Aldi and Lidl unstoppable in budget Britain

As grocery price inflation hits a record high, the German no-frills supermarkets are now a lifeline for millions trapped in ‘food deserts’

The scarcity of affordable, healthy food is so acute in some of the poorest parts of Britain, Birmingham, Liverpool, Bradford, Durham and the Welsh valleys, that campaigners are calling for the vast majority of homes in these areas to receive targeted help.

A study from consumer campaign outfit Which? found that nearly half the neighbourhoods in the North East of England – and about a third in Yorkshire, the West Midlands and the North West of England – lack easy access to supermarkets, are poorly serviced with online deliveries and have low levels of car ownership, making it much harder for low-income households to physically put food on the table.

It is another grim statistic in the cost of living crunch with Britain in danger of becoming a country where housing, energy and now food are unaffordable for millions.

Yet, at the same time, such is the inexorable march of no-frills champions Aldi and Lidl that it is almost hard to believe that there are people in this day and age for whom cheap food is totally out of reach.

With the latest market share figures showing once again just how quickly the pair continue to grow, at a time when the Bank of England has warned that Britain is about to be plunged into a deep recession, one begins to wonder whether the German discounters can ever be stopped.

In the 12 weeks to the end of October, Aldi was once again the fastest-growing retailer, increasing sales by 23pc year on year to leave it with 9.2pc of market compared to 7.9pc during the same period last year. Sales at Lidl grew by 21.5pc to take its market share to 7.2pc from 6.2pc the previous year.

By comparison, performance at the established “big four” was positively pedestrian with 3.1pc sales growth at Tesco, 3.3pc at Sainsbury’s and 5.3pc at Asda.

Morrisons registered negative growth of 4.6pc, capping a miserable few months after it surrendered fourth spot in the rankings to Aldi, a seminal moment in the ongoing battle to rule the supermarket aisles, and a blow to its new American private equity owners Clayton Dubilier and Rice, whose takeover has left the Bradford-based chain saddled with £6.6bn of debt just as the interest rate cycle performs a handbrake turn.

The pair have completely upended a sector that had been dominated by the same quartet for more than two decades. Since the 2008 financial crash, the combined market share of Aldi and Lidl has ballooned from 4.4pc to 16.4pc, steadily nibbling away at the competition year after year. On the current growth trajectory, Lidl could also surpass Morrisons within the next year. Co-op, Waitrose and Ocado have all been going backwards recently, too.

Indeed, as food inflation tears through British homes, the coming downturn could herald a new golden age for the pair. Four-week grocery price inflation has hit another record high of 14.7pc and data specialists Kantar say it is still too early to call the ceiling.

Consumers now face a £682 jump in their annual grocery bill if they continue to buy the same items, at a time when just over a quarter of all households say they are struggling financially.

People are trading down to own-label foods in record numbers, delaying the purchase of traditional seasonal goods such as Christmas puddings and shunning non-essential items like clothing and household decorations. This is budget Britain in full swing.

Even the owner of Primark, the high street’s low-cost trailblazer, is warning of a combined £2bn hit from inflation this year. Yet, at the same time, the retailer’s sales are back at pre-covid levels, profits have doubled this time around, and it is promising to hold prices steady.

This, despite what Associated British Foods boss George Weston called “significant input cost inflation and sharply moving currency exchange rates” for a chain that pays for stock that is mostly sold in Europe, in dollars.

Still, a separate, ongoing study from Which? has found, not unsurprisingly, that Aldi and Lidl are consistently the cheapest supermarkets in the country, month on month, despite Tesco and Sainsbury’s making a big thing of going head-tohead with the pair in the price wars.

October’s research shows that a trolley of 48 popular items cost £75.79 at Aldi, compared to £77.68 at Lidl, and an incredible £25 cheaper than the most expensive option, Waitrose.

Critics question whether this is a race to the bottom. Ensuring that what we put on our plates remains affordable sometimes comes with some serious knock-on effects.

Suppliers are often the first to be squeezed whenever a price war erupts at the tills. Many of these are hard-working British farmers already operating on wafer-thin margins.

But so too are the supermarkets, and with the likes of Tesco pledging not to pass on inflation to today’s hard-up customers, suppliers could quickly become collateral damage in the latest price wars.

As Shore Capital analyst Clive Black has pointed out, another almighty food fight could have serious implications for sustainability, animal welfare standards, the obesity crisis and even the viability of the countryside.

Yet needs must. In the current economic climate, there is an argument that Aldi and Lidl are providing something akin to a public service. For those low-income families not stuck in one of Britain’s “food deserts”, as Which? has labelled them, no-frills food is a lifeline.

‘The pair upended a sector dominated by the same quartet for two decades’