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Market growth was 1.4% in the 12 weeks to 16 June 2019, according to the latest results from Kantar. Performance has slowed compared to this time last year, when growth was 2.1%. We look at the factors influencing this and key retailers' performance.

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We look the continued evolution of Aldi and Lidl UK, including three key areas the retailers are focusing on.

1. Small store expansion in London: appealing to the city shopper

After the successful trial of its first 'Local' store in Balham, South London, Aldi has announced it will be opening seven more. According to The Grocer this will include a new store to open in Camden on 27th June and conversions in Archway, Eastcote, Kingston, Kilburn, Tooting and Romford.

The new stores will be around half the size of typical Aldi stores. The range will be reduced from 1,800 SKUs to around 1,500. In order to tailor the 'Local' branch to its city location, non-food 'Special Buys' and larger pack sizes have been removed from the range. Aldi told The Grocer this is to make the store easier to shop without a car. Maintaining breadth of range and space for fresh is essential, as our ShopperVista data has revealed produce is the most shopped category in Aldi.

Aldi has emphasised this is not a move to expand into convenience, and the roll out is still part of its trial. However, expansion in city centres, and particularly London is often challenging for discounters with a lack of the larger sites with car parks they typically target. Continued innovation in small formats gives the retailer more opportunity to grow its presence in these areas and target new shoppers on different missions.

There is a sizeable opportunity for growth in London, however the competition for the best sites is intense. Our ShopperVista data shows 53% of London shoppers would use an Aldi or Lidl more if there was a store closer to them. Subscribers can read more about this in our UK discounters: factors influencing growth report.

Aldi's announcement followed on from Lidl reporting it will be investing £500m in expansion in small London stores over the next five years. This will include 40 new store openings that are smaller in size to the traditional Lidl stores. The retailer has said;

"London is at the heart of our growth plans across Great Britain."

2. Developing online: growing presence and attracting new shoppers

Aldi will be extending its relationship with iForce, showing continued investment in its online platform. iForce is an Eddie Stobart retail logistics services firm that currently support Aldi delivering its non-food 'Specialbuys' and wine products. iForce has said;

"The extension of the partnership will mean that iForce can look at developing Aldi's online proposition to grow its market share across the UK."

iForce believes that the scope of Aldi's online proposition has continued to expand and with the partnership they will grow this further.

This comes after the announcement that Lidl is "actively exploring" ecommerce in the UK for the first time.

3. Sustainability: new initiatives to reduce plastic waste

After its successful plastic free trial in Scotland Aldi will be rolling the initiative out to all stores in the UK by the end of 2019. According to Aldi the trial has already saved more than three tonnes of plastic since its launch in March.

Aldi has also recently removed all plastic bags from its stores. The retailer has pledged to reduce its plastic packaging by 25% by the end of 2023.

Lidl has pledged to reduce its own brand plastic packaging by 20% by 2022. By 2025 the retailer is looking to ensure 100% of its own brand packaging is widely recyclable, reusable or refillable. It is also looking to increase the recycled content of its own brand packaging to 50% by 2025. 

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We look at the latest developments from Lidl UK including expansion into ecommerce, a new marketing campaign and labelling system.

1. Exploring ecommerce

Lidl has said it is "actively exploring" ecommerce in the UK for the first time according to The Grocer. This comes after the retailer has advertised for an e-commerce project manager and a junior project manager. It has been a year since Lidl created the holding company Lidl Digital Logistics. Since then there has been growing evidence that the retailer is looking to expand into online.

Lidl first introduced its delivery service in Ireland in 2018 in partnership with Buymie. Buymie is a third-party grocery delivery service that began as a start-up in Dublin. It uses self-employed couriers to fulfil orders placed on an app in a similar way to Deliveroo. After a successful trial it rolled out the service across Dublin in January 2019.

Source: Google Play

Buymie now looks as though it is expanding into London. It has recruited a London-based general manager according the The Grocer. Buymie secured  €1m (£880,000) of investment in January and is expected to use this to roll out its operations in the rest of the UK. The businesses new general manager is Oli Reynoldson who previously worked for Deliveroo.

There has been no official announcements made but Buymie's new recruit has generated media coverage speculating over whether Lidl will partner with Buymie in London and launch a new delivery service in the capital. The Drinks Business has also revealed that part of Lidl's online team were at its London Wine Fair in May, adding to the speculation that an online offer is coming, and that alcohol will be part of this. 

Over the last 12 months, Lidl has expanded its online presence from four countries to 11, including grocery ecommerce operations in five countries.

Read more about how the how the discounter is accelerating its online expansion with an in-depth look at its presence across Europe and the US.

2. 'Big on the big shop'

Lidl has launched a new marketing campaign that focuses on product quality, sustainability and the wide range of products Lidl stocks. The retailer is still using the 'Big on quality, Lidl on price' catchphrase but the emphasis is on quality first and price second. There is a TV advertising campaign and in-store POS to support this.

