You only have to eye the Kantar figures since August to know how tricky times are for the supermarkets - but the downgrades this week on Tesco ahead of next week’s Q3 results this week were another sobering reminder. Tesco has spent hundreds of millions on store refits, reinvigorated its own label, improved its ads, etc etc, yet still volumes decline. And none of the big four, not even Sainsbury’s, can afford to be smug, because like-for-like volumes are down across the board.
As well as the obvious structural issues surrounding the internet, and the disparity between RPI and wage inflation, there’s the discounters to contend with. And they have gone from minor irritant to major concern.
“The big four are not taking the threat of the discounters seriously. They obsess about online - something the discounters are doing very nicely without”
Adam Leyland, Editor
At the start of the recession, Sir Terry Leahy was very clear about the threat they posed. But then both Aldi and Lidl appeared to self-implode, with senior management exits and entrances, and the big four went back to obsessing over one another. But the discounters brushed themselves down, sorted themselves out and have come back stronger than ever. It’s not just the Kantar numbers that keeps telling us this. It’s the awards they keep winning, for their products and their advertising, as well as their overall performance. And they’ve also benefited from communicating their story more openly.
In this week’s issue, for the first time ever, we’ve interviewed Lidl CEO Ronny Gottschlich. He’s given us some fantastic insight into what’s going on at Lidl, and why it’s so successful, and why he’s as confident and happy in his role as he is. And whether it’s tasting Lidl’s award-winning products, visiting its new stores, or eyeing its lavishly produced brochures (with whole Serrano ham for £39.99), I consider the discounters as big a structural threat as online.
Yet I still don’t think the big four are taking them seriously. Actually, some are. A senior Tesco commercial buyer told one supplier he didn’t care whether it did a deal with Asda it was Aldi he was bothered about. And at last week’s Sainsbury’s trade briefing, Justin King warned delegates not to be discounter parasites.
They are right to be concerned. Indeed, some suppliers, in the hunt for volume, have offered astonishingly generous terms to the discounters, undermining both themselves and their bigger customers. So much for the waterbed effect!
Mind you the big four haven’t done themselves any favours. They still benchmark against one another. Aldi benchmarks against M&S. Their ranges are often too complex. So are their processes, with weekly price changes, and constant back and forth over trade investment. Indeed one supplier told me he no longer saw his role as helping retailers with category management his job was to help the big four fight the discounters.
And, meanwhile, they obsess over online and, even more obscurely, click & collect, while the discounters grow by eschewing online. Maybe what the big four need is not new bells and whistles, but new (discounter) formats.
Read this: Lidl UK MD Ronny Gottschlich - Big interview