market(s) Positioning

ALDI’s philosophy of grocery retail is based on a ‘less-is-more’ approach, and the simplified strategy for retail operations is intended to address consumer demand without succumbing to the dangers of market saturation:  1) Purchasing power – translates to customer savings with 1,400 ‘select brands;’ 2) Streamlined operations – global operations with decentralized logistics equal cost reductions; and 3) Global standards – adherence to stringent quality standards intended to match or exceed leading national brand in taste, appearance, and/or performance in the various markets. Adequate analysis of sites for aggressive advancement of wine varietals within ALDI stores across the board requires data on the overall picture of the various market regions and segmentation analysis of both the wine industry and its customers, for future integration of operations and knowledge sharing with industry partners toward realization of the Group’s planned expansion in this product area.

Consumer segmentation research tells us much about the nature of consumer interest in certain products over others, and the qualities attributed to ‘luxe’ categories of grocery products like wine, upon in-store selection. From taste, type, vintage, and price point to often less known measures of decision making such as prestige and nation of origin, wineries and their products are subject to a range of decision making influences and patterns, not always within the control of advertising nor reach of the retail marketing team. Instrumental to changes within the national markets that Aldi Group benefits from the market research and analysis of its suppliers, and quite a few of the better known brand names associated with alcohol and wine stock products offer invaluable market insights into the current state of the industry.

Product Overview and Strategies to Consider

ALDI’s best strategy for advancement of its wine segment rests outside the EU market. At present, saturation of the European market is evident, in that European companies in this segment capture 63.9% of the market, followed by North American counterparts at 20.3% and Asia-Pacific at 14.3%. Given the stratification of the market measured against population of consumers, the median apportionment indicates that North American markets are the most primed for the expansion of wine product offerings, and quite ready to contribute to the overall ALDI global picture.

The US wine industry is constituted of approximately 1,800 companies with combined annual sales revenue of about $12 billion. Industry concentration is characterized by fifty major companies with more than eighty percent of market share (Hoovers 2010). Demand for wine is primarily driven by the restaurant and hotel industries, correlated to the level of business entertainment spending, and consumer income. In the United States, the wine industry is an economy of scale, driven by several strong regional production areas, and especially the West Coast region of the country, which includes the California wine industry. Small producers compete with big-volume suppliers through vintage of high quality wines that can then be sold at a premium price. As the industry is capital-intensive, with average annual revenues per worker at about $370,000, translation of costs to consumers may run high. ALDI’s challenge is to coordinate partnerships with large and mid range volume producers that also offer ‘luxury’ quality wines.

In 2009, the California vinters shipped approximately $467.7 million gallons (196.7 cases) of California wine to the U.S. wine market with a modest .02% increase to the prior year. Estimated retail value of those sales was about $17.9 billion, a reduction of 3% as U.S. consumers ‘traded down’ to lower priced wines in response to caution over spending (The Wine Institute 2010). This is not to say sales from all wine sources did not benefit, as the national market consumed steadily with an increase of wine sales to the U.S. from all production sources—California, other states and foreign producers—grew 2% to 767.4 million gallons (322.8 million cases) in 2009. At the international level, California wine shipments actually decreased by 1.2 % to 563.5 million gallons (237.0 million cases). According to the Nielsen Company, a global provider consumer information and analytics, growth overall all is seen with the American wines, while foreign wine volume was flat. In short, the United States revealed the most promising market for ALDI Group’s wine expansion strategy, while the European Union with its decreased imports by 22 percent to $380 million in winery revenues in 2009 compared to 2008 stagnated. Wine revenues in other regions in 2009 are as follows: Canada, $242 million, -7%; Japan, $79 million, +28%; Hong Kong, $47 million, +84%; and China, $36 million, +64%.

Pricing Strategy

Profitability depends on production volume and sales price. Translation of cost mitigation to consumers is directly dependent upon the volume of crop sales and production, and in the case of smaller wineries, distribution channels may also impinge upon price point. One of the strengths of ALDI’s German based operations has been the Group’s flexible approach to strategic opportunities during moments of economic downturn. A company known for its vision of offering the ‘cheapest’ high caliber products to its markets, ALDI has brought its ‘home,’ national and international brand grocery product lines to customers at the lowest possible prices while retaining the select-assortment concept indicative of specialty stores. The Group is reliant upon a tri-partite model of conducting retail business, which includes concentration on:

1. Purchasing power which translates to customer savings, by a large grocery retailer with focused attention on a limited number of 1,400 grocery and household items, of which are mostly ALDI ‘select brands’;
2. Streamlined operations that enable the corporation to reduce costs;
3. Adherence to stringent quality standards dedicated to matching or exceeding the leading national brand in taste, appearance, and/or performance.

