Kantar Retail: 'Lidl is going to take significant market share away from a lot of folks'

Kantar Retail: 'Lidl is going to take significant market share'

Given that Lidl is only opening its first US stores this week, it’s impossible to predict with certainty what its future looks like, but it could be a significant force in US food retailing in just five years, predict analysts at Kantar Retail. 

Kantar works on the assumption that each Lidl store - with around 23,500 square feet of selling space - could, once up to speed, generate sales of around $16million, or $681/sq ft, compared with the industry average of $400-600/sq ft (although rival Aldi notches up around $755).

“It always takes a while to get the bugs out, but a fully mature store that’s been open for a couple of years should do about $16m in sales annually," Kantar Retail Director Mike Paglia told FoodNavigator-USA. "So when these stores open next week they won’t be doing that, but over time, they could."

Lidl’s plan is to open 100 stores over the next 12 months and should this rate continue (100 stores/year) that would mean around 630 stores by the end of 2023, he said.

If you multiply $16m by 630 you get $10.08bn, but as not all of those stores will be fully mature and therefore won’t be 100% productive, Kantar predicts that Lidl could be generating annual sales of around $8.8bn in 2023.

630 stores in 2023

“They already have at least a couple of hundred sites picked out and our understanding is that these stores are typically free standing buildings in reasonably developed suburban areas in the same locales as Walmart, Kroger, Ingles Market and Aldi," said Paglia.

“The box is around 36,000 sq ft with 23,500 sq ft of selling space with a limited assortment that’s around 90% private label [85% of the assortment will be sourced from the US], whereas Aldi’s stores have around 10-15,000 sq ft of selling space, so Lidl is setting itself up to be the main destination for shoppers seeking a fill-in trip, but also a destination for those looking to save money on their shopping trip. They also plan to have an instore bakery and non-food items.”

Prices are claimed to be up to 50% less than other US food retailers, he said, noting that a Kantar Retail price survey conducted in the UK found that Lidl was on average 15% cheaper than ASDA (which is owned by Walmart).

Like rival ALDI, Lidl is appealing to the mid-market shopper, despite its discounting credentials, and will offer organic and gluten-free options, and private label products without certified synthetic colors, trans fats, or added MSG.

Its seafood will also be certified sustainable by the Marine Stewardship Council Best Aquaculture Practices or the Aquaculture Stewardship Council.

Interested in how Lidl will impact CPG manufacturers? Check out our incredible lineup of speakers at FOOD VISION USA 2017 (Chicago, Nov 13-15), who will explore how the changing food retail landscape will impact suppliers.

Why all the hype?

The media hype surrounding Lidl’s US invasion is significant, and justified, claimed Paglia.

It’s not often that a new retailer of the size and scale of Lidl sets up shop in the US and they have a very strong track record of entering new markets and succeeding. The only market that didn’t work for them is Norway.”

He added: “The east coast is a dense crowded saturated market, so over time, Lidl is going to take significant market share away from a lot of folks. The least vulnerable retailers are the ones that are highly differentiated and market leaders in their space such as Publix and Wegmans, but it’s going to impact retailers such as Ahold Delhaize and it’s going to put some pressure on Walmart.”

And given that Aldi and Lidl now account for 12% of sales in the UK grocery market, up from just 1% 12 years ago, you wouldn't bet against them, he added. 

Survey: Shoppers at all income levels excited about Lidl

According to a recent online survey of 508 shoppers in North Carolina, South Carolina, and Virginia conducted by management consultant Oliver Wyman, 67% of respondents said it was likely or very likely that they would try shopping at Lidl and 52% said they were excited about shopping there, with enthusiasm from consumers at every income level .

George Faigen, partner in the Retail and Consumer Goods practice of Oliver Wyman, said: “Grocers who believe my customers would not shop at Lidl or Aldi will likely be surprised. The US and European trends we have measured over the past five years tell a clear story of consumers moving portions of their weekly shopping from incumbent grocers to these private brand retailers.”

Part of the Schwarz Group, the largest retailer in Europe and one of the largest in the world, Lidl keeps prices low by offering a limited range (SKU count) and a strong private label offer, although it also stocks some national brands. Its first US stores will open this week in North Carolina, South Carolina and Virginia.

Rival ALDI, which first entered the US in the 1970s, operates nearly 1,600 stores in 35 US states today and recently announced a $1.6bn plan to remodel 1,300 of them. It is also expanding rapidly, and plans to expand its US store base to 2,500 by 2022 as part of a $3.4bn investment announced this week. 

Lidl stores offer weekly promotions of non-food products from fitness gear and power tools to small kitchen appliances, and fashion items (Heidi Klum is also launching a new line of clothing at Lidl later this year, for example).

"Wherever possible, we source our produce from local suppliers who adhere to sustainable growing techniques. In fact, Lidl products meet some of the most stringent quality standards set by organizations around the world to ensure healthy foods, sustainable production practices, and reduced environmental impact. These organizations enforce standards around overfishing, organic farming and production, sustainable harvesting, fair trade, and more.

From in-store initiatives and recycling stations to programs at our distribution centers that help us recycle paper, plastic, glass, wood, metal, electronics, and other materials, Lidl is at the forefront of reducing landfill waste.

Lidl supports the Fair Trade movement. We source products like coffee and chocolate from ethical sources, because we believe that all farmers deserve a living wage.”

Source: Lidl USA

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