Aldi is launching an ambitious UK expansion drive to take on the Big Four grocers, according to Chief Executive for the UK and Ireland, Matthew Barnes. In an interview with The Grocer he speculated that the discounter could potentially have a store in every UK town and city and further in the longer term “for every 25,00 to 30,000 people”. That would equate to 2,600 stores, a huge jump from around 765 UK stores currently.
Aldi has already set a target to reach 1,000 stores by 2022 but Barnes told The Grocer that it could be closer to 1,300 by then and there is “massively more potential” with 600 town locations in the UK that currently have no store.
The UK retail landscape has always been highly competitive and crowded compared to other European markets, but with the current economic pressures and fears over Brexit, price is becoming a major factor in people’s shopping decisions. This plays into the hands of the discounters, with the channel set for continued growth. According to LZ Retailytics Aldi is already the eighth largest UK retailer with sales of EUR10.24bn last year and 4.35% market share. Its consistent value proposition, reputation for quality and focus on fresh has seen the retailer’s popularity soar. But whilst sales at the discounters continue to grow rapidly, something else has changed - the big box retailers are also battling tooth and nail in order to win back customers.
Tesco, Sainsbury’s, Asda and Morrisons continue to invest in lowering prices in response to the discounter threat and have funded this by lowering overheads, including reducing assortments and cutting back on multibuys and promotions. These efforts have seen better-than-expected sales reported in the last quarter for both Morrisons and a resurgent Tesco. Sainsbury’s also went some way to reversing its negative like-for-likes. It has taken some time to get to this point, but with the leading UK grocers competing so hard on price and to win back customers, the ambitious plans of the discounters appear to us to now be less achievable than previously.
LZ Retailytics anticipates that Aldi will operate around 1,010 stores by 2022, exceeding its 1,000 store target. However, Aldi’s longer-term ambitions of reaching more than double this number of stores seem to us unrealistic and highly likely to be thwarted by not only a resurgence from the Big Four UK retailers, but also practical hurdles such as planning regulations. However, there is no doubt that the discounters will continue to significantly disrupt the market for the foreseeable future.