The fervour surrounding Aldi and Lidl’s discounting belies the longstanding tradition of discounters in the UK retail market.

The fevered focus on Aldi and Lidl’s escalating growth in the UK has coined a misleading phrase, not only in the media but the sector itself: ‘the new discounters’. This is bizarre as these hard discounters are scarcely recent invaders. Like Costco (the limited-assortment discounter writ large that landed here at the same time), Aldi arrived almost 25 years ago. In fact, by 1992, Aldi was already operating 63 stores in the UK.

It is worth remembering how many British ‘old discounters’ already existed. Two stalwarts, Kwik Save and Lo-Cost (Argyll), were joined in the early 1990s by start-ups such as Shoprite and others spawned by the advent of Aldi, including standalone fascias belonging to the then-major supermarket groups: Gateway launched Food Giant, the Co-op developed Pioneer and Asda opened Dales. There were 12 discounters in total. None of them remain today – other than Aldi, of course.

Twenty years ago, Asda appointed a certain Mike Coupe as managing director of Dales. Now, as he takes over the supremo’s reins at Sainsbury’s, he finds himself in a joint venture with Netto, the company that four years ago was bought by his alma mater.

In keeping with the popular image of the Danes’ traditionally liberal attitude to multiple bedfellows, Netto seems to revel in promiscuity. In its sole capacity in the early 1990s, Netto operated almost as many stores in the UK as Aldi. Then Carrefour arrived with its hard discount format Ed and promptly joined forces with Netto in the UK. Not long after, it sold out to Netto entirely. Having partnered with Carrefour and subsequently divested to Asda, Netto is now returning to the UK in a joint venture with Sainsbury’s.

Will it be third time lucky in Netto’s corporate bed-hopping stakes?

A crucial point of difference between Aldi and Netto’s partners mentioned above is that Aldi is privately held whereas all of Netto’s partners have been public companies.

Aldi’s private status has been key to it establishing a presence in numerous markets, regardless of the number of loss-making years this might entail. In Denmark, appropriately enough, it reportedly took 10 years for Aldi to make a profit.

Interestingly, one reason why Aldi has had less success in France than in the UK is because its leading French competitor on price, Leclerc, is not a public company either.

Another reason, commonly overlooked, is that the operations in France (and most of northern Europe) belong to Aldi Nord. In the UK they are part of the more adaptable Aldi Süd, whose earlier adoption of scanning to break the 900 SKU limitation imposed by the human memory, introduction of more brands and gourmet lines, less austere stores and TV advertising have served it so well over here.

Now ‘new discounters’ from Britain are to challenge established players elsewhere in Europe, many of them privately held. Will B&M and Poundland, fresh from their IPOs, show that public need not mean puny or short-termist when they fight on the Continental battlegrounds of price?

  • Michael Poynor is Senior Advisor to Financo