Does Biotiful tie-up signal a change of direction for Aldi?

At first glance, Aldi’s Beautiful Everyday kefir appears to be straight out of its ‘like brands, only cheaper’ playbook. It has all the hallmarks of an own-brand line carefully crafted to mimic the look and feel of a leading brand – in this case, Biotiful.

Yet on closer inspection, it emerged Biotiful had produced the product for Aldi. Both have remained tight-lipped on the reasons behind the tie-up since it was revealed this month, but Beautiful kefir undercuts the branded price by nearly 25%.

So what’s in it for both parties? And is it the sign of a new, more collaborative direction for the discounter?

For Aldi, there is a clear motivation to tap the expertise of a brand. “All the hard work has been done by Biotiful so they haven’t had to do anything other than decide what the packaging looks like,” points out Ged Futter, director of The Retail Mind. “If you have a product that you already know works, it saves you a huge amount of time and money.”

Aldi likely had kefir in its sights as a fast-growing opportunity. “When they [the discounters] spot a trend that is considered in the top 1,000 customer requirements in any particular market, they go after it,” says Paul Foley, head of Foley Retail Consulting and former MD of Aldi UK & Ireland.

“Increasingly, if a copy is impossible to find – specifically at the same quality – they will entertain the idea of co-branding,” he adds.

As the market leader, Biotiful has proven quality credentials. And a tie-up with the leading brand was arguably the most efficient option, considering kefir is still not a staple, points out Discount Retail Consulting.

“We can imagine that kefir is not high enough in volume to introduce directly as own label at a discounter,” say managing partners Marc Houppermans and William Snollaerts. The discounters are increasingly open to this collaborative way of working if they “see the benefit in volumes and sales”, they say.

However, it’s unlikely to mark a shift in strategy – and higher-margin copies are still the end goal. “If they are sure of success, they will always select the traditional way,” they add.

That’s echoed by Ronny Gottschlich, CEO of Heunadel Retail Advisory and former MD of Lidl UK. The discounters will only favour collaboration over their own lines in cases where “it would be too complicated or too much time or money to invest in something that is too niche” he says. “I don’t think their general strategy will shift.”

Read more:

• Biotiful Dairy’s Natasha Bowes on promoting gut health with plant-based kefir

• Biotiful Gut Health returns to profitability as kefir sales boom

• Biotiful Gut Health launches £1m-plus advertising campaign

Biotiful benefits

If the benefits for Aldi are obvious, the advantages for Biotiful are less clear to see. One other brand that did a similar deal with Aldi cited cashflow as a key motivation.

That wouldn’t appear to be an issue for Biotiful, which has been flying high without any involvement from the discounters. The brand grew sales by 21% to £35m last year [NIQ 52 w/e 9 September 2023].

Discount Retail Consulting believes the additional sales offered by Aldi are nonetheless attractive, even for a fast-growing brand. “We think Biotiful needs the volumes Aldi can offer,” say Houppermans and Snollaerts.

It all comes back to a common conundrum for brands, says one source who has worked with Lidl. “It’s the age-old problem that food manufacturers face – how to best manage the threat of own-label variants. Do they refuse to supply, denying potential additional revenues and ‘filling the factory’ volumes, or should they bite the bullet and become a ‘valued partner’?” they say.

Becoming a partner brings risks as well as benefits. “If they choose the latter route, as Biotiful have done, then they inevitably lose some control, and that can become a real issue for any business that seeks to build or sustain its branded offering,” they add.

Plus, the Aldi version retails at £1.99 for a 750ml bottle compared with £3.50 for a litre of Biotiful’s branded equivalent – which could push loyal consumers into the discounters.

But ultimately, Futter says, brands have more to lose through copycats. Taking Aldi on in the courts can be “really, really expensive”, he says – especially when the ruling favours the discounter, as it did in cider brand Thatchers’ challenge earlier this year.

So it could be a case of if you can’t beat ‘em, join ‘em.