The German supermarket chain Aldi revels in austerity, with stores reminiscent of fluorescent-lit bunkers, shelves packed with €1 cans of sliced pork and 39-cent "River Cola," and cashiers who started taking credit cards only last summer. That hasn't stopped a widening controversy about, of all things, extravagant spending in Aldi Nord, which owns the chain in northern Germany and eight other European countries, but is separate from the Aldi Sud chain, which operates in Ireland.
The heirs to co-founder Theo Albrecht's €15 billion fortune, according to the Bloomberg Billionaires Index, are battling for control of Aldi Nord, Theo's elder son, Theo jnr, has publicly attacked his widowed sister-in-law Babette Albrecht for her purchases of art and vintage cars, and withdrawals from one of the company's controlling trusts.
He is using the dispute to try to wrest influence from Babette and her five children, a move she is fighting in court. The company is a rich prize: last year it had €12.3 billion of net revenue in Germany alone. The feud has upended decades of obsessive discretion at Aldi, whose owners are so secretive that the only widely published photo of Theo jnr is a grainy, decades-old paparazzi snap.
The given names and exact ages of Babette’s children – quadruplets who are about 26 and a sister who is about 24 – are so closely guarded that they were not revealed until last year, and the family won an injunction against a magazine that published them.
"It's totally natural that the younger generation would react against the excessive thriftiness," says Eberhard Fedtke, a former Aldi Nord manager and author of a 2011 company history called Aldi Stories. "The parsimony was so extreme it was unsustainable."
Cult following
The battle has been lapped up by a German public that has long had a love-hate relationship with Aldi. For a postwar generation whose culinary compass was orientated towards cheap food in vast quantities rather than eating as a refined indulgence,
Aldi was the obvious destination for staples such as sugar and flour. Ultra-low prices, combined with a resistance to anything resembling an uplifting consumer experience, have given the supermarket a quasi-masochistic cult following. Its shops are social melting pots, and it’s not unusual to find Aldi milk, cheese or juice in the fridges of Germans of all incomes.
At its core, the dispute is about control of a pair of trusts named after saints Markus and Jakobus, a reflection of the family's Catholic roots set up by Theo snr to ensure long-term control.
The conflict could affect company strategy. Babette’s camp is pushing Aldi Nord, which also runs the US chain Trader Joe’s, to more quickly spruce up stores and products, according to a person with direct knowledge of the matter. Company representatives declined to comment or make Theo available. Babette’s team declined to comment.
Trust board
The conflict heated up in 2013 after Babette's husband, Berthold, died of cancer. His heirs sought to remove long-time Aldi lawyer Emil Huber from the board of the Jakobus trust, which had been revamped to reduce the children's influence.
They maintained Huber was backing Theo jnr in an attempt to cut them out of decision-making, and that their father had been too ill to make a competent judgment when he agreed to the changes in 2010.
In a 2014 letter to Babette, Theo jnr wrote that she was “a burden on our company” by refusing to “subordinate your private lifestyle to the interest of our group.” Theo jnr and his mother, Caecilie, also said the €25 million Babette and her children receive from the trust annually is excessive.
Babette’s response: her spending is her own business. Around that time, Theo jnr tried to buy her out at what she considered a lowball price then offered to pay Babette’s side €25 million a year if they would pledge to follow his lead on trust votes regarding Aldi. She declined.
"It's grotesque that Theo Albrecht is attacking his sister-in-law invoking the company's reputation," says Stephan Holzinger, a Munich litigation adviser who is not involved in the dispute. "Aldi's reputation has been more damaged by the mudslinging."
In January, Babette and her children won a court ruling striking down the 2010 changes to the board structure. In response, Theo jnr did the unthinkable for a man who, in Holzinger’s words, had spent decades “sealed like an oyster”: he went to the press.
He told the daily Handelsblatt that Babette's spending, and a widely publicised case in which an art dealer from whom she and Berthold had bought works was jailed for fraud, had tarnished the company's image. "The Albrecht name requires a modest lifestyle," he said in Stern magazine.
While Babette’s lifestyle is not particularly lavish by billionaire standards – her home is a modest, two-story stucco in the suburbs of the industrial city of Essen – it stands out when compared with Aldi’s obsessive penny-pinching.
She and Berthold met in the 1980s at a nightclub on the island of Sylt, a summer getaway in the North Sea favored by Germany’s jet set.
They shared a love of fine wines, haute cuisine and golf, with Babette's outgoing personality a stark contrast to the traditional Albrecht reticence, a friend says. "Aldi's principle of austerity is outdated," says Martin Kuhna.
Classic cars
According to German media reports, Berthold spent more than €100 million on art and a dozen or so classic cars, such as a 1939 Mercedes roadster and a 1960s Ferrari. Last year, Babette was photographed in the front row of a Dusseldorf fashion show draped in pearls with a black pencil skirt and a jewel-encrusted watch.
Aldi, a contraction of "Albrecht Diskont, " emerged out of the rubble of the second World War, when Theo snr and his brother Karl took over their parents' grocery. From a single shop about eight miles from where Babette now lives, they started undercutting rivals with a product range that was basic in the extreme: mostly canned food sold on wooden pallets.
Over the years, the mix has been broadened, but even today Aldi stores exhibit a fierce devotion to frugality and carry less than 10 per cent as many products as a typical supermarket.In a dispute that in some ways mirrors the current internecine strife, the brothers parted ways in 1961 after a series of strategy spats. They split the business along a border dubbed the “Aldi-equator” slicing through the centre of Germany, with Karl getting everything south of the line, Aldi Sued, and Theo snr taking Aldi Nord.
While the two sides share a brand name and some purchasing, they are run as separate companies. Aldi-Sued, controlled by Karl Albrecht’s descendants, has a reputation for somewhat snazzier stores with more fresh produce and major brands. The dispute between Babette and Theo jnr affects only Aldi Nord, which has stayed closer to the traditional austere formula.
Legendary parsimony
The Albrecht family’s parsimony is legendary. After Theo snr was briefly kidnapped in the early 1970s, he fought successfully to deduct the seven-million-deutschmark ransom from his taxes as a business expense. Until the early 2000s, his cashiers typed in product codes by hand, to avoid the cost of barcode scanners.
As the retail environment gets more crowded and complex, Aldi Nord must adapt by going more upscale, says Boris Planer, chief economist at consultancy Planet Retail in Frankfurt. "You have aggressive challenges from mainstream supermarkets as well as online shopping," Planer says.
Aldi Nord is taking tentative steps in that direction. In 2012 it began buffing up stores with softer lighting, wider aisles and popular brands such as Coca-Cola in addition to house products, boosting revenue an average of 19 per cent in renovated locations over three years. Long-stemmed roses, champagne, and giant prawns at bottom-feeder prices have joined the selection. An ongoing feud could slow those initiatives.
The trusts representing the Albrecht heirs need to sign off on major investment plans, and Theo jnr and his mother are not on speaking terms with Babette's side of the family, according to the person familiar with the matter. If the revamp stalls, Aldi risks falling farther behind rivals such as Lidl, which for years has sold branded goods, fresh fruit and a luxury selection that many shoppers wouldn't hesitate to serve for Christmas dinner.
"Aldi's principle of austerity is outdated," says Martin Kuhna, author of The Albrechts, a 2015 book about Aldi. "If I were Theo jnr's adviser, I would tell him to relax a bit, especially since he himself defied the family's vow of silence." – (Bloomberg)
