Last year, Aldi managed to outperform Tesco and Carrefour to take second place in the ranking of the largest European food retailers, after rival Schwarz Group (Lidl and Kaufland). Further consolidation in the sector seems inevitable.
“Unlimited growth potential”
It is a remarkable trend: discounters are increasingly dominating the European food retail landscape. A new report by LZ Retailytics, which is based on preliminary results for the year 2019, even speaks of ‘a small sensation’: it is, indeed, the first time that Aldi has achieved a higher turnover than mainstream supermarket players Carrefour and Tesco. Unapproachable and first in the ranking is Schwarz Group, the parent company of Lidl and Kaufland. Lidl is also Europe’s largest supermarket chain on its own. Two other players in the top six, Rewe and Edeka, also generated a significant part of their turnover with discount formulas.
According to the report, the food retail sector is steadily set out for further consolidation. In 2016, the thirty largest supermarket players in Europe represented a market share of 59%. That will be 61% by 2022. The discounters’ growth potential is almost unlimited, says LZ Retailytics. Although some markets are showing signs of saturation, there is still plenty of room for growth, from the UK to Romania. Part of this growth results from the fact that Aldi and Lidl are adjusting their discount concepts: they are becoming more mainstream and are responding to the expectations of a wider audience with a tailored offer. Their ranges have been developed to include local products, niche products and innovative start-ups. This also offers new opportunities for suppliers.
Another important trend is the increasing importance of sustainability, even in the low price segment. Schwarz Group is a lot further ahead in that area than you would expect from a discounter. The group is taking steps towards vertical integration, recycling its own plastic waste and recently launched a collection of sportswear partly made from recycled PET bottles under its own brand. Sustainability is not just an element of differentiation, but is becoming a competitive financial advantage, the report concludes.
