Falling domestic sales force Aldi into Eastern Europe

The German discounter plans to open 11 stores in Slovenia next month as its home market becomes saturated.

According to a recent Euromonitor report, the original discount store's sales in Germany fell by eight per cent in 2004 compared to an increase in direct rival Lidl's revenues of four per cent.

And year on year sales growth at the company slowed each year between 2000 and 2004, despite growth in certain stores during this period.

While Aldi remains the leading discounter in Germany it has previously been slow to react to market trends, which has allowed competitors to challenge its position as the world's leading discounter.

Aldi is renowned for its cautionary business methods has followed Lidl and Netto's expansion into Central and Eastern Europe (CEE).

The Euromonitor report claims economic problems and high unemployment in Germany are making consumers nervous, resulting in a fall in spending which has forced Aldi to expand in previously untapped markets.

Retail analyst at Planet Retail, Boris Planer claims there is massive untouched potential in the CEE region, yet Aldi currently only operates a modest 18 stores in Poland.

Euromonitor claims Aldi has always maintained it will only enter economically stable markets that are ready for the hard discounter.

This may by why it has chosen to expand into Slovenia which has the highest income per head in the region and it is due to enter the EU in 2007.

Opening 11 stores will not change the face of the company but it may be a glimpse of things to come if Aldi plans to maintain its position as the world's leading discounter.

The stores in Slovenia, which will be managed by Austrian subsidiary Hofer, will be located in the capital Ljubljana and nine other towns.

The Hofer stores will feature a range of 700 products including traditional Slovenian foods along with local dairy and vegetable products.

Locally sourced products can be very important to the population when Western retailers move into a country, as fears that local suppliers will be priced out of the market are often rife.

The announcement by fellow German retailer Plus this week of plans to invest €300million in Eastern Europe over the next year may incite Aldi to change its precautionary ways and make a sizeable investment in the region.

Planer believes the expanse of the discounters will peak in 10 years but it may drag out for 20-30 years.