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Retail Viewpoint – Lidl

Lidl benefits from Christmas trend for premium

Lidl has posted strong year-on-year growth of 16.0% for the Christmas period. The discounters have both significantly outperformed the food & grocery market this quarter, with Aldi posting 15.0% sales growth versus our Q4 forecasts for the total UK food & grocery market of +3.2%.

2017 has seen high levels of food inflation, and as a result spending on groceries has grown to take up a larger portion of consumer disposable income. Therefore, consumers are seeking the best value essentials, which has driven discounter growth. In addition, Lidl has focused on improving its premium range to capitalise on the increasing polarisation in consumer demand that we have seen throughout 2017, and particularly over Christmas – eroding the premium quality differentials at the likes of Waitrose and Tesco Finest. Sales of its luxury 24-month matured Christmas pudding led to a 60% increase in luxury Christmas pudding sales, while premium alcohol sales have also been strong over Christmas, and Lidl’s growth in this segment has been particularly impressive with Prosecco sales up 60% and Champagne up 25%, and the introduction of deluxe liqueurs provided some of the period’s bestselling items.

Lidl’s aggressive store expansion shows no sign of abating, with 34 stores opened in 2017 prior to the Christmas period taking the portfolio to 693, which would imply space growth of +6.6%, thus over the Christmas period Lidl was in strong positive like-for-like territory of +9.3%. Lidl’s full year like-for-like performance is not consistent with this trend, and with such high levels of space addition, it has often bordered on negative like-for-like. Improving sales densities and asset utilisation must remain a focus as input costs are expected to remain high throughout 2018.

As inflation continues to restrict consumer spend, the discounters will benefit from shoppers switching away from the mainstream grocers, especially as ranges are invested in and high growth categories such as premium, free-from, and food-on-the-go are expanded.

Source: GlobalData, 10th January 2018

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