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RO change Part 1_LIDL STRATEGIC V4

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John Barlow

on 18 August 2016

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Transcript of RO change Part 1_LIDL STRATEGIC V4

LIDL STRATEGIC
ANALYSIS

Performance Summary
Buying
Logistics
Logistics
Merchandising
(inc. future store)

Fresh juice now served in store with the produce fixture
UK Concept
Merchandising
(inc. future store)

Property
Services
(QA/CR/CS)

Store Operations
Lidl UK RDCs
Based in the Midlands area.

Walsall RDC is used as a Non-Food Specials re-work and storage site. Operating a centrally controlled reverse logistics team, co-ordinating recalls and reworks of old stock which is buyer controlled.

100% agency staff.

Lidl UK RDCs
Aisle
picking
Gravity Fed Racking
Freezer Pods
Lidl UK RDCs
Lidl UK RDCs
Lidl Wednesbury RDC

Currently under construction
Possible location for e-commerce FC
Lidl UK RDCs
In 2012 SSI Schaefer installed an automated picking warehouse system for Lidl in Kirchheim/ Teck, Germany.

As well as installing Schaefer Case Picking (SCP) System, the warehouse includes a high bay racking system with five aisles and around 15,000 pallet storage spaces plus a Schaefer Tray System (STS) with 16,000 storage position on five storage levels.

The system guarantees optimally packed pallets for transporting and unloading goods at the store.

See below link for a video of the exact system Lidl have trialled.

Lidl uses the Schaefer Case Picking System for order picking
Lidl have 3 European hubs run by 3rd parties to consolidate and distribute products:

Valencia (specialist site for produce)
Rotterdam (Port centric – Rotterdam is Europe's largest container port)
Austria
Barcelona (used for inbound consolidation)

Lidl Intralogistics make decisions on which consolidation centres service which RDC’s.

Their RDC network is fully integrated across Europe to allow freight diversion (trunking) opportunities.
Use of Consolidation Centres

All European Suppliers are controlled centrally through Germany. (similar to IB and Aldi UK Buying from IB).

Buying terms are DDP/ DAT into the 3 hubs, then transferred to regional distribution centres across Europe.
Lidl currently contract third party hauliers to trunk goods between the pan European distribution centres (Valencia, Rotterdam and Austria) to local RDCs and between RDC to RDC

This enables Lidl to import smaller amounts whilst maximising their vehicle capacity ensuring minimum amount of haulage on the roads. This also guarantees the best possible freshness of products whilst reaming efficient and environmentally friendly

The example given is of produce sent from Valencia via short sea through the port of Bilbao in North West Spain for distribution across the U.K

Trunking
Produce to Ireland

Lidl buy on a Day 1 for day 3 basis.

Lidl currently use McBurney Transport Group based in Liverpool to complete their Produce to Ireland shipments using the Liverpool to Dublin crossing. As McBurney’s are located so close to the Liverpool port this is the cheapest and most efficient option for them. Suppliers deliver into McBurney for transportation to Lidl using the suppliers transport at the suppliers cost.

They currently receive orders from Lidl by 16:30pm on day 1 and deliver into Ireland from 06:00 on day 3. This leg is charged to the supplier at an average £50 per pallet. All produce is ordered in full pallets.

Produce
Aldi currently deliver Long Life Chill products to Naas and Mitchelstown regions at a cost of £45 per pallet from CML to Naas, £55 per pallet from Oakland's to Naas, £50 per pallet from CML to Mitchelstown and £55 from Oakland's to Mitchelstown.

McBurney’s are currently shipping 10 – 20 loads per day for Lidl. Currently running a cross stock operation only storing Ambient, Produce and Frozen goods.

Aldi currently buy all produce sold within the Irish business through a dedicated Irish Buying Team based in Naas.

