Lidl & Kaufland: Hard Discounters 2012Release date: October 30th, 2012 (122 pages) PDF/Powerpoint format. Price: GBP950.00 |
Abstract
Schwarz Gruppe is not just the driving force behind Lidl’s remarkable success story over recent years, but is also behind Kaufland – currently the most successful hypermarket business in the EU. The Kaufland operation is separately run from Lidl but managed according to identical, strict discount principles and the compact hypermarket format’s performance in Germany and CEE is outstanding. The reason behind Schwarz’s success is a relentless focus on price and slow and steady adaptation to changed shopper needs paired with first class execution.
Whereas Kaufland demonstrates that strong growth is possible for a hypermarket format, even when most competitors are struggling against the tough macro economic backdrop, Lidl has transformed itself into the leading European retailer with the highest store count in the largest number of countries of the EU. ResearchFarm predicts that with the combined turnover of Lidl and Kaufland, Schwarz will also become the leading EU retailer by sales generated in the EU in 2013, overtaking Tesco, Metro Group and Carrefour. It will be a closely fought race though.
In France, Lidl’s most important foreign market, the discount format will see a major update of the formula. Over coming months management will import Lidl’s latest cutting edge thinking from other markets, upgrade the in store presentation, extend the branded ranges and deepen the crucial focus on fresh produce. Lidl’s convenience outlet is an adaptation of the traditional hard discount format, featuring a number of innovations - and is characterised by the absence of non food. That said, we believe that non food represents a major opportunity for Lidl, as Germany’s transactional online operations showcasing a huge branded non food presence can be rolled out internationally.
While much change is afoot at Lidl, the core strength will remain the private label proposition and as such there will be a clear limit for brands in store. As the first mover Lidl serves as a clear template for Aldi. Past experience at Lidl, ranging from Super Saturdays, outstanding footfall generation to the innovative promotional stance - and the gentle move away from EDLP suggests what the future could look like at Aldi and crucially what probably will not work.
Lidl is also further ahead than Aldi in terms of private label segmentation and unlike its rival in vertical integration, as these have become key strategic objectives for the retailer. For Schwarz vertical integration also means optimising the supply chain and utilising spare capacity efficiently. Schwarz’ supply chain optimisation, bundling smaller suppliers’ deliveries has really driven down costs and the initiative is now also copied by Aldi.
Schwarz now needs to prepare for the attention its new status as the EU’s biggest retailer will bring. We believe that focusing on making its business future proof - by securing supply through vertical integration and by attracting top talent and shop floor staff through offering better compensation than much of the competition will be the first steps on its exciting journey over the coming years.
Table of contents
Executive summary | p15 |
Context – the Macro-economic outlook for the EU | p18 |
GDP sizes: EU 27, 2011 in €bn, the structure from Germany to Malta | p19 |
GDP sizes: EU 27, 2007-2011 in ‘000 €bn | p20 |
GDP sizes: EU 27, 11 countries still lagging behind their 2008 levels | p21 |
GDP sizes: EU 27, Currency devaluations, Poland keeps momentum going, ECB action | p22 |
Unemployment: EU 27, annual average 2011 (%) from Spain to Austria | p23 |
Unemployment: EU 27, Misery in the periphery while… | p24 |
Unemployment: EU 27, …Germany roars on due to the right policy mix | p25 |
Inflation: Euro Area and EU27, 2006-2011 (HICP), % | p26 |
Inflation: EU 27, deflation avoided, lost decade in store? | p27 |
Inflation: Euro Area 17, 2006-2011 (HICP), %, welcoming Estonia | p28 |
Interest rates: ECB and BoE, record low rates and quantitative easing | p29 |
Interest rates: breathing space for southern Europe, LTRO | p30 |
Context – EU Retailing in 2012 | p31 |
Retail sizes: EU 27, 2007-2011 in ‘000 €bn | p32 |
Retail sizes: EU 27, crisis has left a deep, deep scar | p33 |
Retail sizes: EU 27, 2007-2011 growth in %, CAGR | p34 |
