The debut of the discount retailer Lidl in the United States has many executives throughout the food and beverage supply chain wondering what impact the new retail competitor will have on the market. Lidl, Arlington, Va., recently opened its first U.S. store and plans to have 20 opened by the end of summer. By 2018, the retailer is planning on having 100 stores on the East coast.
Aldi, Batavia, Ill., recently announced a $3.4 billion capital investment plan in the United States to expand from a footprint of 1,600 stores today to 2,500 by 2022. The retailer also is in the process of investing $1.6 billion to remodel 1,300 stores by 2020.
Hubert Weber, the president of Europe for Mondelez International, Northbrook, Ill., has worked with discount retailers for many years and said they will bring a new dynamic to the United States.
“When you want to do business in Germany, Lidl and Aldi have 40% of the market,” he said June 13 during a presentation at the Deutsche Bank Global Consumer Conference taking place in Paris. “So, when you don’t work with them, you are not really in Germany.
“They are part of our distribution strategy. They fit nicely in the balance between consumer reach and profitability.”
Mr. Weber said he hears some of the same concerns from executives in the United States that he heard from executives in France and the United Kingdom when Aldi and Lidl entered those markets.
“I think other retailers need to be more concerned than branded goods manufacturers like ours, because Lidl and Aldi are really setting the standard in supply chain efficiency and running very, very efficient end-to-end business models that enables them to be very price-competitive versus their competitors without compromising on the margin,” he said.
He added that the notion the success of both retailers is fueled by their focus on private label to be overblown. When Aldi first launched it sold private brands almost exclusively, Mr. Weber said. When Lidl launched, its stores featured a mix of branded products and private label brands.
“As their models evolved and they were aiming to get to a higher penetration and get into the neighborhood store space, Aldi integrated more national brands,” he said. “Lidl went a little bit more toward private label.”
The most important change for both retailers, Mr. Weber said, was when they started offering fresh products, including meat, seafood and in-store baking operations.“…It makes them much more acceptable for the total portfolio, (the) total basket purchase by the consumer,” he said. “That led overall in their approach to a better balance between price aggressiveness and portfolio. And that is something to keep in mind as we think about the expansion into the U.S.”