The UK Produce buying team are currently exploring the opportunity to improve the quality of produce in Ireland through adopting the buying of Irish sold produce within the UK buying infrastructure. This includes a project with CLD to identify the best supply chain solution.
Returnables
No evidence of Lidl owning returnable equipment in the UK & Ireland, however Lidl are currently renting Teacrate’s from PHS Group for their Fresh Meat and Poultry products, these are equivalent to Aldi’s black crates.
This rental contract includes the washing and issuing of all crates.

Returnables (Lidl)
Lidl currently use 8 different types of equipment in store;

Euro Pallets (LPR & CHEP)
D Pallets (LPR & CHEP)
White Pallets (Lidl Pool)
2 litre beverage trays
Plastic UDP
Plant Trollies
Nestable Euro Pallets (Cabka and Pooling Partners)
PHS issue the crates to suppliers, who then deliver goods into Lidl where the empty trays are stacked to be collected by PHS for washing.

Currently Lidl’s charge to supplier for the rental of crates is £0.40 per crate in comparison to Aldi’s £0.25 per crate.
Lidl currently merchandise all produce in cardboard crates to create a market stall feel.
Non-Food Specials (Logistics)
Logistics and Fleet Information
CSL Logistics - Lidl Case study
One of a number of 3PLs Lidl use for store deliveries and waste collection

Lidl UK do not own any transport fleet themselves

Lidl liveried vehicles are owned by 3rd Parties

All DC to store routing and scheduling is controlled centrally using SAP TMS through their Wimbledon HQ

Backhauling goods from suppliers is also controlled centrally.
Personnel
(inc. organisational
structures)

Personnel
(inc. organisational
structures)

Logistics and Supply Chain
Logistics and Supply Chain
Store Distribution (UK)
648 UK stores
126 Ireland stores
655 UK stores
182 Ireland stores
Store Distribution (UK)
Store Distribution (UK)
Logistics and Supply Chain
24 stores within the M25
76 stores within the M25
Greater London
3 new multi temperature sites opening:
Wednesbury (West Birmingham) in 2017
Southampton in Sept 2016
Exeter in 2018
IRE: Charleville, Mullingar, Newbridge, Belfast
Lidl are building 5 new RDC sites in 5 years
Lidl UK RDCs
Lidl Lutterworth RDC
Wellington Parkway, Magna Park, Lutterworth LE17 4XW
Lidl Lutterworth RDC
Wellington Parkway, Magna Park, Lutterworth LE17 4XW
Electronic POD System
Lidl Livingston RDC
Tailend Farm, Deans Industrial Estate, Livingston EH54 8SE
Lidl UK RDCs Recruitment
In November 2015, Lidl opened a new concept store described as the ‘Lidl of the future’. The store in Rushden, Northamptonshire U.K opened at a fit-out cost of £2 million. At 1,400m, the store is one of the largest in the UK estate, significantly larger than the average Lidl size of 1,000m
Glass frontage allows more light as well bringing energy costs down, which is matched with low level, LED interior lighting

Trolley bays have been moved to the car-park to further open up the entrance area and create feeling of space

Totems advertise fresh bakery in addition to services such as toilets and free parking

Part of a £1.5 billion investment in the U.K over next 3 years ramping up new openings to 50 per annum, all of which are to follow this format
UK Concept
A warm welcome to Lidl at the store entrance

Positive approach to customers enhanced with bicycle shelters, additional navigational signage and Lidl branding on glass
New format is step change with in store bakery a focal point, dedicated 80m preparation room providing 35 SKU’s of fresh product to entice customers entering store and providing real differentiation from competition
A large fresh bakery is encountered immediately on entering the store

Immediate sensory impact both visually and via fresh smell

Much of the bakery items are sold loose to emphasise freshness
UK Concept
Other features include the adoption of a new dark grey colour scheme and POS which helps to portray a more quality-orientated, sophisticated and cleaner image.
UK Concept
The larger size of the store, has allowed it to introduce wider aisles at 2.7m, a larger produce section (40% larger than previous) brought to the front of the store and an expanded BWS offer, all enhanced with open ceilings and the removal of hanging boards.
UK Concept
Produce is displayed on ‘fresh’ branded wood-style crates.
The expanded produce has been moved to the front of the store, next to the bakery
Premium BWS fixture incorporating points based wine guide and a craft ale section

