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Fear Thy German Discounter?

13/05/2016 11:40 | Updated 13 May 2016

Invasion, conquest, price wars. Reading the headlines you're tempted to conclude an all-out war has broken out amongst food retailers in the UK. Arguably, the main culprits are German budget supermarkets Aldi and Lidl, who seem to instill fear into the hearts of British supermarket managers at Tesco, Asda, Sainsbury's and Morrisons. Apparently, the big four are shaking in their boots.

According to some news outlets, the competitors from mainland Europe are opening two new stores each a week. Well, if this isn't an invasion, what is? However, as the infographic by Statista based on figures from Kantar shows, the British food retail industry still looks very much British.

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The market share of the big four has declined by margins of less than one percentage point each in the course of a year (Asda -0.8, Tesco -0.6, Morrisons -0.5, Sainsbury's -0.4). They're still the biggest chains on the isles even though Aldi and Lidl have scooped up 1 and 0.9 percentage points consecutively.

It doesn't seem like there's a complete hostile takeover by the discounter Huns under way. Why so fearful then?

Aldi's and Lidl's pricing policy is often criticised for being very aggressive. However, competing for market share by outpricing contenders is one of the oldest tricks in the capitalist's rule book. It does however not just put pressure on direct rivals but also on producers and wholesaler up the chain of supply. Then again, aggressive outpricing strategies aren't sustainable in the long-run and the all-out war might turn into a low-intesity conflict or stalemate.

Most importantly, Aldi and Lidl, while driving contenders up the supermarket walls, are liked by consumers. A recent poll by YouGov shows that Aldi and Lidl have pretty good reputations. Asked if what they'd heard about the brand was positive or negative, most respondents gave the thumbs-up.This probably doesn't come as a surprise. Who doesn't like to get more cheddar for their sterling?

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