German supermarkets are taking on British competitors

German retailers Aldi and Lidl are overtaking their British rivals with higher investment and lower prices, upsetting the established order.

With the announcement of a record investment of 1.4 billion pounds (1.6 euros) in new stores and lower prices, Aldi is taking on its British competitors.

The two-year plan is designed to accelerate expansion across the UK and close the gap with the country's three major players.

By the end of the year, more than 100 existing stores will be renovated and 23 new stores will be opened.

The capital investment will see Aldi expand its offering to 1,020 stores and a workforce of over 45,000.

To address the supply chain demands of delivering to more stores more efficiently, Aldi plans to expand its network of 11 regional distribution centers and upgrade the technology infrastructure underlying its operations.

In the last three months, the retailer has invested around £100 million (€89 million) in price cuts for consumers, while increasing retail staff salaries by a total of £79 million (€94).

Higher profits drive growth

According to Retail Economics, Aldi is now the UK's fourth-largest supermarket, closing in on rivals Tesco, Sainsbury's and Asda – the top three performing retailers in the UK's highly competitive supermarket sector.

Aldi's latest full-year results for the 12 months to December 2023 show its highest ever period of sales growth – up 16% to £17.9bn (€21.4bn), compared to £15.5bn (18 .5 billion €) in 2022.

Giles Hurley, chief executive of Aldi UK and Ireland, says he is focused on driving footfall by providing value to cash-strapped consumers: “British shoppers are voting with their feet and choosing Aldi as their supermarket of choice.”

“We are responding with our largest ever annual investment in the UK.”

He continued: “For every £1 of profit made last year, we are investing £2 this year – opening more stores and building the supply infrastructure to deliver high-quality, affordable food to millions more families across the UK.”

Things are also looking up for fellow German Lidl.

Lidl is now the sixth largest supermarket in the UK and has 11,000 stores in 32 countries, including more than 800 in the UK.

Consumer data firm Kantar has found that Lidl's sales rose 10.9% year-on-year in the 12 weeks to May 12, 2024, driven by both its in-store bakery offering and its highly successful loyalty program.

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The good news for Lidl continued with its market share growing from 7.7% in 2023 to a record 8.1%.

Lidl's rise will be difficult for British competitors to stop

Lidl has also gained recognition in British retail. It was named Grocer of the Year at the UK Retail Week Awards in March.

The judges were impressed by its growth over the last 12 months and its added value. Social commitment, such as the provision of food donations, was also praised.

Summing up Lidl's impact, one judge said: “Lidl has a great business in which it has captured a lot of market share. If the rest of the supermarkets don’t do anything, this will continue.”

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Ryan McDonnell, CEO of Lidl GB, was proud of the supermarket's achievement and said: “We are delighted to be recognized as Grocer of the Year, a particularly poignant award as we celebrate our 30th anniversary in the UK in 2024. “

“When the doors of our first store opened in 1994, our promise was simple: to offer our customers high-quality food at an unbeatable price, and that commitment still stands.”

He added: “Big on Quality, Lidl on Price is not just a brand slogan. It is a promise that embodies what our company stands for and encapsulates our commitment to social responsibility and sustainability, which are at the core of our DNA.”

“Over the years, this has helped to significantly change the way British households shop for their food.”

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According to financial data company Moneyzine, Tesco is the top UK supermarket with a market share of 27.5% and sales of £39.7 billion (€47.5) in 2023.

As one of the world's largest retailers, Tesco has more than 6,000 stores in Europe and Asia, including 4,074 in the UK, and employs more than 400,000 people worldwide.

Sainsbury's, the UK's second largest retailer, follows with a share of 15.6%, while Asda comes third with 13.4%.

Aldi overtook Morrisons to become the UK's fourth largest supermarket.

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Although Lidl is in sixth place, it has the financial resources to push for the top spot. It is part of the major German retailer Schwarz Gruppe, a family-run retail group that operates more than 12,900 grocery stores, supermarkets, hypermarkets and discount stores in 33 countries.

The owners of Lidl have the ambition, the industry knowledge and the financial resources to further disrupt the British supermarket sector.