1planetretail.netMarch 2014

Senior Retail AnalystSTEPHEN SPRINGHAM

UK DISCOUNT GROCERYStructural not cyclical change

2

1. Market Structure and Channel Trends

2. Aldi and Lidl in the UK

3. Key Strategic Initiatives

4. Further Reading

ContentsContents

1. Market Structure & Channel Trends

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Kwik Save was for many years the standard-bearer for UK discounting, but is now defunct. Aldi and Lidl now dominate the channel.

1. Market Structure & Channel Trends1. Market Structure & Channel Trends

Aldi’s compatriot and arch-rival Lidl opens its first UK stores. Lidl is part of the German Schwarz Group grocery business.

German giant Aldi first enters the UK (opening its first store the following year). The UK business falls under the operating umbrella of Aldi Süd.

Lidl UK surpasses the 500 store benchmark.

1989 1990 1994 1998 2007 2008 2011 2013

Having been slowly wound down by its parent, the residual Kwik Save business is liquidated. At its peak (the early 1990s), the business had over 1,000 stores and a 7% share of the UK grocery market.

The UK Netto business was sold to Asda (owned by Walmart) for GBP778m (USD1.3bn). Asda retained 147 stores and was forced to offload 47 others on competition grounds. Netto had around 0.6% of the UK grocery market.

Netto launches in the UK. The business is part of the Danish retailer Dansk Supermarked Group. Long-established

indigenous soft discounter Kwik Save was acquired by supermarket operator Somerfield (now part of the Co-op) for GBP1.3bn (USD2.1bn).

Aldi UK surpasses the 500 store benchmark.

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Historic view - international grocery markets have different heritages. But markets with different starting points logically move in different directions.

1. Market Structure & Channel Trends1. Market Structure & Channel Trends

UK France Germany0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

5.9%

32.1%

9.1%

51.6%

15.1%

12.6%

13.8%39.1%

27.8%

4.9%

6.6%

32.2%

7.6%

1.5%

1.5%6.3%

2.8%

6.8%

9.8%2.8%

10.0%

Selected European Grocery Markets: Breakdown by Channel, 2002 (%)

Hypermarkets

Superstores

Supermarkets & Neighbourhood Stores

Discount stores

Convenience & Forecourt stores

Cash & Carries & Wholesale clubs

Other

Gro

cery

Sal

es (%

)

Note: ‘Other’ comprises Department & Variety Stores, Non-store Commerce, Other Grocery formats, Other Non-Food Formats, Catering and Wholesale.Source: Planet Retail.

France pioneered the hypermarket, Germany the hard discounter. The UK has a limited discounter heritage.