Selected range in crates adding premium feel

Individual bottle divider system ensuring sharp displays with accurate POS location

Self check-out zones and a modification of existing tills allowing customers to pack whilst cashier continues to serve, further evidence of mind-set change to meet customer needs
There are six self-service checkouts, supervised by one member of staff

The addition of self service demonstrates Lidl's desire to embrace customer trends within national markets

UK Concept
Chilled island , similar to what is found in more mainstream UK supermarkets such as Tesco, Sainsbury’s and Waitrose

Move away from chest chillers with vertical chill space finished with premium colours
Expanded space for key growth categories with the focus on fresh; Meat, Fish, Bakery & Produce

These categories are stronger focal points as a result; the bakery creates a feature front of store whilst fish is now located in a stand alone chiller to give focus

Crucially it is the space not the range which has changed to create the new concept

UK Concept
Low level LED and wider aisles improves the shopping experience, while replacing the typical yellow and blue colour scheme with dark wood and black signage gives a more upmarket impression
Lower Specials tables and removal of price board for specials adds to the feeling of space

Wood effect surrounds on NFS tables removing wire ‘cage’ look

High level category headers directing customer journey through store

UK Concept
For legal reasons alcohol cannot be merchandised outside of segregated area – thus none on flexible 4 tier special shelving
International Concepts - Ireland
Ireland – Local brand names offered in addition to category headers – reinforcing provenance message
Increased ‘Just Free’ & whole foods offering.
Non Food given category headers to help facilitate customer mission
Bakery and food to go sections have adopted the lighter wood finish trialled in Switzerland

Additional POS space dedicated throughout store highlighting Irish provenance of key core range commodity groups
International Concepts - Ireland
Latest new format store in Gorey has the addition of ‘Lidl to Go’ range seen elsewhere in Europe, with hot prepared food backfilled adjacent to in store bakery
Additions to bakery include; loaf slicing machine and wall mounted menu detailing all product ingredients, giving additional premium feel

Additional ambient meat section catering for local market in Spain and Spanish islands such as Lidl Majorca
International Concepts - Spain
Current trial of enhanced Health and Beauty fixture focussing on Lidl ‘Cien’ brand
International Concepts - Spain
‘Lidl to go’ range offering hot prepared food. Back filled display adjacent to in store bakery

‘Pick n Mix’ style frozen shell fish self served by customers from chest freezers
International Concepts - Spain
Exterior signage has adopted a ‘softer’ approach whilst consistently inviting customers to comment or contact Lidl via a variety of social media platforms
International Concepts - Spain
International Concepts - France
Bread fixture has addition of plastic covers, with product only accessible via designated scoops rather than by hand to minimise customer handling of product and improve perception of quality
Existing store refurbishment taking place in line with new store format.

Part of a project to invest €450 million over 5 years refurbishing 900 of Lidl’s 1,500 French stores
Trial of lighter wood effect on bakery with a slightly changed bread menu, fixed to pillar behind perspex cover
POS surrounding office door dedicated to celebrity chef endorsement
Additional gondola end wine fixtures in keeping with lighter wood grain as per rest of store
Trial of electronic HD screens in place of paper POS and poster frames

Dual customer tills, allowing customer to pack whilst another is served
International Concepts - Switzerland
Free electric car and bicycle
charging points in car-park

Dedicated merchandising space to Lidl ‘Bio’ range of organic products
Entrance areas in Switzerland have added recycling points in welcome wall for customers, In addition to local picture and welcome message
International Concepts - Switzerland
To do this Lidl will focus on its private labels, benchmarking its ranges against those of Monoprix in France and Migros in Switzerland to make sure that it is offering a quality product at an affordable price
International Benchmarks – Migros
Frederic Fuchs CEO of Lidl France, detailed to Le Monde that Lidl was aiming to change shoppers' perception of the retailer and its products. This has been rolled out at a national conference of French store managers
Founded by Gottleib Duttweiler in 1925 Migros is SWI largest retailer and employer
Founded on selling just 6 basic foodstuffs to households who struggled to have access to markets it has expanded considerably so that now 99% of SWI households either shop at Migros, go on holiday with Hotelplan or bank with Migros

