Aldi and Lidl have been described as “considerable irritants” to their major grocery rivals as the discounters continue to perform well.
Shore Capital analyst Clive Black said that the German discounters’ proposition is chiming with consumers and they are improving margins rapidly due to a growth in stores and scale.
The grocery analyst said: “Negative volumes, inflation and the challenge of new deep-discounters and it has to be said convenience players [characterise the competition for Tesco, Asda, Sainsbury’s and Morrisons]. When volumes are negative attrition becomes all the more painful.
Black believes that Aldi has is gaining more traction through a strong fresh food and bolstered non-food offer. The latter has achieved strong sales due to seasonal ranges such as ski wear and car care lines.
The 400-store retailer holds a 2.2% share of the market and achieved growth of 27.9% in the 12 weeks to April 15, according to Kantar Worldpanel. Lidl holds 2.6% and had 11.1% growth. Both are expected to grow share when Kantar updates on grocery performance in the 12 weeks to May 13 later today.
Black said: “We can see why Aldi UK is right for current economic times. There is more to admire than not in the high quality of its range management albeit there is an act of faith that is required to extensively shop its private label brands; clearly though ‘needs must’ and many Britons are doing so.”
The analyst added Aldi remains short on brands and understaffed as well as offering fewer add-ons such as a pharmacy, cafe or counter services provided by its quoted rivals.
He questioned the long-term prosects for non-organic growth. “Whilst Aldi should attract new customers, most certainly the curious as it enters new localities, we continue to question the overwhelming duration of limited range retailing when compared to superstores. Such an open assertion will become more important if and when economic circumstances become more normal, volumes grow and trading up ensues,” he said.