Retail

Aldi Australia “guilty” of being a private company says local chief executive, but nothing’s changing

Dominic Powell /

The head of German supermarket Aldi’s Australian arm has admitted to being “guilty” of being too secretive about the private company, a statement that comes just weeks after prominent Australian entrepreneur Dick Smith lashed the company for not opening up and “sharing wealth”.

Aldi Australia’s chief executive Tom Daunt made the comments at a company event in Sydney this week, as reported by news.com.au. At the event, Daunt addressed the concerns from figures like Smith about Aldi’s covert operations, with the estimated $40 billion international company staying private over its 70-year history.

“We’ve definitely been guilty in the past of focusing on running the business, on taking care of customers, and we’ve invested no time or effort in informing interested parties in what on earth we’re doing,” Daunt said at the event, reports news.com.au.

“The benefits of that approach have been really clear: when we’re not having to spend time on explaining what we’re doing we’ve got more time to get on with [running the business]. But the disbenefits [sic] are also very clear.”

A privately-operated supermarket with a presence such as Aldi’s is somewhat of a rarity in Australia, with big-two supermarkets Coles and Woolworths being listed on the Australian Stock Exchange, effectively opening their financials and operations to scrutiny. Speaking to SmartCompany, retail expert Gary Mortimer beleives Aldi’s business model of staying private is unlikely to give them much of a significant advantage when it comes to running the business.

“They don’t need to publically list sales and profits results, but as a private company they still have to pay the same taxes and apply the same requirements for employment and food standards and such,” he says.

“I don’t see how they really benefit from being private. Aldi’s real advantages come from nearly 97% of their product being private label where they own the IP. That means they don’t have to pay manufacturers or wholesalers any margins on products.”

“They actually make much more of a margin on private label products, that’s why Coles has flagged it will move to 40% private label products over the next five years.”

Daunt says being privately owned has subjected Aldi Australia to “inaccurate misinformed information” about how the company operates, misinformation he says becomes more pronounced when Aldi can’t be compared to other supermarkets. But all in all, Daunt says private ownership is a “huge advantage” for the discount retail chain.

“Private ownership is a huge advantage for us. Unlike public listed companies that get a lot of pressure for short-term results, we don’t have to act that way,” Daunt said.

“We can always take a long-term strategic and sustainable view; our philosophy is if you partner with suppliers truly then you can develop a win-win scenario that is great for them and great for us and which benefits the customer.”

Mortimer believes we will never see a public Aldi in Australia or any other country, saying being a private company was “their business model”.

Last month, Smith’s iconic food brand Dick Smith Foods announced it would shut down, with the entrepreneur placing the blame squarely on the shoulders of new market disruptors such as Aldi and Amazon, which he claimed would send the company “into bankruptcy” in two years.

“Aldi has a formula — they’ve come here and imported most of their products while employing virtually no staff, they have 20% of the staff of the major supermarkets. That means they can sell at a really low cost,” Smith said at the time.

“Aldi is now the most trusted brand in Australia, and they’ve completely outmanoeuvred us.”

SmartCompany contacted Aldi Australia but did not receive a response prior to publication.

NOW READ: How Aldi Australia managing director Bronwyn Post motivates her team of more than 1000 employees

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Dominic Powell

Dominic is the features and profiles editor at SmartCompany.

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