Aldi reunited?

On the face of it, these are great times for Aldi, the discount retailer set up by Karl and Theo Albrecht in 1946. The group now has 10,000 stores, employs 170,000 people and has sales of over €60bn a year. It is fast expanding beyond Europe, having recently bought the Bottom Dollar Food chain in the US. According to a recent article in Germany’s Manager Magazin it is planning to open stores in China.

But there is a huge question mark over the group: can it survive the death of its founders in its current form? Karl died earlier in 2014 aged 94 – his brother died six years ago at 88 – and there are doubts about whether the idiosyncratic group can continue to tolerate its own peculiarities now that they are both dead.

The problem, essentially, stems from a decision in 1960 to split the group into two, called Aldi Sud, run by Karl, and Aldi Nord, run by Theo. (This was due to a disagreement either over whether to sell cigarettes, or a loan, depending on which version you believe.) Although they are legally separate, regulators allow the two to be considered a single entity for the purposes of purchasing products like milk and toilet paper.

But the two halves have distinct cultures. The conservative – arguably backward – Aldi Nord relies heavily on the established markets of France, Denmark and the Netherlands, and its shops are often shabby. (Oddly, it has also owned the California-based chain Trader Joe’s since 1979.) 

Aldi Sud, however, is a much more thrusting business, expanding into the UK and Australia, and is behind the recent US and mooted Chinese expansions. Aldi Sud’s management structures and technology are also far more up-to-date. Between 2008 and 2013, Aldi Nord grew at just 2.9%, ẃhile Sud grew at 7.8%.

The cultural differences might be getting even greater. Following Karl’s death there was a power struggle between the professional managers and the Heister family which runs Aldi Sud, according to German reports. The ambitious family are thought to be worried about Aldi’s domestic business, as it has been overtaken in recent years by rivals such as Lidl and Netto.

If the group is to keep up, goes the logic, the Nord branch has to up its game. Are they up to it? According to Manager Magazin, one leading member of Sud thinks not, and said that within the next five years it should take control of Nord. That might fall foul of anti-trust regulation. It might also be complicated by the foundations which divide up the two halves of the business between the family members.

But it raises the prospect that the family’s ambition could see a business which separated five decades ago once again become united. What such a power grab would do to the family is another question.