Aldi and Lidl on a path to destruction?

By Nicholas Robinson

- Last updated on GMT

Aldi's and Lidl's fast growth could be their downfall
Aldi's and Lidl's fast growth could be their downfall

Related tags Aldi Tesco

Discounters Aldi and Lidl could be on a path to destruction, potentially becoming “the person they tried to beat”, if their growth is mismanaged, leading city analysts have warned.

The German discounters had boosted their number of stock keeping units to satisfy growing consumer demand, particularly in fresh and chilled, according to Shore Capital director and head of research Clive Black.

“People don’t go to Aldi and Lidl for German biscuits, of course they don’t,​” Black told the Federation of Bakers’ annual conference yesterday (June 2) at the Royal Armouries in Leeds.

“Shoppers go to the discounters to get cheaper fresh and chilled products, which means Aldi and Lidl have to stock more and more as they grow – becoming the person they tried to beat.”

Aldi and Lidl had increased their wastage as a result of stocking more fresh and chilled products, he added.

“They are now overtrading, there’s no doubt about that,” ​said Black.

‘Now overtrading’

Aldi had become the UK’s sixth largest supermarket in April this year, taking 5.3% of the market and overtaking Waitrose. Lidl holds 3.7% of the market.

Director of communications at Kantar Worldpanel Ed Garner confirmed that Aldi had increased its activity in fresh food.

“Aldi is overtrading on fruit, veg and salad,” ​he told the delegates. “They make up the majority of shoppers’ baskets and is 38% ​[in volume] higher than the average ​[supermarket].”

More stock was also being added to stores, which contradicted the foundations Aldi and Lidl were built on, Black added. However, this was inevitable as they tried to cater to more tastes in a bid to attract and maintain shoppers.

However, Aldi had not managed to build a strong base of loyal customers, Garner pointed out. More than 90% of the discounter’s shoppers were loyal to one of the big four retailers.

It was apparent that Aldi’s and Lidl’s growth had also dramatically slowed in recent months, he said.

‘Not growing as fast’

“They are not growing as fast as they did and it’s clear that they’re slowing up,” ​said Garner. The days of the pair achieving more than 20% growth each a month were long gone, Garner and Black agreed.

Finally, if the big four – Asda, Morrisons, Sainsbury and Tesco – could turn around their businesses fast, they could potentially reverse the discounters’ growth, they added.

Meanwhile, high street discounter B&M announced it would open 60 new stores in the UK this year​ after reporting group revenues up by 29.5% to £1.6bn.

The Liverpool-headquartered retailer, which stocks 40% grocery, opened 52 new stores last year after making an initial public offering.

However, Conlumino consultant Greg Bromley warned all discounters that their growth would be threatened as a result of the recovering economy.

“As the economy continues to recover and disposable incomes grow, B&M and its rivals will find it more challenging to ensure their propositions retain relevance.”

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sour grapes

Posted by mark jones,

we shop every week at our local lidl in holywell north wales.the majority of their foodstuffs are either of a better quality than our local tesco or far far cheaper. no nonsense regular low prices and no stupid spend this much and save 10pence argy bargy that tesco persist rules ok!!!

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Discounters will continue to be relevant

Posted by Anna Sen,

I disagree, although I understand about their growth levelling off. I think people will continue to enjoy spending less on their food and more on holidays and other luxuries. The "recovery" is not really happening for a huge section of British society, and austerity measures may hit people even harder with this government in power.

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Total nonsense

Posted by Oliver Grave,

Total nonsense - Mr. Black dose not know anything about Aldi or Lidl (companies origin, strategy, objectives)

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