Discounters are winning market shares

Grocery store. Photo: Nathalia Rosa/
Photo: Nathalia Rosa/
By Reidar Molthe

18 August 2023 13:32

Discounters are winning market shares

We see it all over Europe. Discounters take market shares from supermarkets. It happens in Norway, Sweden, Denmark, and UK to name a few markets.

In UK Aldi continues to grow at the highest rate at 21.2% according to latest Kantar's UK market data report for 12 weeks ending 6 August. Also, Lidl performed a significant growth of 19,8%.

Consumers continue to seek out the best value for money, with private label sales outperforming the market at a growth of 9.7% in the last four weeks compared to brands growing at just 6.4%.

However, this will be costing the retailers a lot of money as margins are extremely low, or even negative, for private brands, argues DRC (Discount Retail Consulting GmbH), a German consultancy.

The price differences between private label value tier and standard tier are considerable. Take Chopped Tomatoes for example, where Sainsburys standard tier is 60p whilst their value tier is 35p (with just 5% less tomato content). The difference is even more extreme on Rice Pudding, where their standard tier at 90p is 260% more expensive than their value tier at 25p. This is just a couple of examples from DRC.

Inflation helps discounters

In UK last year inflation peaked at 17% in April this year. With year-on-year annualization the rate is easing, down to 14.4%. In the last four weeks it has fallen further to 12.7%.

But many prices are still on the rise as certain commodities such as sugar and eggs continue to increase. Crop yields across the world are a major concern with unpredictable weather patterns affecting many continents. Therefore, it is a lot of uncertainties regarding food prices later in 2023 and of course for 2024 and beyond, argues IGD, a consultancy.

Of the “big 4” supermarket chains in GB, Tesco have been the most resilient over the past five years – with their share falling by just 0.4%. Sainsbury’s have seen a fall of 0.7%, whilst Asda and Morrisons have suffered the most from the growth of the discounters with share losses of 1.5% and 1.7% respectively.

Discounters wins in Scandinavia

We see some of the same tendencies in Scandinavia; low-cost chains have the greatest growth.

In Denmark, the Norwegian chain Rema 1000 has managed the feat of becoming both the most liked and probably the biggest very soon. How is that possible – in the "land of merchants”? It is of course complex, but the combination of competitive prices, private initiative, and skilled strategic management – as well as good acquisitions provide a clue.

In Sweden ICA is losing market shares pretty fast because ICA for some inexplicable reason does not yet have a low-cost concept.

In Norway, ICA lost heavily because they shut down Rimi and built bad supermarkets.

“Big blow again – when will ICA rethink and give Willys and Lidl a tougher match? ICA continues to lose and especially to the now 500 discount stores. The latest setback shows that ICA must rethink – and establish a new chain. For what are management and traders waiting? Is it not time to give Willys and Lidl a tougher match,” writes Thomas Ohlen in a comment on ICA's results for the 2nd quarter.

"ICA scrapped Rimi more than 20 years ago and that gave free room for new discount stores in Sweden. The question is what ICA Sweden, and the 1,500 ICA traders are waiting for? It is high time for ICA to restart and give Willys, Lidl, Xtra and Pekås a tougher match,” Ohlen argues.

CEO Nina Jönsson has a lot on her desk. What actions will she take?

Sources: Kantar, DRC (Discount Retail Consulting GmbH), Dagligvarunytt.

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