Founded on a concern for health and wellbeing of customers, Migros does not sell alcohol or tobacco
0.5% of turnover is dedicated to social and cultural projects making Migros industry leaders in many areas of CR
If EBIT surpasses 5% retails in stores are lowered

Pioneers of the self scanning system, developed with Polygon in 2009. The aim is to remove the need to queue or to pack in store, which in feedback given highlighted these as the two biggest frustrations of customers

Named ‘Subito’ up to 20% of customers are now users accounting for up to 40% of store turnover, rising to 50% in busy periods depending on location. All target throughput times have been broken in ‘Subito’ stores

International Benchmarks – Migros
Incumbent French discounter with quality focus on both food and non-food
Now part of the Casino Group
International Benchmarks – Monoprix
Store layouts have non-food on entry, focussing on textiles and health & beauty
Fresh produce is a key focus for the business,
Trial of self scanning system in stores
Fresh juice now served in store with the produce fixture
Focus on fresh and provenance is the consistent message throughout the store
International Benchmarks – SuperValu
Trial of self scanning system in stores
Focus on fresh and provenance is the consistent message throughout the store
International Benchmarks – SuperValu
280 local suppliers now part of the SuperValu ‘Food Academy’ programme

Supporting over 1,100 Irish jobs with 85% of participants now claiming they will be recruiting over the next 12 months
Largest grocery share in Ireland at 23% with 2.8% year on year growth

This has predominantly been driven across fresh categories , produce, meat and fish as the market has moved toward higher frequency shops
Business claim that over 70% of products are now sourced or produced in Ireland
1,900 SKU’s spread across 3 tiers; Daily Basics, SuperValu Range & SuperValue Signature Tastes
Lidl overtook Aldi’s market leading year on year growth position in October 2015
This has since recovered in the latest 12 w/e data
Switching
Over the period where Lidl’s growth was larger than Aldi, switching losses to Lidl are experienced.
These switches are greater than expected, and reflect the risk of an ever closer approaching competitive threat to Aldi’s market position as Lidl continue to reform.
There are also smaller than expected switching gains from other retailers, which should be monitored.
Lidl Buying Approach - Overview
What do we already know about how Lidl buy compared to Aldi?
Lidl Buying Process Analysis
Lidl have a clear strategy of replicating Aldi’s range and utilising Aldi’s supply base. This allows them to take advantage of Aldi’s development work and trials, after which they usually launch a very similar product.
Potential future threats from Lidl:

Several ‘quick wins’ are available where Lidl have significant undertrades vs Aldi
Increase in speed to market in replicating or even bettering our NPD
Building strategic relationships with suppliers where Lidl are currently transactional
Insight from Aldi’s supply base suggests Lidl do not have a faster launch process – there are some instances where it appears suppliers have passed details of Aldi’s NPD programme to Lidl

Opportunities to defend:

Strengthening Aldi’s existing long term partnerships with suppliers and encourage a strategic relationship with only one discounter
Be aggressive in Aldi's NPD programme to widen the gap
Tendering NPD selectively to trusted suppliers
Agreeing exclusivity on new products, recipes and packaging for appropriate timeframes
Challenging Aldi's launch timeframe to allow us to accelerate ahead of Lidl and close the gap with the big 4

Lidl Buying Process Analysis
Lidl will continue to replicate Aldi's range, and as their buying department grows in the UK, they may strategically start to look ahead of us and begin to replicate the rest of the market before we do. One opportunity to defend against this is to be more agile and secretive in launching critical NPD. There is a potential to significantly reduce Aldi's critical path to enable this to happen where necessary.

