Lidl 26

The Times isn’t keen on the discounters. Four weeks ago Rachel Johnson took a memorable trip to Lidl. Yesterday the business desk penned a critical piece that began by complaining Aldi didn’t come under media-fire in the same way as Asda and Tesco over horsemeat, even though the adulteration levels were higher at the discounter. The Times believes the coverage proves the discounters have been given a ‘free pass’ by the press, in whose eyes they can do no wrong.

It’s inevitable that Asda and Tesco copped more flak than Aldi over horsegate – proportionally, coverage was broadly reflective of market share and Tesco was ten times larger than Aldi back in January 2013 (today it’s more like nine…). Besides, press and public alike have mocked the discounters for years. Some still do. They haven’t got a free pass, they have earned a reprieve thanks to a stellar performance over the last few years.

It also poked fun at the “gushing coverage” of Lidl’s latest TV ad, which, for me, reflects what some grocery shoppers are finding; that shopping at the discounters can be a pleasant surprise. However, positive coverage like this overlooks a basic rule, it claimed. “You cannot sell a Bentley for the price of a Ford.” Well, no. But you can operate a leaner model that requires smaller margins resulting in cheaper prices. And advertise that effectively, which both Aldi and Lidl have done, with two distinctively different campaigns.

It then reveals a discounter “tactic” of claiming to stock champagne at “knockdown” prices but only in a handful of stores, leaving disappointed customers empty handed. It’s a woeful example because the opposite is true. Lidl sells champagne all year round in all its stores, and there is plenty of it. And while Aldi enjoys offering limited numbers of bargain priced products called ‘Specialbuys’, which are renowned for selling out quickly, given the accompanying strapline is ‘Once they’re gone, they’re gone’ it’s tough to make that hoodwinking charge stick.

It goes on to say the idea that discounters have “awesome buying power” is a “myth” and the reason they can offer produce at such cheap prices is because as one “rival grocery chief executive” says, they can hit a cheaper price point because “they are selling produce the rest of us don’t want”.

The suggestion that fruit and veg is great at the big four but a bit iffy at the discounters is laughable to anyone that shops at both. As for buying power, it may not top Asda or Tesco, but combined, the discounters operate in 28 countries and their limited range means it can buy one pack of spaghetti for all of them. That’s powerful. And its buyers are considered to be among the best in the business.

Of course, that limited range is one reason the discounters are far from perfect. Shopping at either is not a trip to grocery nirvana, the experience is still cheap and cheerful and no frills, despite the ongoing evolution. Even the new stores feel poky and basic compared to a vast open hypermarket. But customers are pouring in, particularly from Tesco and Morrisons. This morning, Kantar Worldpanel says year on year sales are down 1.3% at Morrisons and down 4.5% at Tesco for the 12 weeks ending 14 September 2014. At Lidl, sales are up 17.7%. At Aldi they are up 29.1%.

The piece did make two points which carried more weight, over the discounters’ questionable penchant for copying brands in terms of product and packaging, and tax.

No-one would deny the discounters sail very close to the wind when it comes to aping brands. It’s not illegal, but Saucy Fish, which was copied by Aldi, has fought back and sued them. The case will set an interesting precedent when the verdict finally arrives, and not just for Aldi as they are not the only ones at it.

As for transparency over taxes, we’d all like more transparency when it comes to the numbers at the discounters, particularly on tax and profits, but as private companies they are entitled to withhold that information. That’s just the way it is, and it’s an issue that concerns a lot of big business, rather than just Aldi and Lidl. Perhaps all companies should have to provide crystal clear comprehensive tax information if they want to operate in the UK.

The piece ended by suggesting that once customers have more money, issues like this lack of transparency will come into play and shoppers will disown the discounters, saying “Customers do not make spending decisions based on price alone”. Ironically that’s exactly why the discounters are doing so well, because they stopped being about price alone years ago. And when Morrisons CEO Dalton Philip’s suggests that customers “will wise up”, the sales figures would suggest they already have. Just not in the way he, or Tesco, would like.