Jacobs Coffee example from Dieter Brandes, Bare Essential The Aldi Way to Retail Success

Before seizing the next kilometer of EDP print-outs (which explain everything...) or sets out to march through the myriad paths of the data warehouse, it might be better in the supermarket to consider for a moment whether the sales price ratio between the 500 g package and the 250 g package of Jacobs-Krnung (the most famous German coffee brand, manufactured by Kraft-Jacobs-Suchard) is well thought out if you consider the corporate targets or the issue of single person households or absolute gross earnings as a whole.

In many stores we can find the following price relations:

Jacobs Krnung 500 g package euro 4.00 100 grams = euro 0.80 Jacobs Krnung 250 g package euro 3.25 100 grams = euro 1.30

After subtracting the purchase price the stores are left with the following absolute margins for 100 grams:

Jacobs Krnung 500 g package 10 cents Jacobs Krnung 250 g package 23 cents

It thus requires some thinking, work on details and, most importantly, creativity, to respond to the question, which pricing policy is better. If it is true anyway that there is a trend to single-person households, even if it also seems necessary to carry the small package, if in addition the sales price of the large package is set by heavy competition, then it could be considered correct to lower the sales price of the small package by as much as euro 0.32 to a theoretical minimum of euro 2.92. Every customer who switches from the large to the small package would increase total profit (VAT was left out for the sake of simplicity in this case). Besides, this measure would give the store's price image a boost. Only if today's sales of the small package were very strong (which is not the case on the contrary), would other considerations have to be made.

But, interestingly enough, the deciding partners on the industry and trade side still do not recognize the connections. At the ECR conference in Amsterdam in 1997, KraftJacobs-Suchard and Rewe, in a joint category management project, supervised by the corporate consultancy Roland Berger, closely examined the category of goods coffee: with the extremely dubious result of dividing coffee types into the strategies "repeat shopper magnet" (500 g packages) and "profit generator" (250 g packages). The above example shows that there are problems with the profit generation which neither partner possibly completely unstrategically have not yet seen.

General rethinking about basic questions such as, for example, price-policy connections without the burden of columns of figures is thus just as necessary as developing phantasy and imagination about how customer might react to such a modified price policy. This is how the statement made by the physicist Binning can be translated for the food retailers.

Everywhere there are innumerable questions which require creative answers. They should be the central focus of the business. How they are handled determines whether goals will be achieved. Every minor, goal-related question is important and, finally, determines what shows under the bottom line. This thinking dominates at ALDI. The others devote themselves too much to cultivating and optimizing their so important planning, information, coordination, communication, marketing, distribution and other systems.