Aldi claims 4th spot in the UK market

The Big Four is no more?

According to the latest Kantar market shares, in the 12 weeks to September 4, 2022, Aldi’s sales rose by 18.7%, increasing it to a 9.3% market share. At the same time, Morrisons’ sales slipped 4.1%, giving it a 9.1% overall market share. This marks a huge change as the Big Four will no longer refer to the four retailers with the largest share, but instead the four largest supermarkets.

Morrisons has recently struggled with its latest results showing a -6.4% LFL decline. The retailer attributed its lower sales to ongoing inflationary pressure and the downturn in consumer sentiment.

Alongside Morrisons’ struggles, Aldi has continued to thrive, consistently opening more stores and gradually growing market share.

Don’t forget about Lidl

Despite this clearly being a landmark moment for Aldi, it doesn’t mean we should forget all about Lidl. The other discounter continues to also perform exceptionally well, with sales +20.9% in this recent Kantar reporting period. This makes it the fastest growing retailer, and although only just ahead of Aldi, it is well ahead of the market growth of 3.8%. Looking at a three-year comparison, before the pandemic, Lidl also remains ahead of Aldi, growing 35.8% compared to Aldi’s 32.7%. Lidl is also continuing to open new stores consistently and continues to differentiate itself from Aldi through its Lidl Plus app.

Inflationary pressures will support both discounters’ growth

Grocery inflation continued to rise in the last four weeks, hitting 12.4%. This was up from 11.6% in August, and 9.9% in July. Kantar has estimated that the average annual grocery bill will reach £5,181, versus an estimate of £4,610 previously.

Our forecasts suggest inflation will continue to rise in 2022 and could last for longer. While rates will drop in 2023 and 2024, the impact of compound inflation will mean the pressure shoppers feel will not lessen, without stronger than expected wage growth. This will likely see shoppers cut back on their spending further.

Our latest shopper confidence index, for the month of August, showed a record drop and the lowest results yet as it fell from -21 to -27.

What does this mean for the discounters?

All of this will come as no surprise to anyone in the grocery industry. The building financial pressure on shoppers and the already existing long-term shopper shift towards the discounters means it’s unlikely anyone will have underestimated either Aldi or Lidl as they once did in 2008.

What this means for the future is less clear. We know both discounters will continue to open new stores at pace and increase their share further in the medium-term, over the next five years. Aldi is targeting 1,200 stores by the end of 2025, while Lidl wants to operate 1,100 in the same timeframe.

However, how this will play out in the longer term, over the next ten is up for debate. Will they reach saturation point and have to rely on like-for-like sales to achieve growth, and therefore struggle? Or will the growth continue, and the UK become like other markets such as Germany, that are dominated by discounters?

Whilst no one has a crystal ball to look to the future and answer this with any certainty, what we can say is that the market will remain highly competitive over the coming years. The Big Four (in their new guise), will have to come out fighting to truly differentiate from the discounters. With both Aldi and Lidl’s ranges remaining small, some shoppers will struggle to do a full shop with them. However, their ranges are evolving. This means they are increasingly serving the needs of shoppers better. With range being less of a differentiator and price matching already in place, the experience the supermarkets provide will be key, as this is a clear area, they can truly separate themselves from the discounters.