Brief

With Lidl's opening day coming in June, traditional grocers prepare to battle

Dive Brief:

  • With discount store Lidl planning to start opening its U.S. stores next month and already-established discounter Aldi in the midst of a massive renovation and expansion of its existing stores, large U.S.-based grocery retailers such as Wal-Mart and Kroger are bracing for its arrival, according to an article in The Wall Street Journal.
  • Wal-Mart is doubling down on its discounting, with executives telling suppliers that the store's prices should be 15% lower than competitors 80% of the time, as well as amping up its convenience factor. One of Wal-Mart's major suppliers is considering offering distinct products to Lidl to be able to take advantage of the discount retailer's entry into the market.
  • Kroger has sent executives to European cities where Lidl operates to learn more about how other retailers have fought back. For now, according to the article, Kroger and its Harris Teeter stores will continue to cut prices and offer quality store-brand products.

Dive Insight:

Ever since Lidl announced it was coming to the United States in late 2015, the nation's grocers have been bracing for impact. Now with Lidl's first grand openings a few weeks away, it's just about showtime. 

With more than 10,000 stores in 27 countries, Lidl already is a global retail behemoth. Most of its offerings are store brand merchandise, and it uses those agreements to bring high quality at low prices. Its U.S. stores, according to executives, are going to be much the same as its European counterparts in that regard. Shelves will be filled with European chocolates, fresh produce, gourmet-curated wines and meat and fish bearing sustainability certifications. Stores also will have fresh bakeries producing breads and pastries throughout the day.

And looking at the UK as an example, traditional grocers may definitely see some of their market share slipping. Since 2013, when Lidl and Aldi both started their push into the British market, their combined market share has grown more than 75%, according to data from Kantar Worldpanel. Aldi is now Britain's fifth-largest grocer, with about 7% of the market, while Lidl is the eighth largest, controlling 5%.

Aldi, which has been a player in the U.S. since the 1970s, has already started retooling its model for Lidl's entrance with a $1.6 billion chain-wide renovation. Aldi's revamp will bring some of the aesthetics and selection that Lidl is known for to its stores, setting up a direct challenge.

But despite its long history of U.S. grocery retail, Aldi has not dethroned the Krogers or Wal-Marts. Both Aldi and Lidl are known for a streamlined selection of goods — only one type of ketchup, just store-brand varieties of cereal. Larger groceries like Wal-Mart and Kroger, on the other hand, are known for a large selection of goods. This is something they can highlight in battles for shoppers. They also can work with major manufacturers to create exclusive products — something that Hostess has done with Deep Fried Twinkies at Wal-Mart and Hershey's and Mars products only sold at Wal-Mart and Target

Also, the hard discounters are not known for their online grocery presence. This is an area that is growing, with a Unata report finding about one in three U.S. shoppers is expected to order groceries online this year. According to a joint study from the Food Marketing Institute and Nielsen, online grocery is predicted to bring in $100 billion a year by 2025. Many grocery retailers are working to build out their click-and-collect and grocery delivery options through their own initiatives or third-party firms like Instacart and Shipt. They  also should highlight these options. Lidl US execs said this week that they have no current plans to enter the e-grocery market. 

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Filed Under: Grocery Corporate
Top image credit: Lidl Facebook page