Grocers say store expansion rules should apply to Aldi and Lidl

Large chains are typically not allowed to use restrictive land clauses to stop competitors opening nearby stores under rules set out in 2010.

When those rules were made, Aldi and Lidl were viewed as “limited assortment discounters” (LADs).

However, the rapid growth of the two chains has led the CMA to consider whether they should instead be designated as “large grocery retailers” (LGRs), a status held by seven other major supermarkets.

Sainsbury’s, Morrisons and Iceland all responded to the CMA consultation, with their arguments published online.

All three say that Aldi and Lidl should have their designation changed to sit within the large grocery retailers category.

“Competition is currently distorted by the asymmetric ability of Aldi, the fourth largest grocery retailer in the UK, and Lidl, the fifth largest grocery retailer in the UK, to restrict entry and expansion by competitor grocery retailers in local markets, while equivalent restrictions apply to other retailers of comparable or smaller scale,” said Sainsbury’s in its statement.

“Aldi and Lidl’s ability to enter local markets unhampered, together with their aggressive expansion strategy, has enabled them to shape site availability and local market economics through a distinct competitive advantage.”

Effectively tied with Lidl for the fifth-largest grocer in the UK, Morrisons was overtaken in market share by Aldi in late 2022.

In its statement to the CMA, Morrisons argues that “It is clearly the case that the prices offered by Aldi and Lidl in respect of their grocery products can no longer notably be described as being “at a low price” in circumstances where most supermarkets designated as Large Grocery Retailers have introduced price match schemes that ensure customers have access to an equivalent range of grocery products that are priced the same as, or cheaper than, the prices offered by Aldi and Lidl.”

Iceland, meanwhile, argues that “historically, a delineation was established between ‘LADs’ and the ‘traditional four’ retailers on many grounds, including larger SKU counts, and the existence of in-store fish, meat and delicatessen counters, bakeries and pharmacies.”

“However, this distinction has become less clear-cut over time. Many of the existing LGRs have recently taken steps to reduce SKU counts and eliminate in-store counters and pharmacies as a response to rising cost pressures. Accordingly, many of the features once indicative of a ‘full-stop shop’ or ’LGR’ are arguably no longer appropriate or reflective of market realities.”

In its response, Aldi argued that its core range covers 2,005 products, just 10% of the 20,000 to 30,000 SKUs typically offered by the LGRs, and that seasonal lines and regional variations never offer more than roughly 2,703 SKUs at any time.

It added that its grocery rivals offering the Aldi Price Match scheme was evidence of the greater levels of competition it was bringing to the market.

“Designating Aldi as an LGR would also be inconsistent with the order’s original intent, which was to address concerns about established retailers using land agreements to protect dominant positions, not to restrict new market entrants seeking to establish a presence.”