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Aldi Expands

Aldi have announced it is going to spend £1bn, to open a new store in the UK, every week (on average), for the next two years. This could be a BIG worry for the traditional 'top 4' of; Tesco, Sainsbury's, ASDA and Morrisons, where in contrast the store space race of the 'noughties', has more or less ground to a halt in the last decade, instead shifting focus onto convenience, online and offer differentiation.

If an Aldi or a Lidl store opens in your local town, people shop there...a lot of people shop there. There have been two Aldi openings in my local town, Whitley Bay, over the last 2-3 years, and it has transformed the dynamic of the community's' shopping habits. The new stores have stolen customer share from all other retailers in the area. Combine this point with less frequent 'big supermarket' shops, increased consumer promiscuity, more online deliveries, and more convenience top ups, puts the traditional retailer's sales and margin delivery under pressure.

In response to this growth, other retailers have responded with range optimisation, and trying to differentiate their offering from that of the 'discounter's' limited sku count, and smaller footprint, but there is only so much pressure the current retail market can take before a seismic shift occurs. Following the crash of the proposed ASDA / Sainsbury's merger, all bets are back on the table as to what could happen the UK grocery retail market over the next 12-24 months.

However it won't all be plain sailing for Aldi's growth plans. Last year, their sales were up 11%, but profit was down 18%. Also, they plan a significant bulk of their new store openings inside the M25, where space is limited and more expensive, so this could put the standardised store footprint model to the test.

Brexit or no Brexit, these growth plans are a big vote of confidence in the UK Grocery Industry from the German retailer, which is very valuable in these times of economic uncertainty.

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