Retail sizes: EU 27, a sector in turmoil, e-commerce, housing markets, ageing populations | p35 |
Per capita retail spend: EU 27, 2011 in €, from Luxembourg to Romania | p36 |
EU Grocery Retailing in 2012 | p37 |
Grocery sizes: EU 27, 2007-2011 in ‘000 €bn | p38 |
Grocery sizes: shoppers cut back, shop around, trade down and go to hard discounters | p39 |
Grocery sizes: EU 27, 2007-2011 growth in %, CAGR | p40 |
Grocery growth rates: EU 27 2007-11 in %, growth in Poland, decline in Ireland | p41 |
Grocery growth rates: Ireland as a template for the rest of the periphery? | p42 |
Grocery sizes: The leading countries, Top 3 take one of every €2 spent | p43 |
Grocery share of total retail: EU 27, 2007-2011 in % | p44 |
Grocery share of total retail: Clear crisis impact - all but four show higher share again | p45 |
Grocery per capita sizes: EU 27 in 2011 in €, from the UK to Bulgaria | p47 |
Hard discounters, Schwarz to become the EU’s biggest retailer | p48 |
Lidl: the copy cat overtaking Aldi, the original | p49 |
Lidl: the brands equilibrium, Kaufland the growth driver in CEE | p51 |
Lidl: OSA and Warendruck, operational independence for Lidl and Kaufland | p52 |
Lidl: category management, Kaufland the most successful hypermarket operator in the EU | p53 |
Lidl: always the second mover, threat to Tesco, more potential for Kaufland | p54 |
Lidl: all about expansion, solely focused on Europe | p55 |
Recent developments | p56 |
Lidl: minimum wage debates and combating a poor legacy image | p57 |
Lidl: Commitment to Greece, healthy eating in the Netherlands… | p58 |
Lidl: …and the UK, Fair Trade in Belgium, ongoing Swiss expansion | p59 |
Financials – growing through the crisis | p60 |
Schwarz: sales 2006-11, growth, domestic share of total, l-f-l growth through the crisis | p61 |
Schwarz: 6% growth in 2011, aiming for €66.0bn in 2012 | p62 |
Schwarz: on track to become Germany’s biggest retailer – and the EU’s | p63 |
Schwarz: benchmarks, sales, stores, sales per store, space, sales densities in 2011 | p64 |
Lidl - the most internationalised retailer in the EU | p65 |
Lidl: Countries, benchmarks, sales, stores, space, sales densities in 2011 1/2 | p66 |
Lidl: Countries, benchmarks, sales, stores, space, sales densities in 2011 2/2 | p67 |
Lidl: 10,000 stores barrier broken in 2011, 10 million square meter under the Lidl banner | p68 |
Lidl: Germany, sales per store to top €5.0m, cutting the branded SKU range down again | p69 |
Lidl: Germany, the roll out of in store bakeries, Super Sundays, powerful footfall drivers | p70 |
Lidl: 2011, sales per country in €m, market shares of total grocery universe in % 1/2 | p71 |
Lidl: 2011, sales per country in €m, market shares of total grocery universe in % 2/2 | p72 |
Lidl: France, most important foreign market, a success story | p73 |
Lidl: France, rapid growth as the LME opens the market | p74 |
Lidl: UK, benefitting from the downturn, fast expansion pace, space race | p75 |
Lidl: UK, investing in wine to drive up loyalty among the ABs, heavy investment into fresh | p76 |
Lidl: Other markets, catching up in the Netherlands, CEE, Romania and Slovakia | p77 |
Lidl: disappointment in the Baltics and Scandinavia | p78 |
Lidl: Switzerland – market entry lowering price points of the entire retail universe | p79 |
Kaufland – the most successful hypermarket operator in the EU | p80 |
Kaufland: Countries, benchmarks, sales, stores, space, sales densities | p81 |
Kaufland: K-classic, a hugely successful private label line, vertical integration | p82 |
Kaufland: The expansion into CEE, Kaufland first mover and more profitable than Lidl | p83 |
Kaufland: 2011, sales per country in €m, market shares of total grocery universe in % | p84 |
Kaufland: Czech Republic and Romania, shrinking the store size | p85 |
Kaufland: the logistics secret, the potential of the return trip, eradicating empty runs | p86 |
Kaufland: higher capacity utilisation and lowering overall costs, supplier collaboration | p87 |
Kaufland: revamping non food in store, range depth unchanged | p88 |
Kaufland: reason behind the success, slow and steady adaptation, first class execution | p89 |
Location, format and expansion strategy | p90 |
Lidl: revamping the store format towards a convenience fascia, focus on fresh and food | p91 |
Lidl: low branded SKU count, the cash desk innovation | p92 |
Lidl: drawbacks of the new model, analysis, cost drivers, space considerations | p93 |
