Wednesday, April 23, 2008

Small-Format Food Retailing Memo: Aldi USA Creates Promotion That Hits Hot Buttons of Low-Price, Value, Meal Solutions and Quality

Small-format discount grocery chain Aldi USA, which is owned by German-based Aldi International, is launching a promotion in its over 850 U.S. stores this week that offers shoppers excellent value in today's challenging economic times, while at the same time offering consumers the convenience of having three premium-quality meal solutions or full meal menus provided for them in the promotion.

Aldi is calling the promotion "Feed a Family of Four for under $10" The ad in the grocery chain's weekly circular features three complete meals with an outdoor grilling theme. The three "meal solutions" contain a entree, a vegetable side dish and a starch side dish, along with items like marinades and sauces to be used in preparing the meals.

the first $10 dinner for four features chicken breasts (which the customer needs to grill or bake), frozen asparagus spears, a 16oz bottle of BBQ sauce (to use on the grilled chicken) and prepared potato salad from the deli department. The total cost of the complete meal for four people is $9.66.

Meal solution deal number two features fresh jumbo shrimp to grill on the BBQ, bagged garden salad, marinade for the fresh shrimp, along with salad dressing for the salad, all for $9.96 for four people.

The third and last meal solution with an outdoor grilling theme features filet of sirloin steak, a choice of ready-to-prepare scalloped or augratin potatoes and frozen premium green beans. The total cost of this outdoor-grilling meal solution for four people is $9.43, which is the least expensive of the three offerings. Who says you can't eat steak on a budget? At $9.43, that's less than $2.50 per-person for the complete meal.

Aldi, which sells everything from packaged, perishable and frozen groceries, to fresh meats and produce, specialty foods, garden supplies, housewares and more in its little 15,000 square foot small-format discount supermarkets, is even promoting an upscale, high-end propane-powered BBQ grill in the advertising circular as part of the promotion. The grill sells for an advertised price of $229.99

What's most powerful in our analysis about Aldi's "Feed a Family of Four for under $10" promotion isn't particularly the pricing on the grocery products advertised. The advertised prices are fairly low, but many supermarkets are advertising prices this week in their ad circulars that are just as low or even lower on similar items. Rather, its the bundling of the fresh and packaged food and grocery items into compete meals for four for under $10 that's the powerful idea and concept of the promotion. The unique consumer propostition if you will.

This offers numerous consumer benefits. First, it solves the problem most consumers have today when it comes to food at home. That problem is most Americans either can't figure out what to cook for dinner or don't do much home cooking in general. By bundling up the items as a complete meal, Aldo offers these time-pressed and home cooking-challenged shoppers three complete meal solutions (and menus) all at one time in the ad.

Second, by bundling the promoted items as complete meals, Aldi allows the shopper to immediate see the value he or she is getting. For example, four people, less than $10--good deal. After all, Burger King or McDonald's costs nearly twice as much per person for a burger, fries and a soda pop. The meal solution promotion not only offers readily realized value but also lends it self to such comparisons as the fast food alternative just mentioned.

Lastly, by offering quality meal solutions at affordable prices, Aldi's promotion appeals to a wide cross-range of shoppers, yet offers them all the same thing--value. Even a higher-end food consumer would have a hard time complaining about having three meals this week which featured grilled steak, chicken breast and shrimp. At the same time, lower-income shoppers, who you bet most likely spend far more than $10 per meal for a family of four, can actually spend less than normal and eat like the more upscale consumer described previously.

In other words, we think the Aldi meal solution promotion hits all the current hot buttons in the market: low-cost and value, a solution to not knowing what to have for dinner, quality ingredients and products at a reasonable price, and outdoor grilling with the warm weather season having arrived in most places in the U.S.

And of course, offering the $229.99 high-end grill as part of the promotion and advertisement is a very smart way to get the stores average ring or market basket up. A shopper might just cherry-pick the ad, buying each of the three meal solution with their various items and thus spending less than $30. However, all it takes is for them to buy the grill and that average ring just went through the ceiling based on a one-item purchase.

In its online version of the promotion and advertising circular, which consumers can sign up for via email, Aldi has an electronic "meal planner" which shoppers can use to plan further simple, inexpensive but quality meals like the three advertised this week. Click here to visit Aldi's online meal planner feature.

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