Lidl and Aldi see sales soar amid economic downturn
Middle classes help Aldi sales soar 21%; Lidl up by 13%; Sainsbury's weakest of the big four
Wednesday 25 June 2008
The credit crunch is persuading an increasing number of British people, including the middle classes, to shop at the discounters Aldi and Lidl, the latest TNS Worldpanel data has revealed.
The market research company found that, along with the frozen-food specialist Iceland, the two discounters are powering ahead of their rivals in the UK grocery sector.
Aldi was the top dog, growing its sales by a whopping 20.7 per cent, based on the value of till-roll sales, for the 12 weeks to 15 June. The increase gave Aldi its record share of the UK grocery market at 2.9 per cent.
While Lidl's sales increase of 12.8 per cent is below Aldi's, it is still well ahead of Tesco, Asda, Sainsbury's and Morrisons.
Steve Gotham, project director at Allegra Strategies, said: "Clearly the economic circumstances in the UK are playing into the hands of the discounters. They are appealing to new customers and those new customers are coming from more middle-class back grounds."
Mr Gotham said that both Lidl and Aldi have moved away from their "first-generation hard-discounter proposition" by opening in better locations and sprucing up their stores, making them lighter and more appealing. They have also enhanced the quality and breadth of their ranges.
In particular, he said that Aldi has ramped up its advertising around its enhanced premium product range to attract a wider variety of customers into its stores.
Edward Garner, TNS Worldpanel's director of research, said that Aldi's stellar growth had also been driven by its "aggressive site acquisition" strategy. "So it is footage, new customers and a strong performance."
Aldi, which has more than 400 UK and Ireland stores, ultimately sees potential for 1,500 on these shores. However, Mr Garner noted that both Aldi and Lidl have benefited from the demise of Kwik Save, the discount chain that had more than 250 stores before it collapsed into administration last summer.
Mr Garner said that a lot of shoppers tend to "penny pinch" by shopping at both Lidl and Aldi, as well as topping up their weekly shop at the big four – Tesco, Asda, Sainsbury's and Morrisons. Mr Gotham agreed. "I think a lot of middle-class shoppers are still dipping their toes in the water. They are not doing a full shop."
In response to the threat from Aldi and Lidl, Tesco built a mock discount store, which typically sells far fewer lines and a higher proportion of own-label products, around the back of its headquarters in Cheshunt, Hertfordshire. The trial started last summer and Tesco was still evaluating the store this spring.
In other areas of the grocery market, the frozen-food specialist Iceland continues to grow its sales and market share. Mr Garner said: "There is also a bit of a rebirth in frozen food." TNS Worldpanel reported that Iceland grew its sales by 12.4 per cent, giving it a 1.7 per cent share of the total grocery market, for the 12 weeks ending 15 June.
However, Iceland's chief executive, Malcolm Walker, said he was not witnessing any major shift in shopping patterns in its stores. He added that the frozen-food chain had delivered "double-digit" like-for-like sales growth each quarter for more than three years.
Among the big four, Sainsbury's delivered the weakest sales growth at 4.3 per cent for the 12 weeks to 15 June, which was behind Tesco's 5.1 per cent, Asda's 7.5 per cent and Morrisons' 8.1 per cent. Greg Lawless, an analyst at Blue Oar, said: "We have concerns that Sainsbury is starting to find life a lot tougher in the sector, given the inflationary headwind and consumer outlook. In a polarised market, Sainsbury is stuck in the middle ground without a strong price message."
Mr Garner stressed that a reality check was needed concerning recent reports about food prices soaring by up to 20 per cent. He said: "While it is true that certain prices have indeed 'rocketed', TNS believe that it is more relevant to look at the average household shopping basket, taking account of sales levels and promotions and, as a result, state that price inflation in grocery stood at 4.6 per cent for the 12 weeks ending 20 April 2008."
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