Lidl ups pressure on rivals as Tesco’s market share dwindles

German discounter launches advertising campaign aimed at emphasising British products as it takes on market leader Tesco

Lidl is poised to up the pressure on its larger rivals as it targets sales of more than £4bn this year, just a day after the full extent of the devastating impact it, and rival Aldi, are having on market leader Tesco was revealed.

The German discounter today unveils plans for a £20m television ad campaign, in its bid to increase sales by 20 per cent on last year’s £3.3bn.

Lidl grew sales of 18.3 per cent to achieve a market share of 3.6 per cent in the 12 weeks to 17 August, up from 3.1 per cent last year, according to Kantar Worldpanel data released yesterday.  Aldi’s sales rose 29.5 per cent to achieve a 4.8 per cent market share.

The duo has helped to draw larger rivals including Asda and Morrisons into a price war, as growing numbers of middle-class shoppers are charmed by their widening range, rapidly increasing number of stores and affordable prices.

Lidl’s advertising campaign, which begins next week, aims to emphasise the amount of British produce it stocks, and the quality of its products.

The retailer last month lifted a long-held veil of secrecy over its financial affairs in the UK to reveal it paid “more than £25m” in tax in 2013.

In stark contrast to the discounters’ growth, the extent of the challenge facing incoming Tesco boss Dave Lewis was laid bare in a startling plunge in sales.

Sales at the UK’s largest retailer fell 4 per cent in the quarter, while its market share dropped to 28.8 per cent, down from 30.2 per cent a year earlier.

Mr Lewis, who joins from consumer-goods giant Unilever on 1 October, faces an uphill battle to breathe life into the beleaguered grocery behemoth, which is trailing behind all of its supermarket competitors.

Mr Lewis is taking charge after Tesco last month called time on chief executive Philip Clarke’s wretched, three-year tenure, in which he attempted to turn around the business by streamlining its international arm, hiring extra shop-floor staff and adding cafés and restaurants to its largest stores.

Clive Black, an analyst at Shore Capital, said: “Tesco is in no man’s land as it moves from one management regime to another.

“It has lost its relationship with the British household. Price isn’t the only factor, but Dave Lewis has to get it right first to take advantage of its other qualities in online, food and fuel.”

Asda appears to be the most resilient of the “big four” grocers to the challenge of Aldi and Lidl, as well as high street discounters including Poundland and B&M. Asda recorded sales growth of 1.2 per cent in the quarter.

Embattled Morrisons also recorded a fall in sales (down 1.9 per cent) and market share, but will be encouraged by a slowdown in the rate of its decline.

Sainsbury’s new chief Mike Coupe also faces a stern test as he hopes to continue the legacy of departing boss Justin King – its sales rose just 0.3 per cent.

The Office for National Statistics reported last week that spending in food stores fell for the first time on record in July.

Store wars: % change in sales

Tesco -4%

Sainsbury’s 0.3%

Asda 1.2%

Co-operative 1.2%

Morrisons 1.9%

Waitrose 3.6%

Lidl  18.3%

Aldi 29.5%

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