Aldi boss Niall O’Connor: ‘We’re foot to the floor. If we could go faster, we would’

In another life, Niall O’Connor might have been a professional golfer. That was certainly the path the Cork native was on when he left Ireland for the UK after securing an apprenticeship to become a PGA pro just as he was completing his Leaving Cert. These days, the 53 year old doesn’t have much time to swing a club. As group managing director of Aldi in Ireland and the UK, his efforts are largely concentrated on the German-owned supermarket chain’s ambitious growth plans in the Republic, where it wants to strengthen its foothold, particularly in Dublin.

There was a time when a sit-down conversation with O’Connor or anyone senior in Aldi would have been difficult to secure. The grocery retailer adopted a cautious stance with the media, both here and in its home market of Germany. Its owners, the Albrecht family, have fiercely guarded their privacy since the kidnapping of the chain’s late co-founder Theo Albrecht by criminals in a bizarre 1971 plot.

Sitting in a meeting room on a warm early summer day in Dublin, some traces of that guardedness are still evident in the conversation with O’Connor.

“I’m disappointed you said that,” the polished executive says with a wry smile when Aldi Ireland’s cautious approach to publicity is brought up. “You’ve hurt my feelings.” That O’Connor is joking quickly becomes apparent. In the next breath, he admits “that would be a fair comment, historically”.

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He denies, however, that it is anything to do with Aldi’s history or its ownership structure. “When you’re trying to create a business from scratch, there’s lots of competing pressures and challenges. And PR, speaking to the press, kind of probably isn’t top of the list when you’re there.”

Much has changed over the years and O’Connor is eager to discuss Aldi’s plans. This year, the retailer is celebrating 25 years in operation in the Republic where it has grown from two shops in 1999 to 161 in 2024, “from zero to a big business relatively quickly”, as O’Connor puts it.

And there is plenty for Aldi to shout about.

‘We don’t expect our customers to pay for our inefficiency. So our ambition is that we should run our business as cost-effectively as possible’

Commissioned by the company and compiled by Anthony Foley, associate professor emeritus of economics at DCU, a new report published this week sets out the details of the German multinational’s impact on the Irish economy since 1999. Aldi Ireland boasts revenues of €2.3 billion, employing some 4,650 staff across the State and reaching more than 70 million customers annually.

“But we’re not done,” O’Connor insists, restating Aldi’s well-flagged plan to grow the business. “I see the opportunity in the market for another 50 stores in the Republic comfortably. I think if we look at our market share in Dublin, our store number is a long way off. I’m on record as saying that. I could see 25 to 30 of the next 50 coming in the Dublin or the Greater Dublin Area.”

If O’Connor is open about Aldi’s ambitions, he has also been blunt about the obstacles it faces. Soaring property prices, planning delays and myriad other issues have made those ambitions more difficult to execute.

In 2022, he told The Irish Times the chain “has an interest” in 25 sites but conceded that Dublin has become “a bit of a problem for us”, with rivals like Dunnes Stores and Tesco boasting a much larger footprint. He said at the time the company was working hard to find suitable locations but, he said, it took twice as long to open a supermarket on a site in the city compared to other locations.

“We’re quite prudent in terms of how we go about our property acquisition programme,” O’Connor elaborates two years later. “We don’t pay over the odds. We pay fair market rate. That means in a [period of inflation] you’re paying more… but we do so in a very planned and considered way. Planning applications take for us anywhere between three and five years. Every exchange of communication costs.”

So has Aldi had to pump the brakes on its growth plans? Has Ireland reached peak Aldi? “I would say no,” O’Connor says. “We’re foot to the floor. If we could go faster, we would be going faster.”

[ Aldi’s Irish sales edge higher but profits halve amid bid to contain price rises ]

Wholesale changes to planning laws that would speed up the process would be a long-term solution, O’Connor says. But one immediate fix, he suggests, might be for Aldi to look at leaseholds, which currently account for “well under 20 per cent” of the group’s portfolio of properties in the Republic.

