Aldi And Lidl To Be Challenged By Tesco’s Planned Discount Chain: Reports

If media reports are to be believed, plans for the development of a new discount grocery chain for countering the low prices grocers Aldi and Lidl is being secretly prepared by Tesco – the largest supermarket group in the United Kingdom.

Tesco wants to stop the steady shift of consumers towards the cheaper retailers and for this purpose the retailers are separate brand that would challenge the German discounters on price. It has been reported that the new brand of retail chains of Tesco would offer a much less range of products compared to what is offered at the regular Tesco stores – about 3000 compared to the 25,000 at Tesco Extra.

It is also reported that experts form the Boston Consulting Group are assisting Tesco in this planning. A report in The Sunday Times says that non-disclosure agreements have bene asked ot be signed by a number of important own-label suppliers by Tesco before they can participate in the new brand of stores.

A new “Costco-type bulk purchase brand” that is similar to the format that Tesco already operates in Thailan is also under consideration according to The Guardian to counter the impending threat posed by the German discounters.

There were no comments made by Tesco to the reports even though the company revealed last week its plans to “develop new formats to better serve customers”.

Supermarkets Tesco, Asda, Morrisons and Sainsbury’s have bene pressurized by Aldi and Lidl ever since the global financial recession of 2008-09 when Briton were forced to seek cheaper alternatives due to rising food prices.

Aldi surpassed Waitrose in 2015 and left behind Co-op in 2017 and became the fifth largest grocer in the U.K. The market share of Aldi in the 12 weeks till 28 January was 6.9 percent compared to 6.2 per cent a year ago according to the latest data from grocery industry analysts Kantar Worldpanel.

In the same period, the market share of Lidl increased to reach 45 per cent from 4.5 per cent a year ago. Conversely, market have over the last one year has bene lost by Tesco, Sainsbury’s, Asda and Morrisons.

Attempts to launch discount brand by UK supermarkets on earlier occasions have been unsuccessful. However, according to experts, there would be an advantage for the joint efforts of the tie-up of Tesco and wholesaler Booker. The later already possess its own discount branded products.

There has been a change in the manner in which consumers are doing their food shopping. There is a trend to buy locally and regularly instead of doing a weekly shopping at store located outside of the town. Takeaways and online food shopping has also impacted he bottom line of big superstores.

£1 in every £8 that is expended by consumers in UK supermarkets was accounted for by Aldi and Lidl last year.

Sir Terry Leahy of Tesco had last attempted to establish the discount route but that effort was curtailed because the company management feared that the main nbrand would be undermined by the effort.

A similar attempt was attempted by Sainbury’s through a joint venture with Netto – a Danish discount chain in 2014. The companies had to ultimately sell off the stores to Asda ad the venture was scrapped.

The Tesco move sounded credible, said Bryan Roberts, insights director at TCC Global.

“There were rumours that Tesco was planning something like this two or three years ago, and while Tesco undoubtedly has the buying buying power and expertise to make it work, recent history suggests these moves tend to fail in the UK. Discounters work in a fundamentally different way, and it can be hard to change the store management’s philosophy,” he said.

(Adapted from TheGuardian.com)

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Categories: Economy & Finance, Strategy, Sustainability, Uncategorized

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