German-owned discount supermarkets Aldi Einkauf GmbH and Lidl GmbH are ploughing ahead with a rapid expansion in Britain and are on course to grab more market share from the traditional big four players.
A top Aldi executive told Reuters that it aimed to have 1,000 UK stores by 2022, up from its current 762, while Lidl said it sees potentially 1,200 to 1,500 stores in the long term, up from 710.
Meanwhile, store openings at market leader Tesco PLC, Sainsbury’s PLC, Asda Stores Ltd and Morrisons Supermarkets PLC have slowed to a trickle. They are shedding thousands of jobs so that they can save money and better compete with the discounters.
Aldi and Lidl’s cut-price model has turned them into two of the world’s biggest retailers. They have expanded abroad as growth stagnated at home.
Aldi launched in Britain in 1994 and Lidl in 1990, and they have changed the shape of the UK grocery market.
However, their profits have fallen and traditional retailers have questioned whether the model is sustainable. The discounters also have little presence online and could face competition there from the big four and grocery newcomers such as Amazon.com Inc.
For now, Aldi and Lidl’s combined share of the £200 billion (US$282.74 billion) UK grocery market is set to grow.
Ashley Anzie, strategic insight director for grocery at researcher Kantar Worldpanel, forecast that their market share is to increase from 12.1 percent currently to 15 percent by 2020.
“That’s largely driven by the fact that Aldi and Lidl will just physically be opening more stores,” he said.
Aldi and Lidl are also modernizing existing stores and making a push into premium ranges that chimes with British shoppers, who have become more cautious in their spending.
“What we’re doing is investing very carefully in things that add to our customer offer, our store portfolio and our infrastructure,” Aldi managing director of corporate buying Jonathan Neale said.
Aldi’s £1 billion investment program to the end of this year is to create 8,000 jobs, Neale said, adding that Britain’s departure from the EU had not changed the company’s plans.
Seventy new stores are to be opened this year and by 2020, about 850 stores are to have Aldi’s updated format, from 138 currently, Neale said.
Lidl is investing £1.45 billion in Britain during this year, as it plans to open 50 stores and revamp 30.
“To further strengthen our position as a British retailer, we will continue to invest in our UK expansion,” Lidl UK chief executive Christian Hartnagel said.
Although Britain’s big four have narrowed the price gap with the discounters, they have not reversed the trend.
Tesco and Morrisons have reported annual profit growth, but that is partly because their profits were rebased after huge restructurings in 2014. Sainsbury’s has reported three straight years of profit decline and a fourth is forecast by analysts. Asda has seen two years of declines.
One senior director of a big four player said the discounters price position was unsustainable.
“The underlying brand equity proposition isn’t actually there,” the director said. “It’s just that they are giving it away below economic rational behavior.”
Nevertheless, Tesco, Asda and Sainsbury’s have all dabbled with their own discount formats, without success.
According to Kantar Worldpanel data, Aldi, owned by Germany’s Aldi Sud, the world’s No. 5 retailer, has a 7 percent share of the British market, while Lidl, part of Germany’s Schwarz, the world’s second-biggest retailer behind Walmart Inc, has a 5.1 percent share.
The German groups are active in dozens of countries, which gives them a purchasing power advantage over local rivals. This means that they can offer low prices on 1,500 to 1,800 mostly own-brand products.
Aldi said it offers a 15 percent price discount to the market “regardless of what the market does.”
However, this has squeezed its operating margins.
Being privately owned, Aldi and Lidl say they can afford to take a long-term approach, as they are not beholden to shareholders.
One longer-term threat to the Aldi and Lidl model could come from e-commerce, where the British supermarkets are trailblazers. The German companies have not embraced e-commerce, but Amazon’s entry into selling food online could mean that they also have to follow suit.
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) is expected to share his views about the artificial intelligence (AI) industry’s prospects during his speech at the company’s 37th anniversary ceremony, as AI servers have become a new growth engine for the equipment manufacturing service provider. Lam’s speech is much anticipated, as Quanta has risen as one of the world’s major AI server suppliers. The company reported a 30 percent year-on-year growth in consolidated revenue to NT$1.41 trillion (US$43.35 billion) last year, thanks to fast-growing demand for servers, especially those with AI capabilities. The company told investors in November last year that
United Microelectronics Corp (UMC, 聯電) forecast that its wafer shipments this quarter would grow up to 7 percent sequentially and the factory utilization rate would rise to 75 percent, indicating that customers did not alter their ordering behavior due to the US President Donald Trump’s capricious US tariff policies. However, the uncertainty about US tariffs has weighed on the chipmaker’s business visibility for the second half of this year, UMC chief financial officer Liu Chi-tung (劉啟東) said at an online earnings conference yesterday. “Although the escalating trade tensions and global tariff policies have increased uncertainty in the semiconductor industry, we have not
Intel Corp has named Tasha Chuang (莊蓓瑜) to lead Intel Taiwan in a bid to reinforce relations between the company and its Taiwanese partners. The appointment of Chuang as general manager for Intel Taiwan takes effect on Thursday, the firm said in a statement yesterday. Chuang is to lead her team in Taiwan to pursue product development and sales growth in an effort to reinforce the company’s ties with its partners and clients, Intel said. Chuang was previously in charge of managing Intel’s ties with leading Taiwanese PC brand Asustek Computer Inc (華碩), which included helping Asustek strengthen its global businesses, the company
Power supply and electronic components maker Delta Electronics Inc (台達電) yesterday said it plans to ship its new 1 megawatt charging systems for electric trucks and buses in the first half of next year at the earliest. The new charging piles, which deliver up to 1 megawatt of charging power, are designed for heavy-duty electric vehicles, and support a maximum current of 1,500 amperes and output of 1,250 volts, Delta said in a news release. “If everything goes smoothly, we could begin shipping those new charging systems as early as in the first half of next year,” a company official said. The new