Saturday 17 October 2009

The price of milk

Apparently Aldi, the German deep discounter, maintains P&L accounts for each product. Which leads to this tale: Tetra packs of milk sold much better than bottled milk in Aldi stores, but didn’t yield good margins because they leaked and the stores had to spend a good deal cleaning the mess.

So, they stopped stocking tetra packs.

This is supposed to illustrate the store’s commitment to price.

I’m afraid it doesn’t. Because product-wise P&L accounts is a prehistoric concept in these days of data analysis; what Aldi should look at is ‘basket-wise’ P&L accounts.

I suspect those tetra packs went into baskets of single people or childless couples who also bought a good deal pre-cooked and semi-cooked food. And also have more disposable income than other shoppers. Taking them off the shelves, ruins these customers’ baskets, and invites them to shop elsewhere, perhaps for ever – that is, when they are no longer single or when they have children.

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