This activity should help build Lidl's reputation as a destination for a full weekly shop. but when focusing more on quality, Lidl will need to take care not to alienate its more price sensitive customers.

Source: IGD Research Lidl Tooting

3. Transparency in meat production

Lidl is trialling a 'method of production' label on all fresh chicken products. The aim is to improve transparency and help shoppers make more informed decisions. This is a first for the UK. The retailer has said it follows the success of a similar labelling scheme introduced by Lidl in Germany last year, which has led to wide-scale adoption across the industry.

The label will distinguish between the following types of farming;

  • Indoor: Birds are reared outside the UK to legal housing requirements
  • British Indoor: Birds live in a safe, comfortable housing with natural daylight, bales, perches and pecking objects
  • British Indoor +: Birds live in housing with more space to exhibit natural behaviour with natural daylight and environmental enrichment
  • British Free Range: Birds live in safe, comfortable housing with access to the outdoors for a minimum of 8 hours a day
  • British Organic: Birds have access to large outdoor spaces, with smaller flock sizes and a GM free diet

Ryan McDonnell, Lidl's chief commercial officer has said;

"To ensure that we are continuing to make good food accessible for all households, it's important that we offer customers quality meat products that are from a range of different farming systems. In addition to working with trusted partners, to give our customers the confidence that welfare standards are being maintained, we feel it's important to provide them with very clear, objective information about how the meat was produced to enable them to make an informed purchase decision."

In addition, Lidl has also committed to sourcing all its fresh chicken from UK farms by October this year. The retailer sources two-thirds of all its core products in Britain at the moment and it is committed to extending this further in the future.

Sign-up here to receive our free newsletter that will keep you up-to-date about the latest news and developments from Lidl.

Lidl has announced that it will be investing £500m in expansion in London over the next five years. 

What the growth will look like

  • 40 new stores in London
  • The first central London store will be on Tottenham Court Road
  • New locations will be in Alperton, East Acton, Hackbridge and Watford amongst others
  • Lidl has shrunk its minimum size requirement for the new store openings

According to the BBC the chief executive officer of Lidl, Christian Hartnagel has said;

"London is at the heart of our growth plans across Great Britain."

The investment will also include opening a new head office in Tolworth (south-west London) and expanding its Belvedere distribution centre (east London). A new distribution centre is also set to open in Luton, becoming Lidl's fourth site to service Greater London.

Lidl currently has 88 stores within the M25, but none in central London. Expansion in all city centres, but particularly London, is often challenging for discounters. It is difficult to find the larger sites with car parks that they typically target. There is a sizeable opportunity for growth, however competition for the best sites is intense. Our ShopperVista data shows 53% of London shoppers would use an Aldi or Lidl more if there was a store closer to them.

Subscribers can read more about this is in UK discount: factors influencing future growth.

Discounter format development

We have seen Lidl open several new store designs across Europe as it expands its presence, and target different shoppers. The retailer started testing smaller formats in 2016 in Amsterdam, and in February 2019 opened its smallest store in Germany. That store is 503 sq m, less than half the traditional size and offers 80% of the standard range. Most categories are reduced, but the store still carries the retailer's entire fresh food offer. Four stores in this format will be opened throughout 2019 in Munich.

Other discounters are also testing new formats. Most notably, Aldi opened its first ever 'Local' store in Balham, London in March 2019. The store is around 600 sq m, half the size of a typical Aldi, and has a reduced range.

In Europe;

  • German discounter Norma is building larger stores and increasing its range. It will be adding around 160 SKUs to its existing range, mainly in chilled and fresh. The retailer is looking to emulate Aldi and Lidl's larger stores
  • Italian retailer Eurospin is also trialling a larger format, with greater space dedicated to fresh, including a bakery and butchery

Want to know more about Lidl's developments?

The retailer is continually developing its proposition. It has recently announced that it will be exploring ecommerce in the UK for the first time.

Sign-up here to receive our free newsletter that will keep you up-to-date about the latest news and developments from Lidl and other discounters.

Presentations

25/06/2019
Kantar market shares are generated using Kantar Worldpanel’s till-roll scanning methodology and extrapolated using a sample of 30,000 households. Figures are calculated over a rolling 12 week period and include VAT.
18/06/2019
This in-depth guide to Netherlands explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.
14/06/2019
This in depth-guide to Slovakia explores the key trends in grocery retail and growth strategies of the leading retailers.
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Key presentations

As Lidl continues its rapid expansion across Europe and the US, it is looking to build stronger relationship with its shoppers. As Lidl invests in its stores and expands the ranges and services it offers, identify your opportunities with the retailer as we explore the latest strategic priorities that will influence its future performance.

This in-depth guide to Germany explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

An essential summary of trading priorities, latest developments, and other key commercial insights for Lidl.

We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Retail Analysis the most reliable and robust source available for data of this type. 

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We've grouped all the latest European retail news, store visits, retailer profiles and downloadable presentations together in one place.