BPEX asks how far Aldi and Lidl can go in building GB market share

Future market growth prospects for the so-called “hard discounter” supermarkets Aldi and Lidl remain very much open to debate, according to a fresh analysis carried out by BPEX.

Drawing on lessons from the way hard discounters have risen and fallen in terms of market share in France and Germany, the BPEX analysis looks at Aldi and Lidl’s progress to date in the GB market in asking the big question of just how much farther they can grow in the future.

“In GB, it is only in the last five years that Aldi and Lidl have been successful in going mainstream, with 54% of shoppers from across the socioeconomic spectrum using these stores at least once a month,” said BPEX.

“According to Kantar data, Aldi and Lidl now together account for 8% of the GB market. While it is impossible to accurately quantify the future growth of hard discounters in GB, there are some indications of what trajectory discounter growth might take from trends in other EU countries.”

Looking at Germany, for example, Aldi and Lidl together account for around 37% of the grocery market share with 85% of all shoppers using Aldi at least once a year. Even here, however, discounter growth has stalled for a number of years, despite less market competition from large multiple retailers compared to GB.  According to BPEX, this suggests there is as “natural growth ceiling” for the hard discounters share.

In France, meanwhile, mainstream supermarkets have fought back and hard discounters have declined. Having reached a similar French market share to GB (8%) in 1998, discounters grew to 14% by 2009, when the proportion of shoppers using them reached 73%.  French supermarkets then reacted by becoming price competitive with discounters, expanding budget lines, moving away from promotions to everyday low pricing and redefining own-label tiers around clear quality and value-for-money price points.

As a result, the discounter share is now around 12%.  There have also been 150 discounter store closures in recent times.

“GB is a tough market for the discounters and most retail market analysts do not foresee them reaching a similar market share to Germany,” said BPEX.  “They do predict, however, that discounters could achieve a share of between 15% and 20%, as has already happened in Ireland.”

This prediction is underpinned by rapid investment and expansion plans – Aldi plans a 67% expansion to 1,000 outlets by 2022. Meanwhile, Lidl has long-term plans to more than double its number of stores in the UK to about 1,500.

As for the long term, BPEX comments: “Mainstream GB retailers are increasingly responding to the threat of future discounter growth with Morrisons launching ‘Match and More’ and Tesco and Asda, reducing prices on everyday product lines.

“However, it is unclear how far large multiple retailers can go to compete with the discounters on price without some major restructuring, as happened in France.”

See full BPEX analysis

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