Pile 'em high, sell 'em cheap, take pounds 1bn

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The Independent Online
Cut-price Continental supermarket chains have seen their combined UK sales break through the pounds 1bn barrier for the first time, confirming their growing share of the British market and increasing pressure on rivals such as Kwik Save, the Co-op and the corner shop.

Aldi, Netto and Lidl increased their combined UK sales by more than 50 per cent last year to pounds 1.2bn. They now have more than 360 stores between them, with two of the chains, Aldi and Lidl, making reasonable profits.

The details of the discounters' growing stature are included in a new study by retail specialist Corporate Intelligence on Retailing. Its latest issue of UK Retail Report shows that far from struggling in the UK, as some observers have claimed, the "hard discounters" are experiencing rising fortunes.

"They like it in the UK," says Robert Clark of Corporate Intelligence. "The margins are much more attractive here than on the Continent and they are likely to be a growing force in the market place. Those who were banking on them going away will have to think again."

The bullish prediction was confirmed by a senior insider at Aldi, the secretive German discounter, who said: "We will continue to grow in the UK. We are going to be a major player."

The new research claims that though the discounters only have 1.5 per cent of the UK grocery market at the moment, the figure could grow to 5 per cent. It states that the UK grocery market is increasingly polarising with the leading companies such as Sainsbury's and Tesco at the top and the "no frills" budget operators at the bottom. Those in the middle, such as Kwik Save and the corner shops will become increasingly squeezed.

Aldi, which entered the UK market in 1990, is the most successful of the foreign invaders. It now has 158 stores and will open 20 more by the end of the year. It recorded sales of pounds 547m last year and profits of pounds 10.4m. Netto of Denmark, is also making money after recording a loss in 1993. No profit figures are available for Lidl, also German.

Aldi is notoriously secretive - the company's stores are ex-directory, for example - and only files accounts for one of its companies, Aldi Stores Limited. There are other UK subsidiaries which are partnerships for which no accounts are available. It is understood that these partnerships are also in profit.

After targeting the Midlands and North West for its first stores, the company has gradually moved south and now has branches scattered around the M25.

Foreign discount stores' UK performance

Aldi Netto Lidl

Sales pounds 548m pounds 375m pounds 250m

Profits pounds 10.4m pounds 2m (94/95) n/a

No. of stores 158 113 95

Source: Corporate Intelligence