Hard discounters are the major disruptors in the grocery industry, according to Bill Bishop, Chief Architect of Brick Meets Click and industry expert Bill Bolton, founder of Customers & Guests, and former CEO Jewel Foods. The duo presented “When Aldi and Lidl Go Head to Head” at Western Michigan University’s Food Marketing Conference earlier this week in Grand Rapids, Mich.
According to data from the Nielsen’s TDLinx, as presented in Progressive Grocer’s Annual Report of the Food Industry (April 2017), limited assortment supermarkets, specifically Aldi, have been responsible for the largest leap in physical store growth when compared to other retail formats including conventional, supercenter, natural/gourmet, and others. Aldi, which has been in the U.S. for some 40 years, is riding the popularity wave it achieved from cash-strapped converts during the recession. It currently has nearly 1,600 stores across 34 states.
Lidl will be making its widely anticipated debut this year in North America, with a commitment for 150 stores in 2018, mostly in the Mid-Atlantic states.
Bishop and Bolton predict that by 2021, both discounters will account for $53 billion to $67 billion in U.S. sales. Aldi, which will have upwards of 2,500 stores, will generate $32 to $40 billion in sales. Lidl, with up to 1,000 stores by 2021, will have sales of $21 to $27 billion.
Even with a commitment to many more stores, these retailers represent a small percentage of the U.S. grocery landscape. Still, the notable savings, curated assortments, “treasure hunt” offerings and quality continue to win loyal shoppers, who are also word-of-mouth ambassadors.
Lidl is breaking out its historically laggard position, says Bolton, with a greater emphasis on fresh products, including par-baked items and a great presentation of fresh meats. Another point of differentiation: apparel and other themed merchandising programs.
Aldi won’t be rolling over anytime soon, however. Aldi is committed to changing the feel of its stores, focusing on communication, supported by color and graphics, as well as wider aisles, says Bishop. The retailer, which has been noteworthy for its lack of national brands, is adding them in, but at prices that compare with sale prices at conventional supermarkets.
Hard discounters, Bishop and Bolton report:
- Create a low cost infrastructure that will impact the way food retailing is done in North America
- Offer more comfortable shopping experiences that rival other formats
- “Sense and respond” to market changes. Aldi and Lidl are pushing each other to innovate. Where Aldi had been the leader, now Lidl is considered the greater disruptor
- Leverage online grocery as a core element of their go-to-market strategy.
Bolton closed with his mantra from his time at Jewel Foods: “We must be willing to cast aside today’s methods, however effective, for those that seem better suited for tomorrow.”