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Aldi and Lidl running on Christmas cheer!

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Through Stipendia social media, we’ve kept you up to date with any major changes in the supermarket industry as we believe it’s a sector that can have a huge impact on British consumers. This year we’ve seen Tesco suffer arguably the most disastrous 6 months in its 95 year history and the battle of the Christmas ads. However one major trend that has particularly peaked our interest has been the rise of Aldi and Lidl as challengers to the ‘Big Four’ supermarkets. Figures from Kantar Worldpanel suggest that Tesco, ADSA, Morrison’s and Sainsbury’s have all seen declines in year-on-year sales in 2014 from the previous year. Morrison’s saw the biggest sales fall, dropping 3.2% and seeing its market share contract to 11.2%. Tesco’s sales were down 2.7% and market share dropped by almost 1% however thanks to the crisis surrounding Tesco’s financial reporting the largest negative impact for the UK’s leading supermarket was probably the harm to its brand image.

Sainsbury’s and ASDA also saw declines in both sales and market share from their positions last year however discount chains Aldi and Lidl both saw their grip on Britain’s £175bn-a-year grocery market tighten. Figures out this week showed takings through the Lidl tills over the last three months are up 18% on last year with Aldi seeing a sales boost of over 22% over last years’ figures. In the last year, Aldi’s market share grew from 4% to 4.9% as Lidl’s share also grew from 3.1% to 3.7%.

Ronny Gottschlich, the managing director of the UK arm of Lidl attributes the success of his brand to the selection of a small selection of 1550-1650 products which enables prices to stay low. Aldi have positioned themselves as the cheaper alternative to the Big Four, offering similar quality but for a fraction of the costs. This message has been communicated through Aldi’s TV advertisements which have proved popular with consumers.

Aldi and Lidl’s pricing have caused a price war with the Big Four which has reduced like-for-like prices by 0.7% compared with this time last year. Ronny Gottschlich, says he sees Lidl’s arrival on the supermarket scene as similar to the emergence of low-cost airlines in the 1990s and states that now nearly 50% of UK air passengers choose the no-frills operators because the other airlines didn’t react fast enough.

But wait, there is one large supermarket chain we haven’t mentioned so far! The Kantar Worldpanel figures show Waitrose were able to grow during the past year despite the price war affecting the Big Four chains. Waitrose yearly sales saw a rise of 6% along with an increase of 0.3% increase in market share, taking it to 5% (just ahead of Aldi). With a market seemingly focused on prices, Waitrose has done extremely well to see growth of this level. Perhaps distancing their message from price and focusing more on a message of quality has helped disassociate the brand from the price war between other chains.

With the recent decline of the Big Four supermarkets, in particular Tesco, the future for Aldi and Lidl looks bright. If they can continue to communicate their message effectively and keep price promises, sales are likely to increase further.

The supermarket industry is one that has a large impact on British consumers and therefore, alongside our financial and payroll news, we’ll definitely keep you up to date with significant developments in this market during the New Year.

Until then, have a wonderful Christmas from the Stipendia team!

Key Contact: Lynne Auton
Tel: (0845) 308 2288
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