Aldi and Lidl Growth Potential - Three Key Numbers

Institute of Grocery Distribution research about how shoppers plan to buy their Christmas food reveals three telling figures about the potential for Aldi and Lidl.

Of those shoppers intending to visit a discounter -

-          62% will do so to save money

-          40% will go because of the quality of the food

-          17% will go because of fancy foods like lobster tails

The numbers confirm what we already know, namely that low prices are the overriding reason for discount shopping. But what may be surprising is that low prices are so much more important than quality.

Equally telling is the finding that, even at Christmas, only 17% will visit a discounter for speciality foods. The lobster tails and fine wines may be attracting the media hype, but at heart they are a publicity gathering fringe activity, unlikely to be generating big volumes. It is the low prices that matter to most discount shoppers, and the presence or absence of more exotic foods will not matter a jot to them.

The current gap between price and quality puts a ceiling on discounters’ growth potential, but finding the right solutions will not be easy.

The key is to understand what consumers mean when they talk about quality, but not all consumers will view quality in the same way.

Many regular Aldi and Lidl shoppers are delighted with the quality of the foods they buy there, not because they are prepared to compromise, rather they have tried the various products, and know the ones that they like. These precious core customers must not be alienated.

It is likely that the gap between price and quality is greatest among less frequent shoppers. But quality takes many forms. It could be lack of choice that makes shoppers down rate product quality. It could be simply that the discounter version does not taste as good as a branded equivalent. On fresh foods it could be lack of consistency -some days the products are top notch in terms of freshness, appearance, texture and flavour, but some days they are not.   Aldi and Lidl seem to have taken the view that the answer is to add a premium range akin to Tesco’s Finest or Asda’s Extra Special, and throw in the exotic range of food and wines. They will need to do more to bring the number of shoppers buying because of quality closer to the number buying on price, and they must not lose their price position in the process.

Meanwhile, their competitors have their own tightrope to walk, and theirs is the degree to which they can reduce prices, yet keep their shareholders on side. 

Recent performance statistics issued by Kantar Worldpanel indicate that quality issues are not yet hampering the discounters who continue to forge ahead, helped by a number of new stores, and the continued lack of radical pricing action from any of the traditional supermarkets There have been murmurings that the tide may be turning in favour of the mainstream supermarkets, but if so, it is turning very slowly.