That’s what the retailer is doing in Waterford city, one of five new locations that will open this year. “It’s not the normal footprint that we would build,” O’Connor explains. “And so that involves compromise. But that’s what you need to do, certainly in city or town centre locations. It’s probably what we will need to do in some of the Dublin locations, but of course we’re prepared to do that.”

Part of the logic behind the expansion plan is to “dilute” the fixed costs associated with its distribution centres in Naas, Co Kildare, and Mitchelstown, Co Cork, he says. “It’s advantageous for us to keep expanding. And again, Dublin is the obvious choice for us because it’s such a massive population in quite a concentrated area.”

Managing costs is at the core of Aldi’s business model. “The idea is we don’t expect our customers to pay for our inefficiency [in running] our business,” O’Connor says. “So our ambition is that we should run our business as cost-effectively as possible and minimise unnecessary cost.”

Naturally, that has been a particular challenge in the post-Covid era of soaring inflation and unexpected supply shocks emanating from the war in Ukraine and – increasingly – climate-change-related disruption.

Profits at Aldi Ireland, which published its financial performance for the first time in 2021, more than halved to €17.1 million in 2022, according to its most recent set of results despite an increase in sales of more than 1 per cent.

Aldi says its efforts to shield customers from the price shocks the company has seen on the supply side was chiefly to blame for the large increase in costs along with a hiring programme, which boosted staffing costs.

It’s too early to say what this year’s financials will look like, O’Connor says. “We’re fortunate in that we’re in private ownership. And that allows us to take quite a sustainable and long-term approach.” That means, he says, the company isn’t so concerned with the movement of its operating profits year to year.

Still, the cost environment remains at the top of the agenda for businesses and shoppers alike. The good news, O’Connor says, is that there has been some relief over the past 12 months as grocery and energy price inflation has dipped. But the situation remains fluid.

‘This year alone, so far, we’ve spent €20 million reducing prices. Those 400 products are not the fringe products… those products are ones that people are buying day in and day out’

“One of the things we’ve been observing is, quite often, people assume that deflation, or sort of reducing inflation is deflation. It isn’t. It’s still painful. But I think the latest figures would suggest that we’re kind of returning to some degree of normality, which is helpful.”

So, has Aldi moved fast enough to pass on these savings to customers as inflation has dipped? “Well, what I can give you is that this year alone, so far, we’ve spent €20 million reducing prices,” he says. “That’s 400 products. Those 400 products are not the fringe products… those products are ones that people are buying day in and day out. It is hitting their purse in a positive way.

“But I’m also cognisant of the fact that we’re not done. And as prices continue coming down, we have to make sure that we pass those on to consumers.”

There are other issues afoot, of course. “We’re hearing already for Valentine’s Day next year about challenges with crops because of bad weather. So we’re just trying to navigate and understand and plan our range around that and to make sure that we can fulfil the demand.”

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He is well-spoken with perhaps the faintest suggestion of an English accent – a legacy maybe of his exposure to the UK in the formative years of his career where he started in the buying department of Marks & Spencer after college – and there is little audible evidence of O’Connor’s upbringing in Cork. Yet, he credits growing up on the outskirts of Cork city next door to a farm with instilling in him a respect for Irish produce.

“We all know just how close that is to us all really,” he says. “Most families don’t need to go back too far to have some link with the land. So, I think we’re also quite proud of our food tradition and our food production tradition in terms of quality.”

That context makes Aldi something of an unlikely success story. Undoubtedly, the German multiple has had to tailor its offering to suit the Irish audience and, in that sense, it has come a long way since its debut on Dublin’s Parnell Street in 1999. Back then, the percentage of products Aldi sold produced in the Republic was “pretty much” zero, O’Connor says. Today, he says, just under half of its offering is Irish-made.

Aldi says it paid its 330 Irish producers some €1.1 billion last year, mostly on items such as dairy, meat and bread.

