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Analysts: Discounters stepping up the pressure

Aldi, Lidl moves challenge traditional grocers

Russell Redman

November 6, 2018

2 Min Read
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Lidl

Compounding the competitive crunch experienced by supermarkets is the continued U.S. market incursion of German hard-discount grocers Aldi and Lidl, agreed panelists in the 23rd annual SN Financial Analysts Roundtable. A range of research studies have shown that both chains get high marks from consumers — particularly Millennials — and tend to lower overall grocery prices when entering a new market.

“It’s a convenient, value-focused concept that appeals to many different income demographics,” said Christopher Mandeville, equity analyst at Jefferies.

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A major product expansion is underway at Aldi, including enhancing the selection of fresh food by 40%.

Aldi, especially, has expanded swiftly. Now with about 1,800 locations in 35 states, the chain is over a year into a $5.3 billion, five-year expansion program that will enlarge its store base by almost 50% and upgrade most of its stores. By the end of 2022, Aldi aims to have 2,500 stores. “Aldi is growing like a weed,” said Scott Mushkin, managing director of consumer research at Wolfe Research.

major product expansion also is underway that will make 20% of items in every Aldi store new versus a year ago and augment the selection of fresh food by 40%.

More Roundtable coverage:
It’s crunch time for grocery retailers, analysts say >>
Watch out for Costco and Target, analysts warn supermarkets >>
Is the industry overstored with the wrong format? >>

“The middle-income consumer, or even an individual who is well-off, you'll find them actually shopping at Aldi because they appreciate the value that's provided,” Mandeville said. “They feel as though they've won something.”

Lidl is also making moves, having reset its expansion plans and retooled its real estate strategy. After its first U.S. store openings in June 2017, Lidl said it aimed to have 100 stores in the next year but ended up scaling back its growth plans. But in that short time span, the chain made a strong impression on American grocery shoppers and holds a high growth potential. Currently, Lidl has more than 50 stores in Virginia, North Carolina, South Carolina, Georgia, Delaware and New Jersey.

“I think the jury is still out on Lidl. There are some things that consumers like about Lidl, and there are some things that the consumer is not accepting,” said Karen Short, managing director for equity research at Barclays Capital.

“But if you look at where Lidl is going from a footprint perspective,” she noted, “it’s obvious that their focus is the wasteland of the Eastern seaboard that is an entire segment of poorly run conventionals. So it seems to me that it should be pretty easy to take share in the footprint that they’ve currently identified.”

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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