Competitive Benefits

Allows Aldi to accelerate away from Lidl
Enables Aldi to quickly create the right range at key seasonal occasions
Encourages more switching from the other retailers to Aldi rather than Lidl, growing Aldi's share
Drives engagement with key suppliers through a progressive NPD programme
Consideration Points

This critical path is suitable for chilled foods, one of the categories in which both Aldi and Lidl are seeing most success. A solution would need to be found for other categories
It should be used for critical launches only
Store operational constraints would need to be overcome
This process has been developed by a chilled foods supplier, and relies on a commitment from TSPs to be able to reduce timescales of work, and buyers to accept existing factory raw materials to allow shelf life and nutritional testing to be completed quickly.
Standard Aldi Critical Path - 18 Weeks
Fastest Retailer - 12 Weeks (Tesco)
4 Week Fast Track
Lidl Buying Process Analysis
Product Launch
Below compares the critical path timelines in detail, showing where adjustments could be made to allow improvements.
International Buying – Non Food Specials
Each country has one Buying Director for Non Food Specials, and all are bought centrally in Germany.

Lidl use a buying entity similar to Aldi's Asian office, for sourcing from the Far East.

BDs from all countries meet 4 times a year to select products and place orders. Each country is responsible for meeting their turnover plan and will order accordingly.

Each country is responsible for deciding how long they want to have a product on sale for, and the target sell through rate after 1 week.

Any products left in stores can be recalled back to warehouse to be resold with a later promotion. This is controlled by the BD.

BDs have responsibility for all price change.
NFS account for approximately 13.5% of store turnover

Lidl has a strategy of favouring volume of orders over number of lines, adding to their commercial strength

The BD measures success on managing forecasted vs actual turnover and achieving week 1 sell through target of 70% (country dependent).

Based on the knowledge and expertise of Aldi's Buying Department and the findings of consumer research, we can be confident that Lidl are not finding their successes through having better quality products. However, the statistics show some figures to be cautious of.p
Product Quality
Aldi’s peak in innovation registers through 2015 with the launch of the 150 line trial. This potentially correlates with a stabilising in the decline of growth. Lidl show a peak in innovation in late 2015 to early 2016, correlating with the acceleration in their growth. This was also a period of continued vouchering from Lidl, and their first to market Christmas advertising campaign, reflecting a well co-ordinated attack. The impact of innovation is, however, short-lived.
Range Development - Innovation
Levels of innovation are monitored by Kantar, who record sales from existing product (no changes made), Existing Product Development, and New Product Development. The below chart compares Aldi and Lidl’s sales from innovation, by tier, over the past 52 Weeks. It appears Lidl have had a significant focus on Premium tier innovation, whereas standard tier is stable and consistent. Lidl have made strong % contribution progress in value tier NPD because of their low starting point. In contrast, whilst Aldi lead in total % sales from innovation, this is driven by standard tier, the largest segment of the market.

