The UK’s two biggest discounters are poised for battle in determining who can take the most advantage of the credit crunch.
Aldi and Lidl, the German discount giants, are to take different tactics in product range for the first time, they revealed on a BBC programme.
BBC2’s Food Fight: The Discount Boom, presented by Gregg Wallace, saw the MasterChef judge look at the impact of discounters on the UK market.
Aldi has built a high profit business through simple store layout and own-label products. But recently Lidl has re-positioned itself to incorporate more FMCG brands into its portfolio.
The programme backed up recent research from Verdict that people are turning to discounters to help counter the credit crisis.
Richard Perks, director of retail research at Mintel, said: “People are worried about money and it’s playing into discounters’ hands.
“Conditions are ideal for them and if you looks at the advertisements we’ve seen from Tesco and Asda talking about price cuts, you can see they are worried,” he said.
Currently Tesco holds 31.4 per cent of the market with Asda (17.1 per cent), Sainsbury’s (15.7 per cent) and Morrisons (11.2 per cent) behind them. But Aldi and Lidl now combine to make up more than six per cent of the market.
Aldi currently has 382 stores nationwide and aims to open one a week with a target of 1,500 outlets. Lidl currently has 498 UK stores.
Aldi continues to trade using profit margins created by using own-label products with packaging resembling larger brands. “You can get a hundred quid’s worth of food [from the upmarket supermarkets] for seventy quid here,” said Paul Foley, md of Aldi UK.
Lidl has also used traditional discounter tactics such as simple shop layouts and providing far fewer product lines (around 1,000 to Tesco’s 3,000), but aims to introduce more top brand lines to attract more customers.
But Aldi insists it intends to improve the quality of its existing products. “We are increasing our range of premium products and fresh foods,” said Tony Baines, md of buying at Aldi. “We’ve been known for our low price for some time; now we want to build a reputation for high quality.”
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