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Lidl has opened five new stores today to take the fast growing discounter's total number of UK stores to 700.

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The discounter plans to expand its store network and build a new €80m distribution centre.

New 54,000 sq m distribution centre

Lidl is set to roll out its largest planned project in the country, with planning permission now secured for a new distribution centre. Building work for the 54,000 sq m facility in Newbridge, Co Kildare, is set to commence in April.

Since entering the country in 2000, Lidl has transformed the Irish grocery market and the existing Newbridge DC has been central to its success.

Lidl’s store expansion in Ireland

The new DC will be essential to support the retailer’s ambitious expansion plans in Ireland. It currently has 150 stores across the country, but plans to expand its estate to 200 by 2023.

New stores are to be rolled out include Grangegorman, Dublin; Dunshaughlin, Co Meath; Santry, Dublin; and Sligo. Existing stores in Fortunestown, Co Dublin, and Castlerea, Co Roscommon will also be rebuilt. In addition, a number of other proposed stores are still going through the planning system.

The discounter’s latest digital innovation will help build closer relationships with shoppers.

Fun and games to improve ease of shop

This latest initiative from Lidl is designed to engage, entertain and inform shoppers, and it makes a timely appearance with many people ending an alcohol-free “Dry January”.

Utilising artificial intelligence, advice is tailored based on budget, food choices, and other preferences. It is easily accessible through Lidl’s Facebook page, which has 1.7m likes.

The discounter is a fierce competitor in the wine category, attracting headlines for its price positioning, range, innovation and awards. IGD’s ShopperVista research reveals that wine is the third hardest category in which shoppers struggle to make a choice, therefore extra help in making decisions is likely to be well received.

Our view

Lidl’s wine chatbot is further evidence of the discounter reaching out to build closer relationships with shoppers. Recently we’ve seen the discounter experiment with a range of techniques across different platforms:

  • Lidl has a long-standing relationship with influential online network Mumsnet
  • The Lidl Community launched in the UK in 2016, giving loyal shoppers an identity as “Lidlers”, and encouraging them to engage with each other over product reviews, sharing hints and tips
  • The discounter developed its own mobile gaming app, Mini Lidl, appealing to shoppers with children
  • At Christmas Lidl introduced festive filters and emoji-themed mobile game via the Facebook Camera app

With grocers in the UK market becoming more vocal on price, dialling up this sort of activity will help Lidl differentiate by engaging with shoppers on topics beyond value. Previous activity has been at brand level, so it is interesting to see a move into category-based initiatives. If successful, we’re likely to see other hero categories supported similarly, and this could be an opportunities for suppliers to support on, too.

Kesko has reported its 2017 results, with group net sales increasing by 1.8% in comparable terms to €10.7bn. Comparable operating profit increased by 2.8% to €296.7m.

Grocery trade: +2.4% to €5.3bn

Kesko’s grocery business, which accounts for 49% of Kesko’s total sales, saw 2017 comparable net sales increase by 2.4% to €5.3bn. The grocery trade accounts for over 68% of Kesko’s total operating profit, with 2017 grocery operating profit increasing by €27m to €203m.

Market trends: quality, economic growth filtering through to grocery

On market trends, Kesko suggested that ‘the importance of quality and selections has continued to increase’, while the growth in the economy is filtering through to the grocery market.

2017 highlights: service and quality focus, synergies and store upgrades

On the highlights in 2017, the retailer highlighted that ‘strategic concentration on service and quality increased sales and profit’. Meanwhile, the business drove synergies through the acquisition of Suomen Lähikauppa, while continuing to upgrade stores.

Q4 2017 highlights: growth across formats, new store openings and profitability

In Q4, the retailer comparable sales growth of 4.5%, with all formats reporting increases. Meanwhile, new store opening sales were ‘off to a good start’ and profitability increased at K-Citymarket and Kespro.

CEO: '2017 was a year of strong and successful transformation'

Commenting on the results, CEO Mikko Helander said, ‘In the grocery trade, 2017 was a year of strong and successful transformation, resulting in increased market share, sales and profitability. We implemented our strategy by redesigning all of our chains, with the objective of offering the most customer-oriented and inspiring food stores in Finland … We are also particularly happy with the good performance of K-Citymarket and Kespro, and the strong openings of new stores'.

S Group 2017: supermarkets +1.%, service stations and fuel +5.8%

Elsewhere in the market, competitor S Group has also recently reported its 2017 results, with supermarkets in Finland, the Baltics and Russia seeing comparable growth of 1.7% . Meanwhile, service stations and fuel saw comparable growth of 5.8%.

Kesko 2018 outlook: net sales likely to be lower due to divestments and restructuring

On what lies ahead, the results' press release from Kesko stated that net sales are expected to drop below that achieved in 2017 driven by divestments and restructuring. Comparable operating profit is likely to be higher, although there will be ‘investments in store openings and redesigns, in the expansion of logistics operations and in digital services’.

Kesko opens health, beauty and wellness chain, targeting 30 stores in 2018

In other news, the first of Kesko's health, beauty and wellness chain of stores in partnership with wholesaler Oriola KD has opened under the 'Hehku' ('Glow') banner. The first two stores opened in January 2018, with one  in Helsinki’s award-winning Forum shopping centre, one of the country’s largest and busiest shopping centres. The range in-store includes ‘familiar, emerging and completely new brands’.

There are plans to operate around 30 stores by the end of 2018 and ultimately 100 stores across the country.

Source: Kesko

Lidl continues refurbishment programme

Elsewhere in the market, Lidl is continuing its store refurbishment programme, which has seen stores upgraded in stages. In February, the next phase of stores in Uusimaa, Kerava, Helsingin Ala-Tikkurila, Klaukkala, Järvenpää and Ekenäs will be upgraded.

As a result of changes in other stores, colour schemes have been changed to white and grey, while signage has been improved. The order of categories in-store has been revised, with produce being brought by store entrances, for instance. New equipment has also been introduced.

Commenting on the developments, Nicholas Pennanen, Lidl Operations Director of Finland said, 'We are investigating how our customers visit stores, for example, in which order the store is typically [shopped] and what are the most popular shelves. We combined this data with customers' wishes. This is how we got a planned order that best serves the customer, but also improves the efficiency and efficiency of our skilled personnel'.

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