Australian entrepreneur and philanthropist Dick Smith blames Aldi for the demise of his grocery line. Credit:James Brickwood. "I do feel very sad about it, I feel that it is a personal failure," he said in an interview with Fairfax Media. Mr Smith said he believed that Aldi's aggressive low-cost business model would eventually challenge Australian giants Coles and Woolworths. "Unless Coles and Woolworths match Aldi by reducing their product range to about 1700 lines and getting rid of about 75 per cent of their staff, I don't know how they can compete," he said. Mr Smith said that Aldi maintained low cost not just by sourcing cheap overseas foodstuffs, but also by keeping down the number of products it sold so that it did not need as many staff to stock shelves and maintain its stores. The money saved in employment costs was then redirected to the company's private owners, he said.

Aldi Australia chief executive Tom Daunt says the supermarket chain has an Australian-first buying policy. Credit:Janie Barrett "You've got this company that has now been voted the most trusted brand in Australia ... Most people don't know that it is a private German company that works on the principle of getting people sacked and importing from the absolute lowest price countries in the world," he said. As an example, he said that Dick Smith Foods' peanut butter, sourced from local growers, sold for $1.28 per 100 grams, while its Aldi competition sold for 48¢ for the same amount. He said that, when Aldi entered the Australian market, it sourced much of its grocery line from Australian producers, but now that it was established it relied on lower cost international producers. On Wednesday, Mr Smith sent a letter to the managing directors of Coles and Woolworths supermarkets, as well as to the chief executive of Metcash Group, which controls IGA, to explain his decision. The letter included a chart that showed how Dick Smith Food sales had declined in Australia since 2001 at a similar rate to the increase of Aldi turnover.

"By a fluke of birth [Aldi's owners] are multi-billionaires when we have five million Australians who live pay packet to pay packet," he wrote. "It looks as there is nothing we can do about this. It is simply modern extreme capitalism." Mr Smith also wrote to Aldi's owners Karl Albrecht and Beate Heister via the chief executive officer of Aldi Australia, Tom Daunt, to outline his concerns about the impact of Aldi in Australia. "Karle and Beate, I understand you are the son and daughter of Mr Karl Albrecht Snr, who came up with the Aldi 'plan'. That is, basically sharing the wealth less. Your father, who started the great expansion of the company, worked out that by having a lesser selection of products, you could therefore employ less workers. "I have an important question to ask you. When will enough be enough?"

He accused the family of running a secretive company that it had used to accumulate a personal fortune of $40 billion, and invited them to come to Australia to explain their long term plans. "What I want to know … is their plan to keep expanding here and to take over the market place? I suspect it is." In a letter to Fairfax Media Mr Daunt said that Aldi had "never sought to 'maximise' profits at the cost of something or someone else". "Continually maximising profits becomes a zero sum game. If you truly partner with suppliers, you'll develop long term prosperity for both parties to the benefit of customers. If you look after your employees they will enjoy turning up to work and they'll enjoy looking after customers. "We proudly support an Australian first buying policy and have shared our growth with hundreds of Australian manufacturers and thousands of staff who have been direct benefactors of our business growth.

"We are not a business trying to artificially accelerate market share and we're not looking to match the store count of our competitors. We do not cut corners, we do not abuse our market power, we do not mislead our customers. We do not avoid tax payments, we do not squeeze our suppliers. We keep things simple and we focus our attention on what matters most to consumers." A Woolworths spokesperson told Fairfax Media: "Dick Smith Foods is an iconic Aussie brand that many of our customers love and support, so we're sad to hear this news. "More and more of our customers tell us that a one-size-fits-all approach to supermarket ranging doesn't deliver what they want or need. "It's why our long-term vision is to broaden the range of products we carry across our network, so we can deliver more tailored and locally relevant ranges for our customers in their local store."