The 5 Secrets to Aldi’s Private Label Success

At the Private Label Manufacturers Association (PLMA) trade show, Aldi U.S. President Dave Rinaldo shared valuable insights on how grocers can drive the continued success of private label products. Here are the five key principles that Aldi follows to excel in the private label space:

1. Commit to Quality

• Aldi’s focus on quality is relentless, emphasizing that quality should always come first. The company samples 35,000 items annually to ensure its private label products meet the highest standards. Rinaldo advised other retailers to avoid cutting corners on quality to boost margins, stating that compromising quality ultimately harms long-term success.

2. Innovation Needs to Be Constant

• Rinaldo emphasized that the era of “boring” private label products is over. Innovation and excitement are key to engaging and retaining customers. By combining innovation with competitive pricing and quality, grocers can create a winning formula that keeps customers excited about private labels.

3. Lower Operating Costs

• Aldi focuses on reducing operating costs and reinvesting those savings back into the business. This strategy helps create a “flywheel” effect where increasing volume and customer satisfaction drive continuous reinvestment, allowing Aldi to maintain low prices while enhancing product offerings.

4. Be Transparent with Customers

• Trust is crucial for customer loyalty. Rinaldo encouraged grocers to be upfront with their customers and avoid tactics like changing product sizes or prices to manipulate short-term transactions. Aldi’s fanatical customer base is a testament to the company’s commitment to transparency and trust, which results in long-term success.

5. Put Shoppers at the Center

• According to Rinaldo, customers should always be the top priority. Retailers must consistently deliver on price and quality to keep shoppers loyal. If grocers take customers for granted, they risk losing them to national brands.

Expansion Plans

• Aldi’s growth strategy is aggressive, with 240 new stores planned for 2025 and 800 new locations over the next five years. The expansion will be funded by a $9 billion investment and includes acquisitions like Southeastern Grocers. Aldi is seeing strong demand, particularly in the Northeast, and plans to enter new markets like Las Vegas.

Challenges

• While Rinaldo is confident in Aldi’s growth, he acknowledged supply chain capacity as a significant challenge, particularly with such rapid expansion. However, Aldi is prepared to work closely with its supply partners to meet the demand.

These principles have been key in driving Aldi’s success and will likely continue to shape the grocer’s future in the competitive private label market.