The German discount giant Lidl is set to ramp up the pressure on the big four supermarkets with bold plans to open another 230 stores.
Christian Hartnagel, UK boss of the grocery chain, plans to open the extra stores in the next three years, taking its total to 1,000 by 2023. That accelerates Lidl’s growth plans after it previously said it would open 50 to 60 stores a year.
Lidl and fellow discounter Aldi continue to spread across the UK despite the efforts of Morrisons, Sainsbury’s, Tesco and Asda to narrow the price gap that has allowed their upstart rivals to undercut them dramatically.
Aldi plans to open about 50 stores a year for the next two years, and between them the discounters now account for 14% of the UK grocery industry, according to researcher Kantar Worldpanel. That is up from just over 5% in 2008.
The German companies initially focused their expansion on areas where land was cheap, but are now pushing harder in London and the southeast, where the higher rents have historically acted as a deterrent. In recent years, they have both invested more heavily in their premium ranges, which has helped draw in more affluent shoppers.
The disruption wrought by the discounters spurred Sainsbury’s and Asda to attempt to merge last year, only for regulators to block the deal — a move that, in effect, outlawed big consolidations for the forseeable future.
Asda’s owner, Walmart, has since said it plans to float the business over the next few years, although Aldi and Lidl’s expansion creates an unhelpful backdrop.
Price cuts by the big four contributed to a decline in Aldi’s operating margins in the UK and Ireland — down by a third to 1.74% last year. Lidl does not break out profits for its UK arm separately.
Lidl is owned by the Schwarz Group, Europe’s biggest retailer, which generated sales of €104.3bn (£89.9bn) last year. Boosted by store openings, its UK sales grew by 8.2% in the 12 weeks to October, making it the country’s fastest-growing supermarket chain. Tesco’s sales were down by 0.2% over the same period.
Hartnagel, 37, a Lidl lifer, was parachuted in to run its UK business in 2016. He is experimenting with ideas on how to take it online, but has yet to see a profitable route for doing so. Lidl opened its first store in the UK in 1994, but it was not until the financial crisis that discount stores gained traction with UK shoppers.