German discount retailer Lidl’s strategy to expand its discount operation in fifteen European countries in which Aldi has no presence is likely to move it ahead of Aldi in the small format discount market in Europe by 2012, suggests new research.

Lidl and Aldi share the same domestic market, Germany, where currently Aldi has 9.4% of the domestic market (4050 stores) and Lidl has 4.9% (2522 stores). Both retailers have been expanding rapidly into France and Western Europe but Lidl’s strategy to move into Central and Eastern Europe has seen it rapidly gain market share in the discount sector, according to the latest research from food and grocery think tank IGD.

Lidl already achieves higher sales from its non-domestic European markets than Aldi. (€9bn (US$11.2bn) verses €8bn). It is stronger than Aldi in France, Spain and Ireland and is targeting Denmark, Hungary, Estonia, Latvia, Lithuania, Croatia and Slovenia where Aldi has no presence. Lidl is also already established in a further eight markets where Aldi is not present.

By contrast Aldi is targeting Switzerland and Norway in Europe (which Lidl is also targeting) and is focussing on global expansion in Canada and New Zealand. IGD therefore predicts that Lidl is likely to overtake Aldi in European discount retailing taking the number one position by 2012.

“There are some extremely interesting developments in European Grocery retailing as our annual study shows. Lidl moving to No 1 position in the discount retailing sector overtaking the current market leader Aldi by 2012 will impact suppliers. It illustrates the pace of change in this dynamic sector and highlights the need for players to keep up to date with developments,” said Joanne Denney-Finch, chief executive of IGD.

“In discounting we are seeing a dramatic change world-wide, as the discounters move away from their core lines.  In Europe, they have gone from a focus on dry goods to stocking fresh meat and produce, ready meals and healthy eating alternatives, really helping to broaden their consumer appeal,” she continued.

“The discounters’ combination of low price and convenience is clearly proving irresistible and we anticipate this will fuel their continued growth. They now list key brands, are increasing their marketing emphasis and are introducing customer service initiatives, such as debit cards and longer opening hours.  With range adaptation and own label improvements there are opportunities for suppliers but they must understand and back the winners,” Denney-Finch added.