UK DISCOUNT GROCERY Structural not cyclical change STEPHEN SPRINGHAM March 2014 STEPHEN SPRINGHAM Senior Retail Analyst

Contents Market Structure and Channel Trends Aldi and Lidl in the UK Key Strategic Initiatives Further Reading

1. Market Structure & Channel Trends

1. Market Structure & Channel Trends Kwik Save was for many years the standard-bearer for UK discounting, but is now defunct. Aldi and Lidl now dominate the channel. German giant Aldi first enters the UK (opening its first store the following year). The UK business falls under the operating umbrella of Aldi Süd. Aldi’s compatriot and arch- rival Lidl opens its first UK stores. Lidl is part of the German Schwarz Group grocery business. Having been slowly wound down by its parent, the residual Kwik Save business is liquidated. At its peak (the early 1990s), the business had over 1,000 stores and a 7% share of the UK grocery market. The UK Netto business was sold to Asda (owned by Walmart) for GBP778m (USD1.3bn). Asda retained 147 stores and was forced to offload 47 others on competition grounds. Netto had around 0.6% of the UK grocery market. 1989 1990 1994 1998 2007 2008 2011 2013 Netto launches in the UK. The business is part of the Danish retailer Dansk Supermarked Group. Long-established indigenous soft discounter Kwik Save was acquired by supermarket operator Somerfield (now part of the Co-op) for GBP1.3bn (USD2.1bn). Lidl UK surpasses the 500 store benchmark. Aldi UK surpasses the 500 store benchmark.

1. Market Structure & Channel Trends Historic view - international grocery markets have different heritages. But markets with different starting points logically move in different directions. France pioneered the hypermarket, Germany the hard discounter. The UK has a limited discounter heritage.