Finance Finance News Aldi chooses new partner in supermarket wars

Aldi chooses new partner in supermarket wars

The sky is the limit for Aldi's ambitions. Photo: AAP
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Aldi is changing gears in its ongoing plan to win the wallet of more Australians – the supermarket chain has just switched media agencies.

It has dumped its partner of 14 years, an agency called Maxus, and is instead hooking up with ZenithOptimedia.

In the world of advertising, creative agencies get a lot of attention, but the money really flows through the companies that set strategies and do the media buying.

That means they choose where the ads go; papers, magazines, online, radio, TV, in-store and flyers. They also butt heads to do the pricing deals.

Aldi is keeping its creative partner, BMF, which brought us ads like the one below.

The change in media agency suggests Aldi wants to get even more bang from its advertising spend, which hit $42 million last year. That’s big dollars and is a magnet for media companies facing shrinking ad revenues.

Long gone are the days when Karl Albrecht, the original founder of Aldi, refused to advertise as part of his push to eliminate costs.

Aldi’s new partner, ZenithOptimedia, is already a big hitter, handling contracts for the likes of Tennis Australia and is part of a global chain of advertising agencies called Publicis.

Peter Murphy, principal of OMG Creative, told The New Daily that connecting with a big agency brings advantages in terms of access to potential partnerships with TV shows and events that are seeking sponsors.

“If you’re a big firm, people will come to you with the deals first,” he said.

By connecting with Zenith, Aldi hopes purveyors of sponsorship deals will start knocking the door down.

Aldi’s old media buyer, Maxus, hooked it up with the TV show The Block. As the contestants renovated, they snacked on Aldi foods and used Aldi products. But The Block, while still reliable, is not the big ratings winner it was a few years back.

Shaking things up

Matt James, CEO of Publicis media, has hinted the new partnership with Aldi could bring big changes to how the retailer advertises.

Aldi wants to expand its consumer reach. Photo: Getty
Aldi wants to expand its consumer reach. Photo: Getty

“Having Zenith partner with a disruptor such as Aldi is set to be an exhilarating journey,” Mr James said.

The timing of the change is crucial, as the German invasion of Australia’s grocery sector is going faster than ever. It’s going national and changing the way it does business on the east coast to deliver Coles and Woolworths a bit of shock and awe.

Aldi has opened 100 new stores in the past two years and now has over 400 nationwide. Aldi is also boasting of lifting sales by around 20 per cent to $5.8 billion in 2014 but Fairfax Media says that figure could now be $7 billion.

Its recent expansion into Western Australia comes at a perfect time, as the WA economy hits a serious roadblock and unemployment shoots up to 6.2 per cent.

Coles and Woolworths, meanwhile, are bleeding while Aldi prospers.

Coles food sales growth has slowed down rapidly in the last year as this next graph shows.

Source: Wesfarmers first quarter 2016 sales results.
Source: Wesfarmers first quarter 2016 sales results.

Woolworths’ sales in its food and petrol business went backwards in 2016 compared to the year before.

The fresh food gamble

WA champagne tastes give way to beer budgets. Photo:Getty
WA champagne tastes give way to beer budgets. Photo: Getty

Having captured territory and a great number of hearts and minds, Aldi is going after Coles and Woolworths in their strategic stronghold: fresh food.

This represents a giant threat to Coles and Woolies – if it works. If it doesn’t work, it also represents a big threat to Aldi.

Aldi has got where it has by being cheap (last year it was around 6 per cent cheaper than Coles and Woolies for a basket of Christmas specials, according to CHOICE).

But if Aldi starts extending its selection of fresh fruit and veg, they put their low cost base at risk. Supplying consistently fresh fruit and veg demands a lot of work behind the scenes.

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