Fascination Aldi Equator: Why there is constant speculation about a reunification of Aldi Nord and Aldi Süd

It's called the Aldi Equator: the invisible border runs right through Germany. It bisects the federal states of North Rhine-Westphalia and Hesse and runs along the border between Bavaria and Thuringia.

Depending on whether customers live above or below this range, they shop at Aldi Nord or, as in Switzerland, at Aldi Süd. Although the two discounters have the same name, they are two different companies. This has been the case since 1961, when the two sons of company founder Karl Albrecht split the company. Aldi stands for Albrecht Diskont. The name says it all: The brothers focused on a concept with a small product range, low prices, and self-service.

The reason for the split is unclear, like so many things in the secretive Aldi empire: Did the two really disagree on whether Aldi should sell cigarettes or not – or did it have more to do with the brothers' different characters and leadership styles?

The fact is that the two companies have grown closer over the past decades. According to Wirtschaftswoche , a reunification is even conceivable at some point, as the paper recently reported. The descendants of the two brothers, i.e., the heirs of Karl Albrecht Jr. (Aldi Süd) and those of Theo Albrecht (Aldi Nord), have reportedly been negotiating a merger of the two companies for weeks.

Citing "family insiders," the magazine reports plans for a joint holding company. This would then belong to the various family foundations that currently hold stakes in the two Aldi companies.

There is, however, no official confirmation of these plans, which were already speculated about two years ago . Observers are skeptical.

There were, however, signs of a thawing. An important step was the settlement of their disputes among the heirs on the Aldi Nord side two years ago – over influence, co-determination, and dividends. This agreement was considered a prerequisite for the north and south to even discuss a more far-reaching merger of their companies. Whether this will be enough for the two parts of the Albrecht clan to actually take the step remains to be seen.

Aldi Süd and Aldi Nord already cooperate in various areas of retail. For example, in advertising and in private labels, where product alignment has taken place. The two companies also pool their procurement volumes to obtain lower prices from suppliers.

But there are limits: Because North and South have different needs, they have recently stopped conducting these negotiations with the manufacturers only through a single contact person for both discounters.

The only joint venture in which the two held a 50/50 stake will soon be dissolved: the joint online shop for non-food items. The northern region in particular no longer saw any future prospects for itself in the joint venture, wrote the "Lebensmittel-Zeitung." Furthermore, the division had consistently posted losses.

From a customer perspective, there are visible differences in the companies' appearance. This starts with the logo: Aldi Nord has a blue A on a white background within a red frame, while Aldi Süd's dark blue logo is framed in red and orange.

The store design is also different. The southern region is considered a pioneer in refreshing its stores, while the northern region clung to the sober discounter look with lots of boxes on the sales floor for longer. Tobacco products, on the other hand, were part of Aldi Nord's product range from the very beginning, while Aldi Süd only added them after the turn of the millennium. In the southern region, aspects such as sustainability and organic products are given greater importance in their product range.

The fact that these are independent companies with a healthy sense of self-confidence is also evident in their corporate headquarters. Just a few years ago, Aldi Nord built a new headquarters in Essen, including the office of Nord founder Theo Albrecht as a museum piece. The floor plan of the spacious building complex is shaped like an A.

Just under half an hour away by car is the German headquarters of Aldi Süd, with a campus in Mülheim an der Ruhr. However, within the group, which dates back to Karl Albrecht Jr., a power shift has taken place to Salzburg. The holding company, which also controls Aldi Süd's international business, is located in Austria.

The Albrecht brothers have divided not only Germany, but also the rest of the world between them. In any given country, only one or the other company is present. The exception is the USA. There, Aldi Süd is growing successfully and already has over 2,500 stores. Aldi Nord, on the other hand, operates in the United States not with the traditional discount store format, but with the supermarket chain Trader Joe's.

In Europe, Aldi Nord operates in the Benelux countries, France, Poland, Spain, and Portugal. The Aldi Süd empire includes Austria (under the name Hofer) and Switzerland (Aldi Suisse), as well as Italy, Slovenia, Hungary, the United Kingdom, and Ireland. The group also operates in China and Australia.

A potential merger would therefore ideally complement each other geographically. However, there would be hardly any savings from a merger, as only one of the two companies currently operates everywhere.

Together, the companies will generate revenue of €112 billion (2023). However, the size difference between the two is considerable. While Aldi Süd generated €83 billion (of which around €2.5 billion was in Switzerland), Aldi Nord generated "only" €29 billion.

Skeptics see this gap in sales as a hurdle for a merger: How should one deal with the fact that the influence of the heirs from the North would have to shrink significantly in a merged company?

In its ranking of the world's largest retailers, the consulting firm Deloitte counts the two Aldi stores as one company, placing them seventh. Competitor Lidl is larger, with sales of €125 billion—and significantly larger when including the €34 billion of the Kaufland stores belonging to the group.

Now, at the end of May, Lidl launched a full-frontal attack on Aldi, announcing price reductions on 500 products in a major marketing campaign. Lidl is generally considered slightly more expensive than Aldi. This is partly due to the fact that around 25 percent of its product range is branded. Aldi's branded products only account for about 10 percent. The rest are the discounter's own brands.

To defend its price leadership in this battle in the future, it might make sense for Aldi to combine the strengths of its southern and northern competitors. However, the more the two companies want to exploit synergies, the more complex the path to achieving this goal will be. This would initially entail significant costs, such as harmonizing IT systems. Therefore, the equator is unlikely to disappear from the map anytime soon.