Private Label Buyer Blog

ALDI and Lidl Seek Private Label and National Brand Balance

July 7, 2014
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I ran across a nice piece in my hometown paper this morning that squarely targets one of the most-intriguing aspects of the private label industry today: astute balancing of store brands and national brands. And this process entails much more nuance that you might initially expect.

The article (Chicago Tribune, “In discounter war, will ALDI’s Coke rush fall flat?”) shows two highly mature German private label retailers facing off in a battle for market share using competitive pricing on a national brand (Coca-Cola) as a key chess piece.

That ALDI would center a strategy on a national brand might seem counterintuitive—and at first glance it is. But ALDI can make this work. It just needs to plan ahead and make each move with intentional foresight.

ALCI and Lidl both operate in the discount channel, but the nature of retail today challenges the C-suite to seek incremental growth by targeting shoppers who typically shop outside of your given channel (particularly in a stagnant market like today’s in Germany). And an internationally known brand like Coke can drive business—even if you are ALDI.

Part of this equation is a question of retail brand positioning. As the Tribune article correctly notes, if ALDI flexes its corporate philosophy too much, it could unduly damage the underpinnings of what made the retailer great in the first place—and in ALDI’s case, that means a strong value proposition built upon a diversified approach to private label. Expending too much energy on corporate strategy tied to national brand could dilute its messaging.

But creatively balancing private label and national brands is vital to long-term, sustainable success. If your shoppers want Coke, give them Coke. But work with your supplier to streamline messaging and pricing strategy. Plan ahead from an R&D perspective and build your soda set to avoid product cannibalization and to nicely complement the brand. And don’t shoot from the hip and second-guess your tactics like Lidl seems to have done.

Every retail dynamic—dialed down to organization, channel, region, current and aspirational shopper demographics, etc.—has an inherently advantageous mix of private label and national brands in every category. But hitting that sweet spot is rarely a result of happenstance—and it rarely stands still.

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