Hope for Big Four as growth at Aldi and Lidl declines
THE boom in sales for German discount supermarkets Aldi and Lidl is ‘grinding to a halt’, according to City analysts.
Bruno Monteyne, of stockbroker Bernstein and a former Tesco director, has warned that growth at the discounters is falling off a cliff and will peter out altogether over the next 18 months.
The analysis will be welcome news to the battered ‘Big Four’ British supermarkets – Tesco, Sainsbury’s, Asda and Morrisons – which have been losing sales to the fast-growing groups leading to a wide-ranging price war.
‘If hard discounters were listed stocks, you would probably be holding short positions by now,’ said Monteyne, referring to the contracts investors take on shares when they expect shares to fall.
According to market researcher Nielsen, Aldi and Lidl currently control 12 per cent of the UK food retail market – a share that has doubled in four years. But despite spending huge sums on advertising, like-for- like sales at existing Aldi stores are falling, Monteyne has calculated. Aldi spent £62.5million, almost as much as Tesco, which is nearly four times bigger by food market share.
Lidl spent an estimated £78.3million last year, making it the heaviest spender of any supermarket.
As subsidiaries of German groups, neither Aldi UK nor Lidl UK publish detailed sales figures. But Monteyne’s analysis of accounts and market share figures collected independently suggests that like-for-like sales, which exclude the effect of new store openings, are under immense pressure at both Aldi and Lidl.
By comparison, sales declines at Tesco and Morrisons have been reversed. Monteyne concluded: ‘Where there are no openings of discount stores, consumers are switching back from Aldi and Lidl into the supermarkets’. The news will be particularly welcome to the market leaders, which as well as battling the discount rivals are having to deal with the drop in sterling, which has put up the cost of products they buy in dollars or euros.
Last month, Tesco had a public spat with European consumer goods giant Unilever over price increases on products including Marmite relating to the currency fall.
According to Bernstein’s research, Tesco now matches Aldi for price on 200 core own-label products. That represents ten per cent of Tesco’s sales but about a quarter of Aldi’s.
Monteyne also pointed to the overhaul of management at Lidl’s UK business, including the departure of chief executive Ronny Gottschlich in September and two other directors since July, which he said was an indication that plans were not going as smoothly as before.
Monteyne said that if the discounters follow the pattern they have shown in overseas markets when growth drastically slows, ‘store expansion will be halted and their capital expenditure redirected to other markets’ around the world.