“There’s a lot of talk – over focus and over concentration – on hard discounters at the moment,” said Shore Capital’s Clive Black. “But 92% of transactions don’t take place at Aldi and Lidl; even though they are growing by 30–35% a year.”
In reality, the complacency of the major supermarkets – Tesco, Sainsbury, Asda and Morrisons – was the major factor driving change in the retail sector. “The rest of the trade [big supermarkets] has been sleep walking – asleep – at the wheel and is now learning the importance of price.”
Black said the market was seeing probably the biggest contraction in supermarket margins for a generation, as 20 to 30 years of work to expand their margins was coming to a very rapid end.
But shopping preferences were not driven solely by price. “At present, price is deemed to be the driver of change and growth in the UK food retail industry. But the vast majority of people don’t necessarily shop on price,” said Black. “And if they did all shop on price, then everyone would be shopping at Aldi, Lidl and Asda.”
‘Bankers and crooks’
However, the nature of the recession had forced shoppers who would not normally consider discount stores to reconsider. “It wasn’t a blue collar recession – it didn’t involve factory closures and strikes. It involved bankers and crooks and, like a virus, it spread across the UK and changed the way everyday people, middle class people, budgeted,” said Black.
“The necessity of saving money has meant that a lot of families, households and women who traditionally would not have been seen dead in Poundland, Aldi or Asda have had to shop there. The change in behaviour has been quite stunning over the past years.”
In response to a question from Edward Garner, director at Kantar Worldpanel, about whether price or provenance was the main driver of shoppers’ changing behaviour, Black replied: “It was not one or the other.
“It would be disrespectful to Aldi and Lidl to attribute their growing sales solely to low prices because provenance was high up their agenda.”
‘Changed with the times’
Aldi now supplied British fresh beef, lobster, British fresh produce and mozzarella. “They have changed with times,” he said.
Black was speaking at a meeting of the Food, Drink and Agriculture Group of the Chartered Institute of Marketing at New Zealand House in London yesterday (April 8).
Meanwhile, the latest figures from Kantar released yesterday – covering the 12 weeks to March 30 2014 – confirmed the inexorable rise of the discount stores. Speaking before the meeting, Garner said the challenging market might have been expected to restrict the growth of individual retailers.
“But this is certainly not the case for Aldi which achieved its highest ever growth of 35.3%, boosting the retailer to a record market share of 4.6%,” he added. “Lidl also experienced strong growth in a record breaking month, and now accounts for 3.4% of the market.”
But all the big four supermarkets faced falling sales over the past 12 weeks, which has been accentuated by the late Easter. All the majors showed declining market shares, with Asda being the most resilient, while Tesco remained dominant, accounting for 28.6% of the market.
Upmarket retailer Waitrose increased its share of the market to 5%, as it prepared for expansion into northern England, Scotland and Northern Ireland.
Watch out later this week for our exclusive podcast interview with Black on how the big four supermarkets “sleepwalked” their way into turmoil and what would be the likely impact on food and drink manufacturers.