Lidl GB has claimed an 8.6% share of the market with sales rising 8.8% in the 12 weeks to 17 May.
Data from Worldpanel shows Lidl has overtaken Morrisons for the first time. Fellow discounter Aldi has an even higher 10.8% stake, not far behind Asda.
Although Tesco and Sainsbury still dominate with a collective 43%, together Aldi and Lidl now represent almost a fifth of Great Britain’s grocery market share.
Lidl has also maintained its position as Britain’s fastest-growing bricks-and-mortar retailer for 35 months; gaining more than £661 million as a result of customers switching from competitors over the last year.
Brands need to be smarter with promo strategies
The news follows UK expansion plans from both Lidl and Aldi announced earlier this year and backed by hefty investments. Their growth comes amidst the persisting cost of living crisis which is dictating consumer spending.
“The cost-of-living crisis is showing no signs of easing and potentially worsening in the short to medium term,” said Clodagh Sherrard, managing director at food and drink consultancy, Levercliff.
Brands will need to work harder to retain consumer loyalty, ensuring they are “seen to be on the side of the consumer”.
Sherrard added that they will need to be “smarter” about promotions, moving away from tactics such as shrinkflation and wasteful multibuys, instead using promotions more “tactically to hold shelf space”.
“Brands will (or ought to be) better marketeers than private label, so those focused on building loyalty should do so with confidence at the same time as being smart on pricing and promo strategy – consumers have different complex needs that won’t always be met by private label.”
Behind the headline growth
Vice chairman, Clive Black, of the investment bank Shore Capital points out that the discounter story is not without nuance.
Although Lidl is growing at pace, its “trading densities” remain well below Aldi, he explained. Still, Aldi’s growth has recently hit a stumbling block, with flat sales this spring making for “quite weak like for like volumes”.
Instead, the fastest growing name in the UK this spring is Marks & Spencer, which as Black flags, is also private label focused.
“Two of the three fastest growing UK supermarkets are private label dominated, which means share gains over proprietary brands continue.”
As a result, “proprietary brand owners are becoming more dependent on the c.77% fuller service players” (e.g. Tesco and Sainsburys) – where private label is gaining share too, especially within the premium category.
The pressure on branded food manufacturers has never been greater.
Mash Chiles, managing director, Gourmet Partners
Opportunities for manufacturers
For Mark Field, CEO of Prof Consulting, the success for Aldi and Lidl reflects a deeper shift in how consumers perceive the sector. The public no longer sees them as ‘cheap discounters’, but instead comparable to traditional supermarkets when it comes to quality.
He added that their model, which is “built around a high penetration of retailer owned brands, large volume, consistent quality and a rigorous obsession with reducing cost through the supply chain,” creates opportunities for food and drink businesses able to scale in private label.
“This creates growth opportunities for food and drink businesses that operate – or are looking to operate – in own brand contract manufacturing that can demonstrate best-in-class supply chain capabilities based within the UK or further afield.”
However, he warns that competition for listings – especially via special deals – will get tougher.
Innovation at risk
Mash Chiles, managing director at consultancy firm, Gourmet Partners, wasn’t as optimistic about this shift.
“The pressure on branded food manufacturers has never been greater,” he said. “The real risk is not just margin squeeze; it’s the stifling of innovation.
“When major retailers identify a successful speciality food concept and simply replicate it under their own label, the incentive for small producers to take risks and bring genuinely new ideas to market is quietly eroded.”
He also raised concerns over UK speciality food distributors partnering with own-label manufacturers, both domestically and across Europe, to develop competition products.
“In doing so, they are cutting out the very start-ups they once helped build. That is a troubling conflict of interest, and one the industry should be talking about openly.”
What next for Lidl?
Based on current trajectories, Ged Futter, director of groceries retail consultancy practice, The Retail Mind, said Lidl’s market share is only set to growth further: “Asda are losing 0.6% share every 12 weeks, Lidl grew their share by 0.5%. That means that by late summer Lidl will have overtaken Asda and by the autumn they will have overtaken Aldi. Lidl could have market share over 11% by Christmas!”
