A “golden era” for the UK’s supermarkets is over thanks to the discounters, which will double in size and take £1 in every £5 spent on UK groceries, according to the former boss of Aldi.
Paul Foley, who ran Aldi in the UK for nine years, warned the traditional Big Four supermarkets, Tesco, Asda, Sainsbury’s and Morrisons, that profitability would fall permanently. He added that he expects a third discounter to emerge to challenge Aldi and Lidl.
“The UK stood out for Aldi as being a golden opportunity because if you look at the history of UK retailing for at least the last 25 years, nowhere else in the world does an entire industry earn the kind of money that was earned in the UK food retailing industry.” He told the BBC’s Wake Up To Money programme.
“The golden age of food retail profits by big, very successful, very well-run businesses is over and discounters are the disrupters that are changing that,” he added.
Asda’s chief executive, Andy Clarke, agreed with Mr Foley. “The level of profitability decline in some retailers over the course of 2014 – we’ve never seen it before,” he said.
Mr Foley, who ran Aldi between 2000 and 2008, said he thought Sainsbury’s joint venture with Dansk to bring Netto back to the UK could play a key role alongside Aldi and Lidl, but did not rule out a further competitor.
In one of the toughest years for the Big Four supermarkets, customers have been flocking to Aldi and Lidl, which trade at much lower margins than their competitors.
Tesco, Sainsbury’s, Morrisons, Asda and Waitrose have also all seen their profits suffer this year as shoppers demand cheaper goods, while the competition has seen grocery prices fall 0.7 per cent over the past year.
More than half the country have visited Aldi or Lidl in the last three months, according to Kantar Worldpanel, but despite an impressive rise in sales, recent data shows that the discounters’ rate of growth has slowed considerably.
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