Kaufland: experimenting with self check outs and updating the format | p94 |
Lidl: The expansion strategy, from quantity to quality, in store bakeries | p95 |
Lidl: the introduction of FMCG A brands in 2007, overtaking Aldi, opportunities | p96 |
Lidl: Growth opportunities | p97 |
Lidl: working the property portfolio, sale and leaseback deals, missteps | p98 |
Lidl/Kaufland: supplier relationships, no traditional category management | p99 |
Lidl/Kaufland: benefits of the sourcing model, supply chain collaboration | p100 |
Kaufland: launching a Private Label product at Kaufland, simplicity, simplicity, simplicity | p101 |
Lidl: social media, digital marketing and exploiting the smartphone opportunity | p102 |
Lidl: using QR codes, little to fear from Amazon or price comparison | p103 |
Strategy | p104 |
Hard discounters: 4 success factors | p105 |
Lidl: Online operations, huge branded non food presence online, international opportunity | p106 |
Lidl: Non food brands available online in Germany (letters B & C) | p107 |
Lidl: tackling the non food issue, easier at Lidl than at Kaufland | p108 |
Lidl: going soft and widening the SKU count – up to a degree | p109 |
Lidl: core strength of private label proposition, a clear limit for brands in store | p110 |
Lidl: private label segmentation and vertical integration as key strategic objectives | p111 |
Lidl: vertical integration achieved in soft drinks, WIP in confectionery, the PET system | p112 |
Outlook and forecast | p113 |
Schwarz: strength, one format at a time, cost control, lean processes, reduced complexity | p114 |
Lidl: challenge, negative publicity, recruiting talent, proactive campaigns | p115 |
Schwarz: online threat, tackling the non food issue, easier at Lidl than at Kaufland | p116 |
Lidl: Lild’s transactional website as a template for the future, drive solution potential | p117 |
Lidl: the expansion opportunity, US on backburner, strengthening the core | p118 |
Lidl: tailwinds from the economy, to do list, on track to become the EU’s biggest retailer | p119 |
Lidl: SWOT Analysis | p120 |
Sources | p121 |
Table 1: GDP sizes: EU 27, 2011 in €bn | p19 |
Table 2: GDP sizes: EU 27, 2007-2011 in ‘000 €bn | p20 |
Table 3: Inflation: Euro Area and EU27, 2006-2011 (HICP), % | p26 |
Table 4: Inflation: Euro Area 17, 2006-2011 (HICP), % | p28 |
Table 5: Retail sizes: EU 27, 2007-2011 in ‘000 €bn | p32 |
Table 6: Retail sizes: EU 27, 2007-2011 growth in %, CAGR | p34 |
Table 7: Per capita retail spend: EU 27, 2011 in € | p36 |
Table 8: Grocery sizes: EU 27, 2007-2011 in ‘000 €bn | p38 |
Table 9: Grocery sizes: EU 27, 2007-2011 growth in %, CAGR | p40 |
Table 10: Grocery share of total retail: EU 27, 2007-2011 in % | p44 |
Table 11: Schwarz: sales 2006-11, growth, domestic share of total, l-f-l growth through the crisis | p61 |
Table 12: Schwarz: benchmarks, sales, stores, space, average space, sales densities in 2011 | p64 |
Table 13: Lidl: Countries, benchmarks, sales, stores, space, sales densities 1/2 in 2011 | p66 |
Table 14: Lidl: Countries, benchmarks, sales, stores, space, sales densities 2/2 in 2011 | p67 |
Table 15: Lidl: 2011, sales per country in €m, market shares of total grocery universe in % 1/2 | p71 |
Table 16: Lidl: 2011, sales per country in €m, market shares of total grocery universe in % 2/2 | p72 |
Table 17: Kaufland: Countries, benchmarks, sales, stores, space, sales densities in 2011 | p81 |
Table 18: Kaufland: 2011, sales per country in €m, market shares of total grocery universe in % | p84 |
Chart 1: Unemployment: EU 27, annual average 2011 (%) (1) | p23 |
Chart 2: Unemployment: EU 27, annual average 2011 (%) (2) | p23 |
Chart 3: Interest rates: BOE | p29 |
Chart 4: Interest rates: ECB | p29 |
Chart 5: Grocery growth rates: EU 27 2007-11 in %, (1) | p41 |
Chart 6: Grocery growth rates: EU 27 2007-11 in %, (2) | p41 |
Chart 7: Grocery sizes: The leading countries | p43 |
Chart 8: Grocery per capita sizes: EU 27 in 2011 in € (1) | p47 |
Chart 9: Grocery per capita sizes: EU 27 in 2011 in € (2) | p47 |
Chart 10: Lidl grocery market share by country in 2011 (1/2) | p71 |
Chart 11: Lidl grocery market share by country in 2011 (2/2) | p72 |
Chart 12: Kaufland: 2011, sales per country in €m, market shares of total grocery universe in % | p84 |
Chart 13: Lidl 4 growth opportunities | p97 |
Chart 14: Hard discounters 4 success factors | p105 |
Chart 15: Lidl SWOT Analysis | p120 |