Business Leaders' Forum

Retailer promotions in the firing line

By Rick Pendrous

- Last updated on GMT

Discounters show 'transparent pricing', said Garner (front, third from left)
Discounters show 'transparent pricing', said Garner (front, third from left)

Related tags Management Aldi

Food and drink manufacturers face big challenges during 2015 as the multiple supermarkets adopt new business models to fight back against hard discounters such as Aldi and Lidl.

The full impact of these seismic changes on supermarket suppliers is yet to emerge, delegates at the Food Manufacture Group’s Business Leaders’ Forum held at the offices of the host sponsor, legal firm DWF, in London heard last month.

Discussions revealed that brand owners would need to differentiate their products to retain business with the multiples as they rationalise their ranges. At the same time, new opportunities would emerge for own-label suppliers to do more business with them and the discounters. Meanwhile, pressure on supplier margins would intensify.


“The potential threat to branded manufacturers is that we will see a resurgence of​ [own-label] growth driven by the major multiples turning to​ [own-label] as their weapon of choice in responding to Aldi and Lidl,”​ warned Will Carter, a director with consultancy Food Strategy Associates.

“The issue for manufacturers is you’d better make damn sure you are a low cost leader in your category or you are a leader in differentiation such that your brands have a value beyond some equity built over the decades.”

The forum, also sponsored by Lloyds Bank and food testing company ALcontrol Laboratories, also heard from Ed Garner, director with consumer insights specialist Kantar Worldpanel, who said that while the discounters were known for low prices, that wasn’t the whole story. “The reason why they are really shaking up the market is this limited list thing.”​ said Garner.

“The business model, particularly Aldi, is they do not promote: none of this buy-one, get-one-free; here today, gone tomorrow promotions –​ [instead it is] here is the price, end of story.”​ This makes life much easier for consumers, since pricing comparisons are completely transparent, he added.

“That is what has shaken up the market, because if you don’t promote and just offer the price, what you’ve got is speed of shopping and trust,”​ said Garner.

Good to do business with

The discounters’ approach also has advantages for suppliers in having a much simpler supply chain, he said. “Surprisingly, if you talk to suppliers, they will actually say that Aldi and Lidl are good people to do business with.”

Other delegates present agreed that the discounters offered good potential growth opportunities, particularly for own-label products. They said discounters were more straightforward to deal with and therefore the cost of dealing with them was much less than the major multiples, which tended to require teams of dedicated people and consequently more time to service.

However, one delegate urged caution in dealing with discounters: “The nature of the relationship with discounters is short-term.” ​This, he warned, constrained any decisions about new capital investment to expand production capacity.

Geoff Eaton, chief executive of New England Seafood International and a delegate at the 2015 Business Leaders’ Forum held in London last month, discussed the changing retail market in an exclusive video round-up.

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