Food suppliers must learn from discounters

By Rick Pendrous

- Last updated on GMT

Food suppliers could learn powerful lessons from discounters such as Aldi
Food suppliers could learn powerful lessons from discounters such as Aldi

Related tags Hard discounters aldi Retailing Morrisons Wal-mart Aldi

Food and drink suppliers should use insights from the success of hard discounters Aldi, Lidl and Poundland to boost their own retail prospects, a category management specialist has claimed.

Suppliers needed to show to retailers that they had a clearer understanding of the power shift that is taking place within the retail market and how this affected the likely success of their own products, according to Bridgethorne.

“There are two issues at play here,”​ said John Nevens, co-founder of Bridgethorne. “The first is the changing nature of shopper behaviour. The rise of the discounter has less to do with demographics and more to do with shoppers exercising their determination to shop where they feel they are going to get the best deal.

Understanding shoppers

“For suppliers and retailers alike, this means understanding the factors that influence the shopper’s decision to purchase – whether that’s price, convenience, brand loyalty – and at what point on their path to purchase that decision to buy is either made or influenced.”

These comments came as structural change among the big four multiple UK retailers continues apace. In a note describing the changes, City analysts Dr Clive Black and Darren Shirley from Shore Capital highlighted the price cutting that Tesco, Asda, Sainbury and Morrisons had already embarked upon or were likely to in response to the inexorable rise of the discounters.

“Asda has been the most alive of the big four superstore players in the UK grocery scene in recent times to our minds,”​ said Black and Shirley. “Each of the big players were caught ‘sleeping at the wheel’ through the economic downturn, by over-focusing upon an amalgam of putting up prices, depending on promotions and protecting gross margins so letting the discounters gain a strong foothold. Asda ‘smelt the coffee’ first and changed for the better in our view.”

Black and Shirley stressed that cost reduction was key to the changes being undertaken by the multiples, which would inevitably feed back to pricing pressure on their suppliers if they are to fight back against the discounters.

Nevens noted that Aldi and Lidl could be on track for combined sales in excess of Morrisons UK’s fourth-biggest multiple together with news that Poundland had posted double-digit rises in full-year sales and profits to reinforce the view that brands needed to understand what motivated shopper purchasing decisions.

Bucked the trend

Aldi and Lidl have consistently bucked the industry trend by ranking among Britain’s fastest-growing supermarkets, remarked Nevens. And he noted that Aldi planned to spend £400M in the UK over the next 18 months.

Aldi’s investment over the coming year will include opening up to 55 new stores and extending about 30 others. Aldi is also refurbishing stores to expand its range of fresh foods, including more ready meals, prepared salads and delicatessen products.

But, said Nevens, suppliers needed to share their insights if they were to share in the success of these retailers. “If you understand what motivates shoppers to buy where and in the manner that they do, suppliers can use these insights to help retailers – discounters and others – to develop categories in line with shopper requirements,”​ he added. 

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