O’Connor has been one of the driving forces behind that change in his years at the company. He joined the business in 2000, not long after its arrival on the Irish scene, working his way up through the ranks from operations director to group buying director and, since 2019, managing director of Aldi Ireland and UK.

That Aldi and its rival, fellow German brand Lidl, struggled to establish themselves in those early years is a matter of public record. Casting his mind back a quarter of a century, O’Connor recalls the initial reaction from consumers was – to put it politely – mixed.

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“If I go back to 1999, [the customer reaction was an] unknown quantity. Intrigue. Surprise. What are those labels they’re selling? Everything’s in a brown box. And what the hell is that thing in the middle? It’s full of everything.”

On the supply side, there was also a certain reticence among Irish producers to be associated with the discount own-brand or private label model at a time when the Republic’s economic boom was, to borrow a phrase, only getting boomier. Local producers had a lot of questions, O’Connor says. “Jeez, who are these guys? Are they going to be like the other guys we work with? Are they going to be different?”

“We had to work very hard,” he says. “The supply base was apprehensive. There’s no two ways about that. We’re very grateful to a number of suppliers that kind of took a bit of a leap of faith.”

Building its relationships from scratch, Aldi was fortunate to receive early support from the late Raymond Coyle’s Largo Foods, best known for the Tayto crisp brand. “There’s a great story there,” says O’Connor.

“We approached him and said look, there’s a crisp in Ireland, cheese-and-onion flavour, that is unmatchable and we would really like to sell your crisp in own-label. Raymond thought about it.”

Coyle agreed to the arrangement but, just as Aldi was getting the product ready, he came to O’Connor and his colleagues with a problem. He was told Tayto would be delisted by another supermarket if he agreed to supply Aldi.

“We said if that happens, we’ll give you business in the UK if you want to export. Fast forward a few months, guess what? He got a call: What the hell is that? Why are you supplying [Aldi]? So it was delisted. We then listed them in the UK and a few months later, Raymond got a knock on the door saying, your product is iconic. We need it back.”

‘We’re fortunate in that we’re in private ownership. And that allows us to take quite a sustainable and long-term approach’

The “essence” of that story, says O’Connor, is that Coyle and a few other suppliers took a punt on Aldi back when its success in Ireland was far from guaranteed. “That enabled us to demonstrate in the early days, actually, these guys are kind of serious.”

Crucially for Aldi, there was a step change in the Irish consumer mindset towards the end of the brand’s first decade in Ireland, largely ushered in by a seismic shift in the economic landscape.

When recession hit and the lure of discount prices became too strong to resist for many, spendthrift shoppers began to see the upside in Aldi’s own-brand model. Product quality also improved, particularly as the chain increasingly won over local suppliers.

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Where just 10 per cent of groceries bought in the Republic in 2004 were own-brand, or “alternative brands”, as O’Connor calls it, something like 51 per cent of all items sold in supermarkets today are private label, he says. “There’s been a complete transformation and acceptance.”

Now living just outside Naas – not too far from Aldi’s buying office – O’Connor says he spends two or three days a week in the UK office. How does he manage the stress? “Pressure,” he insists, not stress. “I think stress isn’t helpful. So I’m quite conscious of that and making sure that doesn’t become a feature. I’ve got a great family. When I’m off, I’m off.

“Actually, that’s something that I probably got better at over the years: just being sensible enough when there are demands outside work to make sure that they get attention. And that requires discipline and focus.”

As for golf, he says he does occasionally get to swing a club. “Unfortunately, the result isn’t what it used to be. But that requires practice.”

Name: Niall O’Connor

Job: Group managing director of Aldi UK and Ireland

Age: 53

Home: Near Naas, Co Kildare

Family: Married to Aoife, they have a daughter, Sadhbh (21), and a son, Hugh (19)

Something about him we might expect: “I’m reliable. I can be counted on. That’s really important to me.”

Something about him that might surprise: He once beat Paul McGinley in an underage golf tournament as a teenager.