Sunday 25 August 2019

'We'll keep on adding stores here as long as we are growing our sales' - Aldi Ireland MD Giles Hurley

The German supermarket giant now employs 3,200 staff in Ireland after spending €1.2bn

Giles Hurley, Aldi Ireland
Giles Hurley, Aldi Ireland
John Mulligan

John Mulligan

Giles Hurley breezes out of the conference room at the Heritage Killenard Hotel just outside Portarlington. The managing director of Aldi Ireland has just been rallying the troops - suppliers in this case - and fielding what he says were some tough questions.

About 400 delegates attended the day-long conference and got to meet Aldi's buyers face-to-face to talk about their products and what the German discounter is looking for.

"Our message was focused on some of the challenges there are now in the market for our suppliers," says Hurley, who's squeezing in an interview before he legs it to the airport to catch a flight to Scotland.

Brexit is an obvious challenge, but suppliers - Aldi has about 175 in Ireland - also quizzed Hurley about why they should be doing business, or more business, with the chain. This is no place for wallflowers.

"There's also unprecedented levels of competition, currency and (grocery) deflation, Brexit on the horizon and a general air of uncertainty," says Hurley (42), who lives in Warwick in the UK Midlands and commutes regularly to Ireland and Scotland in his role as an Aldi managing director with responsibility for the two countries .

He oversees almost 130 Aldi outlets in Ireland, having joined the group as an area manager 18 years ago when there were just five here.

Giles Hurley
Giles Hurley

"We have known challenging times in Ireland, but this is a little different," he adds, pointing out that the conference with suppliers was about reassurance as much as anything else.

At least Aldi has a solid market position to console them, if that's what part of what they needed. The retailer is also neck-and-neck with fellow German discounter Lidl in terms of their share of the grocery market in Ireland.

According to the latest figures from research group Kantar Worldpanel, Aldi has an 11.6pc share of the market in terms of value of sales. Lidl has 11.7pc (Tesco and SuperValu are joint first, each with 22pc).

Back of the envelope calculations based on sales figures from SuperValu results in both Aldi and Lidl each likely generating annual sales in the region of €1.4bn in Ireland.

Aldi doesn't split out its numbers for Ireland, but the chains work on wafer-thin margins. Aldi's combined UK and Ireland operation posted revenue of £8.74bn (€9.9bn) last year and a £255.6m (€289.5m) profit. Sales were 13.5pc higher, but profits were down 17pc as the chain kept margins low amid intense competition.

Aldi and Lidl did well from the downturn, with their promise of lower-priced, quality produce resonating with hard-pressed consumers. And they have managed to hang on to shoppers who had ventured through their doors nursing their pay cheques.

Hurley says the customer remains "at the heart" of Aldi's decision-making, and that pushing products made in Ireland yields dividends for the chain. He also reckons that Aldi's share of sales volumes is probably "three of four percentage points higher" than the share based in value of sales.

"Consumers in Ireland want to buy Irish," he says. "With Irish product comes that sense of assurance and quality and of supporting our own."

There's no doubt that for many suppliers, the push by grocery chains here to stock innovative produce has spurred growth in the domestic food sector. New Irish products emerge all the time, with some, such as Kerrygold Shortbread Biscuits and dairy-free ice-cream maker Nobo, managing to quickly break into global markets.

Aldi spent about €700m buying from Irish suppliers last year. Among the companies doing well from a relationship with the chain is Waterford-based Blackwater Distillery. Its small-batch Boyle's Gin is being sold exclusively through Aldi, and the chain has bagged 15,000 cases worth £300,000 (€340,000) to sell in its UK stores in the run-up to Christmas.

Aldi has a 6.9pc share of the UK grocery market, which is worth a total of about £180bn (€204bn), so the potential for Irish suppliers that get a toehold in the market there is significant.

But could the focus by grocery retailers on beefing up their relationship with Irish suppliers and showcasing Irish food as a selling point become tired, now that all of the main grocery chains have latched on to it?

"The key is to continue to breathe life into it," says Hurley. "You have to continue to innovate and that means always working with the supplier base to find the best new products and opportunities." And those new opportunities include pushing sales of Irish products into other Aldi geographies, as has happened with Boyle's Gin.

"Having fostered these relationships, to support those suppliers to continue growing their volume is a great story," he says. "As their volumes grow, it's good for their cost base, and that's a benefit for us too."

Hurley insists that the provenance of food, especially for millennials, remains important in their grocery buying decisions.

But concerns over so-called food miles often evaporate when the cold, hard reality of pricing comes into the equation. Will consumers really pay more for a vegetable or fruit grown in Europe rather than one imported from say, Morocco?

"There is a bit of an irony," Hurley concedes. "Consumers would like everything, but they want it in a way that's sustainable. I think that's a bit of a challenge for retailers in terms of how we do that. But if Irish consumers want Irish strawberries in April, let's find a way to make that happen."

"People have to vote with the money in their pockets," he agrees. "Basmati rice is always going to come from India. Parma ham will always come from Italy, but there are lots of other areas where there are opportunities to innovate. And you don't have to have a hefty price tag to get quality."

Born in Surrey, Hurley might have a strong English accent, but his parents are Irish and he has spent a big chunk of his life in Ireland.

He was a boarder at the pricey Headfort primary school in Kells, Co Meath, before returning to the UK for his secondary education. He studied history in Trinity College, Dublin, and taught English in China before heading home and joining the McDonald's graduate training programme.

Hurley applied for his first Aldi job using his address in Donegal, despite being based in Dublin at the time.

"I think in those embryonic days in Ireland they thought: 'Oh there's somebody from Donegal and we've got a store in Letterkenny'," he says on first getting through the Aldi door.

The pace of investment quickly accelerated.

A study prepared for the chain this year estimated that Aldi, which employs 3,200 people here, has spent €1.2bn on capital expenditure in Ireland since its debut, and contributed €1.2bn to Ireland's gross domestic product last year.

Earlier this year, the chain embarked on a €60m project to expand its array of fresh foods at its stores in Ireland. That has also seen it move fresh produce to the front of stores, and also trial bakeries.

Hurley says that Aldi and Lidl played a key role making own-brand products, or exclusive brands as he likes to describe them, more mainstream in Ireland.

"You just need to track the popularity of brands in Ireland over the past 15 years to see how it's changed," he says. "We're 17pc of the nappy market in Ireland now for instance. That's a massive share and makes us the second-biggest brand in Ireland."

Aldi hopes to open about 10 new stores next year in Ireland, and has €100m "ring-fenced", says Hurley, to open a total of 20 new outlets in the next three years.

"It's slightly quieter than we would have liked this year," he says, adding that there is "plenty coming down the tracks".

"How big are we going to get? It's difficult to answer. We'll keep on adding stores as long as we're growing sales. Another 20 will bring us to 150 stores. Could there be another 50 stores after that? Yes, I think there could be. We're under-represented in Dublin. It's a big opportunity. It's a great complaint to have that we want to open more stores more quickly."

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