Aldi plans further investment in stores in UK

Aldi plans further investment in stores in UK

September saw Aldi, which has done so much to shake up the UK's grocery market, announce plans for further investment in the country. In the US, Wal-Mart said it would extend moves to cut back-office jobs in its domestic market. And in Asia, Japan's FamilyMart and Uny finalised their plans to merge, a deal that creates the second-largest c-store player in the country.Aldi, which has done so much to shake up the UK's grocery market, announce plans for further investment in the country. In the US, Wal-Mart said it would extend moves to cut back-office jobs in its domestic market. And in Asia, Japan's FamilyMart and Uny finalised their plans to merge, a deal that creates the second-largest c-store player in the country.

Aldi rolls up sleeves for fresh push in UK

Aldi, alongside fellow German discounter Lidl, have shaken up the UK grocery sector in the last decade, with the inroads they have had made into the wallets of the country's food shoppers hitting its Big Four supermarkets - Tesco, Asda, Sainsbury's and Morrisons.

According to the latest market share data from Kantar Worldpanel, published on 20 September, Aldi increased its sales by 11.6% year-on-year in the 12 weeks to 11 September, with its share of the total till roll in the UK standing at 6.2%, up from 5.6% a year earlier.

Over the same period, all four of the UK's leading four grocers saw their sales fall year-on-year, Kantar Worldpanel. While there are a number of factors for the pressure on the Big Four, it is how they are trying to respond to the continued strength of Aldi and Lidl by cutting prices that is at or near the top of the list.

"Aldi and Lidl continue to grow – not only are both continuing to expand their store estates but existing customers are visiting more frequently and upping their basket size," Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said last month. "Shoppers now spend an average of £19.24 when visiting the discount retailers and at a time of falling prices this increase of 4% is not to be sniffed at."

There will have been some in the grocery sector that would have hoped and predicted the inroads Aldi and Lidl have made would have started to recede but the discounters are very much part of the furniture in the UK food retail market now, as the Kantar Worldpanel data bears out.

However, what a deeper dive into historical Kantar Worldpanel data also shows is, while Aldi is still seeing its sales grow at a double-digit rate, that rate of growth has slowed from this time last year, when the discounter was enjoying growth of just under 20%. Part of the reason for that is the attempted fightback from the likes of Tesco as they invest in price and in fresh produce, a key battleground.

But Aldi is preparing a new offensive. September also saw an announcement from Aldi of plans to invest GBP300m in modernising existing stores and building new ones in the UK. Suppliers take note: if you supply Aldi, there could more opportunities to grow your business with them. If you don't, can you afford not to make contact? And if you don't - or have more of your business with the Big Four - prepare for continued demands from them on price and margins.

Wal-Mart to roll-out job cuts in US

Right at the start of the month came news Wal-Mart Stores is to extend the job cuts it had been carrying out in part of its US business to across its domestic business.

The world's largest retailer said on 1 September it would cut around 7,000 back office jobs, Reuters reported. Wal-Mart plans to centralise or automate the positions, The Wall Street Journal said.

In August, Wal-Mart reported a 1.6% rise in comparable sales in the US in its second quarter, a result some industry watchers had said showed the retailer's domestic operations were showing momentum.

However, there is no question the US grocery market remains fiercely competitive, with trading conditions perhaps the most pressured they have been for a number of years.

It is a time of deflation in the US. The US Department of Labor published data last month that showed prices for "food at home" was down 1.9% in the 12 months to the end of August. Last month also saw Kroger, one of the largest grocery retailers in the US, lower its forecast for full-year earnings per share due to the deflation it is seeing in parts of the grocery sector. 

The prices of a number of key commodities have been relatively benign (dairy is an obvious example), which is dampening prices that consumers see when they shop and allowing retailers to move aggressively on price, compounding the deflation.

And Wal-Mart, as the largest player in the sector, is at the centre of the conditions, facing stiff competition on price and perhaps seeing such moves on jobs as a way to free up resource to invest in-store and in prices.

Changes in Japan's food retail landscape

On 1 September, two of Japan's leading food retailers, FamilyMart Co. and Uny Group Holdings - the company behind the Circle K Sunkus chain in the country - announced the completion of their merger, forming what is the nation's second-largest convenience store chain.

The deal, first announced last year, is significant, one of the most notable pieces of consolidation in the sector in recent years as Japan's grocery sector tries to adapt to an economy showing at-best weak growth (the country's government last month announced a revamp of its GDP numbers over fears of the accuracy of published data) and an ageing population.

The new FamilyMart Uny Holdings Co. will have over a total of 18,600 stores in Japan (as well as close to 6,000 outside Japan, almost of which were FamilyMart's). The stores take in convenience and supermarket formats although the c-store format predominates.

Lawson Inc., another major player in Japan's retail market, has been pushed down to third (Seven & I Holdings, the retailer behind 7-Eleven leads the market). It emerged later in September that Mitsubishi Corp., the Japanese conglomerate, had offered to take its shareholding in Lawson from 33% to 51%.

"We are in the process of studying a tender offer made by Mitsubishi Corporation for the purpose of making Lawson a consolidated subsidiary with a precondition of maintaining its listing of shares; however, nothing has been decided at this time," Lawson said.

If Mitsubishi does take control of Lawson, the retailer could benefit from the conglomerate's food processing empire, which could help the retailer do battle with a now larger competitor.