The past nine months has been quite a step change for Lidl, having been consecutively named the fastest growing bricks-and-mortar supermarket and hitting a record market share of 8.1%.
It is fast catching up to Morrisons’ 8.7% share and is not too far behind rival discounter Aldi at 10%.
With plans to open hundreds of new stores this year, Lidl’s growth journey looks set to continue.
But why is Lidl performing so well right now, can its growth continue, and can it ever overtake its closest competitors?
Lidl has been on top form for some time now. It was the only grocer to win spend from all other competitors over the Christmas period and continues to be the fastest growing bricks-and-mortar supermarket, a title it has held for nine consecutive months.
Senior retail adviser and consultant Matthew Nobbs, who spent 22 years in leadership roles at Lidl, highlights a few key reasons behind Lidl’s growth, which he says when combined, “add up to something pretty special”.
Having previously spent six years as Lidl’s UK supply chain director, among other senior roles, Nobbs notes that this is one area that has been a “massive focus” for the discounter.
“Lidl is good with its supply chain from making sure that products are available on shelf, to having its own warehouse network and its own logistics network across Europe.”
He notes the German retailer’s ‘Britishness’ has also helped it to slowly solidify its name in the UK market.
“This started in 2015 when Ronny Gottschlich was the CEO, driving the fact that its a very British supermarket. British meat, poultry, fruit and veg contracts that are not into the weeks or months anymore, but many, many years. The marketing of it as well – they’re more British than pretty much any other retailer. They’re shouting it from the treetops.”
Nobbs adds that more recently, it has been Lidl’s loyalty programme that has helped “drive basket spend and get consumers to switch from competitors”.
“The loyalty programme has been a real game changer. If you think that these products are already at a very low price, because it’s predominantly own-label, and they’re being discounted further – it’s fantastic pricing. It’s a very aggressive strategy in terms of whether it’s wine, baked goods or dairy, whatever those categories are, it’s been highly successful,” he explains.
Earlier this month, Lidl revamped its loyalty scheme with new Lidl Plus Offers which provide members with weekly discounts on a range of products alongside the existing ‘Lidl Plus For You’ Coupons.
A Lidl spokesperson tells Grocery Gazette that the move looks to “make it even easier for customers to save on their shopping”.
Kantar strategic insights director Tom Steel agrees that its loyalty scheme is driving growth. He explains that “everything there is designed to incentivise people to do more shopping with them – it’s definitely all about frequency at the moment”.
Savvy Marketing chief executive Catherine Shuttleworth agrees that its the gamification of its loyalty scheme that makes it so appealing. “It’s quite fun with weekly offers and prizes – there’s reasons to go to the store,” she says.
On the flip side, Aldi may not be performing so well due to the fact it doesn’t have a loyalty scheme offering, Steel contends.
He explains: “When we look at switching, we’re seeing Lidl doing really well, gaining across the board. Whereas for Aldi, it’s struggling a little bit more. It’s losing some spend to Lidl, but also to Tesco and Sainsbury’s.”
Shuttleworth says that Lidl still offers “something different to anything else in the market”. On the other hand, she believes Aldi “has become a bit more like the main retailers, full of floor standing display units, branded items, more SKUs in the shops and some of the stores are starting to look a bit tired.”
Lidl looks “newer and a bit more contemporary”, in comparison she says, adding that “younger family shoppers probably really like Lidl because it’s easy to get around and it looks good.”
In terms of the store experience at Lidl, one of its key features is its bakery, which was named the most popular supermarket bakery in April by Kantar.
The grocer also overtook Tesco for having the largest share of the in-store bakery market in the first quarter of the year, at 18.2% for the 12 weeks to 17 March 2024, just above Tesco which holds 18%.
Steel believes that Lidl will continue to “perform really well” and will be “towards the top” of its growth list, however he warns this may only be the case until August or September.
“Essentially, we started referring to them as the fastest growing retailer around September last year and when they reach that point this year, it’s going to be harder to carry on growing that way,” he says.
He notes that in order for Lidl to continue growing, “a lot will depend on store openings”.
If Lidl keeps pace, opening stores ahead of competitors then it can continue performing at its current level, Steel asserts.
Last month, Lidl unveiled plans to open hundreds of new stores across the country this year in areas including Bristol, Birmingham and Berwick in Scotland, as well as new London locations including in Wandsworth, Fulham, Hoxton and Canning Town.
Lidl GB chief development officer Richard Taylor says: “We’re planning to open hundreds of new Lidl stores but ultimately see no ceiling on our ambition or growth potential.
“This is why we’re continuing to invest in new locations whilst exploring innovative routes to expansion. As we look ahead, we’re excited to welcome even more new shoppers to our existing stores, as well as those we’re planning to open across the country in the coming months and years.”
Nobbs says that when these new stores start coming into fruition in 12 to 18 months, “it’s going to be all guns blazing”.
“When you’ve got almost 1,000 stores, 8.1% market share and you’re growing at a rate of knots when you’re not opening many stores by getting customers to switch – imagine what’s going to happen when you start opening that tap of new real estate again.”
While overtaking Aldi – which currently holds 10% of the market – is a slightly trickier job, Steel says that in the short-term, Morrisons, which currently sits at 8.7%, is a different story.
He says it is the “closest gap” between the two that Kantar has ever seen and predicts Lidl will leapfrog the Bradford-based supermarket within the next six to 12 months.
Shuttleworth agrees that Lidl will have overtaken Morrisons by the end of the year “no questions about it”.
“Morrisons is starting to get its operational business back together, but it’s going to take a long time to bring the customers back. While the new management team is doing a good job, I don’t think that’s necessarily executed in the shop. When you try to sort out Morrisons, you’re turning round an oil tanker, whereas Lidl is already on a trajectory of growth,” she explains.
Nobbs also believes this Lidl will overtake Morrisons through “a combination of customer switching and new store openings,” however predicts a slightly longer timeframe at 18 months.
He says: “Ultimately, what you don’t want to do is upset your existing customers by breaking availability, having regional distribution centres blowing your budget, and Lidl will want to make some money as well. So I think it’s going to take about 18 months, but for sure they will overtake Morrisons in that time.”
In terms of catching up to Aldi, while Steel argues that “it’s not impossible,” he adds: “I think that would be quite some time away and I think Aldi would be continuing to open new stores.”
He believes that Aldi’s market share will “remain fairly consistent”.
“It has got quite a big base and I think it will want to try and remain as competitive as possible. I don’t see it rapidly losing a lot of share. Its always been a business that’s quite ahead of the times and I’d expect it to be trying to respond and at least maintain its share as much as possible,” he explains.
Nobbs agrees that “its not going to happen overnight,” however as an international retailer, he questions where Aldi will put its money in the year ahead.
“It’s on a massive growth drive in the States at the moment. It could be that Aldi thinks its money is better off spending, expanding and turbo charging within the USA and just holding its position in the UK.”
While it might take Lidl slightly longer to reach Aldi’s market share, the discounter is on fire right now. With plans to expand to much more of the UK alongside a compelling in-store and loyalty offer, the next year could see it stealing more share from not just Aldi but the rest of the grocery market.