Due to the high tariffs, taxes and additional costs generated by subsidies in the wine market, export of wines means incorporation of those additional costs into the price to consumer by retailers. The price chain has definitive influence on ALDI Group’s strategy in planning expansion of its wine product lines, and is deeply affected by externalities related to cost inflation in the various national markets. To this end, the Company has crafted a strategy that takes government cost inputs, and attendant regional regulation on industry and sales within the Group’s markets toward a sustainable model of growth in its wine products segment. ALDI’s appreciation of regional wine industries has enabled the company to partner with wineries to offer its customers the highest quality product at the most affordable price.

Distribution Channels

ALDI Group presents a viable case for study of current retail channel marketing, and the future integration of networked operations and knowledge sharing. Interpretation of the position of industry partners within the channel marketing relationship also contributes to the foregoing analysis of the Group’s entrance into regional markets, and its capacity to integrate internal systems of chain management with external measures of competitive performance.

From supplier selection to store location development and operations, each step in the distribution to market chain is managed to facilitate savings substantial enough to impact the everyday lives of consumers. ALDI’s channel operations-to-market strategy has had significant impact in economies of scale like Australia and the United States, where consumer confidence is vested in ‘honest to goodness savings’ sustained by volume discounts on regional products.

Channel marketing strategy by the ALDI Group looks at the total competitive picture in the retail grocery industry, as well as local trends in competition. For example, ALDI’s market share in its home market in Germany has seen a reduction due to the high level of competition. Retention of the Group’s 19% share has forced the stores in the region to offer shoppers more in terms of international brands, and better marketing incentives through semi-weekly promotions intended to capture a larger segment of the middle-class consumer demographic. Manufacturer promotional offerings are often involved in the multi-channel approach to consumer marketing, and ALDI employs this type of ‘partnership’ model in its product marketing mix across the board.

Internal analysis of ALDI Group retail supermarket chain operations advances recent theories on models of sustainable growth through integrated operations approaches to market segmentation analysis and channel marketing approaches to consumer advertising. Channel marketing systems that connect all aspects of retail operations allow companies to extrapolate data from customers, inventory and suppliers, that can then be used as feedback for the design of in-depth consumer insight research studies intended to look at both qualitative (i.e. ethnographic) and quantitative (i.e. demographic, fiscal, inventory etc.) results in dialogue with partners in the organizational chain.

ALDI Group’s multiple retail chain outlets sell products through a number of different channels, and to a seemingly unlimited number of consumers well educated on price information. Less than half of all buying decisions are made before the customer shops. Public advertising and reporting on price parity furthers accuracy in decision making as consumers confront the density of available knowledge through online communications. ALDI Group has been exceptional in product alignment in regard to flexible forces in global market demand, and incorporates volatility into its strategy in general, by way of local supplier relationships. Hence, ALDI is a leader in the grocery industry due to its dedicated channel differentiation of products to its national and regional segments. Initiation of product lines is dependent upon ongoing reporting on those distinctions, and the Company’s channel marketing model considers integration of supplier to market operations to be of high-value. The Company employs an ‘operating system’ as the key interface for integration of its decentralized inventory control systems in the various regions, and accountability at ALDI Headquarters in Germany. Cost analysis and logistics forefront the contributory effects that the well designed inventory control system offers; with market analysis through best-of-class shopper insights and category management methods and technologies secondary in data management priority.

The overall systemization of the Group’s retail stores allows rapid activation of Point-of-Sale insights toward the goal of advancing consumer preference in the stores, to development of better and new partnerships with suppliers with as close to ‘zero’ inventory levels in mind. Options to linking market knowledge with operational logistics are many, and include improved speed to market, more accurate hypothesis testing, increased revenue and more efficient spending. Channel marketing proceeds from this effect, and the impact on multi-channel  marketing strategies stand to benefit from the inventory control and tracking system which includes the Company’s global and regional marketing, sales and marketing research units. Through the ROI, ALDI is able to align brand strategy with retail strategy, and overall product to market execution.

