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Aldi Pressing Suppliers Over Cost

05/13/2024

To maintain the image and reality of Aldi as a deep discounter offering low prices on private brands, the Company is “urging suppliers to drive down costs”.  The secondary consideration is to enhance sustainability consistent with Aldi values.  In return, Aldi is offering long-term supply contracts and collaboration on business development.

 

The corporate policy of Aldi is exemplified in the comment by Scott Patton, Vice-president of National Buying who stated, “I can’t state the importance of reducing costs.” This is a logical and fundamental objective inherent to Aldi but should take into consideration the cost structure of many items including eggs for which feed represents over 60 percent of nest-run cost.

 

Aldi should be cognizant of the need for suppliers to generate an adequate margin to provide a return on investment and to allow for depreciation of equipment and facilities in the production of food items supplied to the company.  Recent experience in the U.K. where chains nickeled and dimed free-range egg producers into negative returns resulted in a sharp reduction and availability as producers ceased production. 

 

Generally, Aldi has a harmonious relationship with egg suppliers although the company wields a sharp pencil.  If Aldi requires producers to invest in sustainability including installation of solar panels or wind generation of power or other improvements to enhance welfare, then it must be prepared to provide a satisfactory return.  If margins shrink in response to higher specifications without compensation, Aldi may be deprived of supplies.  Eggs are an important component of the grocery basket, and supply cannot be compromised.