A Secretive Family's Success What Makes the Aldi Discount Empire Tick
Part 2: A Family Shrouded in Secrecy
It took until the end of the 1990s for the product lines to change, in line with society, gradually and subtly, but with remarkable consequences. Smoked salmon replaced broad beans, Montepulciano wine lined shelves previously crammed with standard German Schnapps. And even middle-class consumers or good earners felt pleased with themselves when they wheeled an Aldi PC out of the store.
Aldi's firmly established presence in everyday German laugh contrasts with a dearth of information about its founders. The secrecy they shrouded themselves in at times seemed ridiculous. Questions to the management had to be submitted by fax. They rarely elicited an answer. This was generally attributed to the traumatic kidnapping of Theo Albrecht in 1971.
No entrepreneur and no company celebrated its own reclusiveness as rigidly as Aldi. The company would say that its founders had nothing to say because they were concentrating on the business. The company had grown because it did not feed a curious public with news, a close confidante once said, describing Theo's creed.
Enthusiasm, Perfectionism and Absolute Thrift
In Aldi's world, open communication was regarded as a mistake, or at least as a waste of time. Anyone who broke that code was a traitor. Almost everyone who provides information on the family or the company does so on condition of anonymity.
Enthusiasm for the product, perfectionism and absolute thrift -- those were the secrets of success for the Albrecht brothers. High-ranking executives would dig old pencils out of their desk drawers whenever one of the brothers paid them a visit, just to avoid causing any suspicion that they were wasting office supplies.
For decades, the brothers have focused on what they consider to be the essentials: the best quality product at the lowest possible price.
In the process, Aldi's product range has always remained relatively limited. The supermarket chain sells around 1,000 different articles. By comparison, the US retail giant Wal-Mart stocks up to 50,000 different products. But anyone who has ever stood looking at a supermarket shelf featuring 28 different kinds of fruit yogurt knows that sometimes less is more.
"From the beginning, Aldi has always focused on two, or a maximum three, varieties of a product, thereby helping the customer by making a useful pre-selection," says Thomas Roeb, a retail expert and former Aldi manager.
Reduced to the Essentials
The philosophy of reducing everything to the essentials is reflected too in the company's stores, where products are displayed on unadorned wire shelves or are simply placed in stacks on the floor, still in their protective plastic wrap. Every square meter of space is used. The aisles are just wide enough so that the customer does not perceive them as too narrow. Each store is like the others, so that customers can find their way around easily.
In no other supermarket are consumers confronted so directly with their own needs -- or with the bleak nature of discount shopping.
"Working for Aldi is hard graft, including on the upper management levels," says one top executive who has been with Aldi North for over 30 years.
The bare-bones philosophy also applies to the checkouts. While West German supermarkets started using scanners at the tills in the early 1980s, Aldi kept using classic price tags for years.
The cashiers had to learn the triple-digit code for each product by heart -- for which they got paid a bonus on top of their salaries. It was not until the turn of the millennium that Aldi South abandoned the system. Aldi North followed suit three years later. Both companies had optimized their own packaging before changing the system: For the chain's own-label goods, which account for 95 percent of the product range, the bar codes were printed on every side of the packaging. The innovation meant that the cashier did not need to turn the product around to find the bar code, thereby speeding up the checkout process.
It is this degree of perfection that still impresses retail experts. The company's internal processes are analyzed, monitored and controlled to an exhaustive degree.
Tough Standards for Suppliers
Aldi applies the same uncompromising standards to its own suppliers. Any firm that does not meet the requirements has a problem. At the end of May, Aldi North provisionally dropped the Italian manufacturer Tronchetti, a longtime supplier of paper tissues, toilet paper and kitchen rolls. The Italian company had apparently not implemented Aldi's demands for sustainability certification quickly enough.
All it takes is for there to be the suspicion of an irregularity or the risk that a product will be evaluated negatively for Aldi employees to turn up unannounced at a supplier's door. "They are faster than the food regulators," says one manufacturer. The Aldi workers demand to know about procedures, weak points and possible solutions, down to the smallest detail. They take their own samples and demand that improvements be made.
Should a supplier make public the fact that it does business with Aldi, a polite phone call will quickly make it clear that the company does not appreciate such publicity. Nevertheless, it is rare to hear any criticism of Aldi's business practices from manufacturers. The only information that can be wormed out of suppliers is that working with Aldi is hard but fair, and the company keeps to agreements.
"Every major supplier wants to work with Aldi," says Georg Heitlinger, a chicken farmer from Eppingen. "They are the best organized when it comes to the daily processing of orders -- they never let products go bad. They don't try to renegotiate deals after the fact, they stick strictly to the arrangements that have been made and they pay on time."
But even though Aldi's business model is simple and clear, the structure of the company -- which is actually two separate groups -- is very opaque. The two brothers have succeeded in making not only themselves, but also their firms, virtually invisible.
In 1961, Karl and Theo separated their spheres of retail influence into Aldi South and Aldi North. The dividing line separates a more sober, poorer and Protestant north from a pleasure-loving, wealthy and Catholic south. The difference can even be seen on the supermarket shelves. Aldi North stores exude spartan sobriety, while Aldi South sells such delicacies as vitello tonnato, an Italian veal dish.
Aldi North, which has its headquarters in Essen, is currently divided into 35 regional companies that rule over 2,535 stores. The southern branch has its headquarters a few kilometers away in Mülheim an der Ruhr and consists of 31 companies with 1,760 outlets. Those totals are constantly growing.
Legally, the regional companies are independent entities. Strategic decisions, however, are made in tandem by the two groups via an executive board. Purchasing is also done centrally using two purchasing companies. Profits do not flow directly into the pockets of the Albrecht brothers, but into two separate foundations, one for Aldi North and one for Aldi South.
With the intricate design, the brothers have not only ensured that Aldi's competitors do not know exactly how business is going at the company. The structure also prevents the company from being sold off one day, especially as the Albrecht brothers have not been involved in the day-to-day running of the company for some time.