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Fred Searle

BY FRED SEARLE

Aldi and Lidl plan rapid store expansion

Both retailers plan to exceed 1,000 branches in next few years but some doubt sustainability of discount model amid falling profits

Aldi and Lidl plan rapid store expansion

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Both Aldi and Lidl are planning rapid UK store openings in the coming years, with Aldi aiming to hit the 1,000 mark by 2022 and Lidl seeing potential for 1,200 to 1,500 supermarkets “in the long term”.

Under the plans, reported by Reuters, the discounters would see their estates grow significantly – Aldi currently has 762 stores, while Lidl has 710.

Both would still lag well behind the big four in terms of store numbers, however. Tesco, the UK’s largest supermarket, has 3,739.

The discounters’ combined market share of the UK grocery market is set to grow 15 per cent by 2020, according Kantar Worldpanel – a trend that will largely be driven by store openings.

By contrast, the big four are in the process of restructuring their businesses and cutting thousands of staff. But it’s not all rosy for the discounters either, with profits falling and traditional retailers questioning the sustainability of their model.

Aldi’s UK profits fell for a third consecutive year in the year to 31 December 2016, down 17 per cent to £211.3m – this despite a 13.5 per cent jump in sales to £8.74bn.

The retailer said half of this fall in profits had been caused by keeping down prices or cutting them, with the rest caused by investment in new stores and distribution centres in a bid for future growth.

According to Reuters, a senior director at one of the big four retailers said Aldi and Lidl’s price position couldn’t last.

“The underlying brand equity proposition isn’t actually there, it’s just that they are giving it away below economic rational behaviour,” the director is reported to have said.

Despite this, Tesco, Asda and Sainsbury’s have all tried out discount formats of their own, according to Reuters, and Tesco is now allegedly planning to open a discount grocery chain to compete with Aldi and Lidl.

The supermarket is said to have hired advisers from Boston Consulting Group to draw up plans to expand into the discount market, according to the Sunday Times.

The planned store openings follow on from both Aldi and Lidl’s current investment programmes.

Aldi’s £1bn investment programme to the end of 2018 is set to create 8,000 jobs, while Lidl’s £1.45 billion pound investment in 2017-18 will see it open 50 stores and revamp 30 others in 2018, according to Reuters.

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