Blackfriar: Could Aldi and Lidl’s day in the sun be over?

Aldi's new Belper store opens on December 8, at 8am.
Aldi's new Belper store opens on December 8, at 8am.
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Could the reign of the discounters be coming to an end?

New research by Bernstein shows that Aldi and Lidl have raised their prices. Whilst their sales look stellar on the surface this is mostly due to new store openings.

The latest research from Kantar Worldpanel shows that the discounters grew at their slowest rate ​in five years although Aldi still increased its sales by 10.2​ per cent​ and Lidl’s sales ​rose 6.1​ per cent​.

However, Kantar measures overall sales, rather than like-for-like sales, so much of this growth is down to new store openings as both Aldi and Lidl are expanding quickly at a time when the big four – Tesco, Sainsbury’s, Asda and Morrisons – are pursuing much slower growth, or in Morrisons case, closing down stores.

Analyst Bruno Monteyne at Bernstein believes that the discounters could be seeing negative like-for-like sales growth.

“If Marmitegate mattered to the nation, then Banana-Milk gate at the discounters should matter 100 times more,” said Mr Monteyne.

“Marmite makes up 0.047 per cent of UK food spending while milk and bananas make up around 4.4 per cent of hard discounter sales.

“Just as Tesco starts to give away bananas for free to children shopping in its large stores, Aldi raised its banana prices by 6 per cent to be more expensive than the supermarkets.

“On milk, Aldi raised prices by 11 per cent on the four-pint whole milk bottle, from £0.89 to £0.99, the same price as Asda and 1p cheaper than Tesco, Sainsbury’s and Morrisons.​“

Matthew Barnes, CEO of Aldi UK and Ireland argued: “We absolutely guarantee that our customers will always pay the lowest grocery prices in the UK when they shop at Aldi.

“This has been verified time and time again by the industry’s most authoritative independent price survey, The Grocer 33, which in our most recent appearance showed Aldi to be 17.9 per cent cheaper than our nearest competitor.”

He confirmed that Aldi’s four-pint bottle of milk is 99p, but claimed that this is the lowest price of any major supermarket. Blackfriar’s research showed that Asda charges 99p for the same amount of milk, whilst Tesco, Sainsbury’s and Morrisons charge £1.00.

Aldi has raised the price of a five-pack bag of bananas from 68p to 72p, but claims this is the lowest price of any major supermarket and 8p cheaper than its nearest competitor.

At the risk of trying to compare not only apples with pears but also bananas, it is true to say the discounters have raised their prices. Bananas have to be imported and the slump in the pound means prices will inevitably rise.

A spokesperson for Lidl said there has been a “slight change in price” for milk and bananas, which was implemented in response to the market.

Former Sainsbury’s CEO Justin King believes that supermarket shoppers will be hit by price rises of at least 5 per cent over the next year and blamed the plunge in the value of the pound since Brexit for creating a “profound change” for food retailers.

Mr King said supermarkets would find it hard to calm price hikes while dealing with increased costs​. The Food and Drink Federation believes prices could rise by 5 to 8 per cent next year​.

“​D​iscounter growth is rapidly slowing down,​“ said Mr Monteyne. ​“They have flat or negative ​like-for-like​ sales growth, margin contraction, management turmoil… and now we see Aldi and Lidl leading food price inflation upwards with price increases on milk and bananas.​”

The big four need to use this step change to their advantage. They sell more than ten times the stock of the discounters in their larger stores.

If the discounters are closing the price gap with the big four by raising prices, canny shoppers will punish them.

If the price is similar, most shoppers would prefer to stick with UK supermarkets rather than German rivals.