Integrated Marketing Communications

As ALDI Group moves toward expansion of wine segments in the United States and elsewhere like Australia and New Zealand that are comprised of avid consumers of both national and foreign wines, the company also looks to two major trends within the market that reflect both: 1) the gender flux within market segmentation indicative of a split between men whom consume for health purposes (American Heart Association 2007, and Barclay 2009), and women whom purchase based on preference (Matasar 2006); and 2) green consumerism that has affected selection within the wine market according to organic elements and inclusion of codes of sustainable winegrowing on brand labels, and in particular in the U.S. and South Pacific consumer and industry segments (Wine Institute 2010).

Promotion Mix Strategy     

The ALDI’s promotional strategy for promotion of its wine segment in national and regional markets interfaces the Company’s traditional marketing strategy with television and print advertising, and discount promotions, with new media promotional tools for online and event transmission of its wine products.

Message Strategy

Unencumbered volume discounts with regional vinters enables ALDI’s to offer ‘honest to goodness savings’ on wine product exclusives.

Promotion Tool #1: Wine Bottle Labels with ALDI’s exclusive logo in partnership with regional wineries

Promotion Tool #2: New media links announcing weekly wine offerings

Promotion Tool #3: Sponsorship of events through banner and other print media (e.g. programs)

Conclusion

While consumers traditionally have based wine purchase on things like occasion, taste, quality, price and packaging, one mitigating factor which is third-party recommendation has been tossed into new a new marketing mix predicated upon environmental factors, and in general health. Unlike decades past where wine fulfilled an advertising idiom related to prestige and wealth, it is now health and affordability at the least cost to the planet that grocer’s like ALDI’s must consider.

References

Aldi Group USA (2010). Retrieved from: http://www.aldifoods.com/us/html/company/7255_ENU_HTML.htm?WT.z_src=main

ALDI Group (2010). Hoovers. Retrieved from: http://www.hoovers.com

Barclay, L. (2009). Drinking Up to Half a Glass of Wine Daily May Increase Longevity in Men. Journal of  Epidemiological Community Health. Medscape Medical News. Retrieved from: http://www.medscape.com/viewarticle/702519

Campbell, G. and Guibert, N. (2007). Wine, Society, and Globalization: Multidisciplinary Perspectives on the Wine Industry. New York: Palgrave Macmillan.

Consumption by Country (2010). Wine Institute. Retrieved from: http://www.wineinstitute.org/files/PerCapitaWineConsumptionCountries.pdf

Consumption By Volume (2010). Wine Institute. Retrieved from: http://www.wineinstitute.org/files/WorldWine%20ConsumptionbyVolume.pdf

Giuliani, E. Et al. (2010). Who are the researchers that are collaborating with industry? An analysis of the wine sectors in Chile, South Africa and Italy. Research Policy, Jul2010, 39 (6):748-761.

Light Wine Intake Is Associated With Longer Life Expectancy In Men (2007). American Heart Association. Retrieved from: http://www.supercentenarian.com/archive/wine.html

Matasar, A. B. (2006). Women of Wine: The Rise of Women in the Global Wine Industry. Berkeley: University of California Press.

Piercy, N. F. (2008). Market-Led Strategic Change: Transforming the Process of Going to Market. Oxford: Butterworth-Heinemann.

The ‘Green Buying’ Influence on Consumer Wine Purchases: California Wine Leading the Way in Sustainable Winegrowing (2010). Wine Institute. Retrieved from: http://www.wineinstitute.org/resources/consumerfeaturestories/article335

Women Spur New Trend In Wine Marketing: California Women in Wine Move into the Marketplace (2010). Wine Institute. Retrieved from: http://www.wineinstitute.org/resources/consumerfeaturedstories/article334

World Vineyard Acreage by Country (2010). Wine Institute. Retrieved from: http://www.wineinstitute.org/files/WorldVineyardAcreagebyCountry.pdf

World Wine Production by Country (2010). Wine Institute. Retrieved from:  http://www.wineinstitute.org/resources/worldstatistics/article87