Range Development - Tiering
Premium own label is a crucial focus in all retailers – nobody is seeing decline in this area. Lidl are focusing heavily on this with almost 50% of premium own label sales coming from NPD – completely new products in the past 12 months. In contrast, Aldi at present has a similar proportion of premium OL sales coming from NPD as EPD- changes to products which have been in the range for at least 12 months. Whilst it is difficult to separate out the exact impact of this measure, it is visible in store that Lidl have focused on their Deluxe brand.
Range Development – Premium Own Label
Range Development – Value Own Label
Innovation in value tier in Lidl is also high, as the range is reasonably new and small. At present there are approximately 28 lines in the Simply range, across various categories, therefore a small amount of range development will have a greater impact on the % contribution towards spend. Whilst the contribution of innovation to the spend on value tier is currently more significant in Lidl than in Aldi, value tier is the smallest tier by value (0.4% of spend in Lidl and 3.1% of spend in Aldi). Standard tier accounts for the greatest share of spend and therefore will have the greatest impact on business performance.
Range Development – Brands
Lidl have a stronger branded presence and as a result lead in terms of their branded product contribution to sales at 11.5% (158 lines, 6.6% of total lines), vs Aldi at 8.2% (122 lines, 4.3% of total lines). However their focus seems to be shifting away from branded NPD, whereas this has increased more recently in Aldi. This is a point to consider when making specific buying decisions, however the overall contribution of branded innovation to sales remains small for both retailers at up to 15% of branded sales over the past 3 years.
Lidl list locally sourced products for specific markets in key categories:
Fresh meat and Irish breakfast meats
Produce
Eggs
Bakery
Range Development – IRE/NI
Little difference is found between the UK/IRE/NI ranges in ambient grocery, frozen or chilled foods. Where it is less viable to source a local product, for instance fresh turkey, they do not state the origin on front of pack. Several products, including fresh meat, have the ‘produced in Ireland’ logo, but are from Northern Ireland.
Range Development – Summary
Range development is one of several factors at play that will have contributed to patterns of growth over time. However, Lidl are significantly improving their customer perception of range closely behind Aldi, and are clearly closing the gap by having an ever closer range to Aldi. There still remains a significant gap to the big 4. How and to what extent we would seek to close this gap is a point for consideration if we are to continue to take share from them and remain ahead of Lidl. Aldi have a tendency to focus on the existing range over NPD. We should aim not to step back in EPD as this overtrade drives Aldi's total share, however balance this out with further focus on NPD, targeting premium own label as a key driver, to make incremental gains.
Shopper Behaviours – Retailer Preference
Aldi shares shoppers with all retailers, however their habits are changing. Whilst this year they are spending more with us and less with Tesco, Asda & Morrisons, they are also spending more with Co-Op, Lidl, Waitrose and M&S. Of these retailers, Co-Op takes the highest spend from Aldi's customers at 5%, and the combined figure is 15.9%, compared to Lidl’s 4.3%. The amount spent in Sainsbury’s has also increased. Aldi's customers still spend the most with Tesco, giving huge opportunity to gain this spend from people who are already shopping in Aldi's stores.
Shopper Behaviours – Retailer Preference
52w/e figures continue to show switching losses to Lidl. However, this returns at 12w/e
Lidl have experienced greater switching gains from premium retailers, highlighting a need to focus on capturing more of this customer demographic
The greatest financial opportunity and potential for loss is the switching from other retailers that Aldi are not achieving because it is going to Lidl.
Switching of course may be due to other factors such as store location, therefore this information may be useful for areas other than the Buying Department
Shopper Behaviours – Switching
Shopper Behaviours – Switching
Shopper Behaviours – Switching
At the point where Lidl were ahead in growth and there was a net loss in switching to Lidl, we were experiencing switching losses in 2 key categories, Fresh Meat and Chilled Foods. We were experiencing gains in wine, but much less in Fruit & Vegetables.
In the latest 12 w/e data, the second consecutive period of growth ahead of Lidl, the 3 key categories of Fresh Meat, Chilled Foods and Fruit & Vegetables are the top 3 categories of switching gain from Lidl, showing how instrumental they are to total business performance.
Buying Strategy: How strategic are Lidl?
Strategic Category Management–Switching
Potential switching losses to Lidl are a risk, but several factors are involved in the long term performance of the Aldi business.
The insight and direction provided by the Category team shows that we need to consider taking a strategic category management approach to maximising sales and profit.
Analysis shows, as previously presented, that Frequency is the key metric to Aldi's future growth, with basket size reaching it’s peak, penetration slowing, and price deflation.
We are also seeing the proportion of Aldi customers who also shop with Lidl increasing whereas the proportion shopping in many other retailers is flat or decreasing.
Strategic Category Management - Roles
Categories where both Aldi and Lidl are showing strongest growth and overtrade are the Destination areas which are price sensitive, and lower in customer loyalty than the store average. This presents a risk of greater switching as Lidl continue to grow, but crucially an opportunity to capture further switching gains from lower loyalty shoppers of our competition. These are the categories which will drive frequency.
Key to our defence is to define category roles to understand the importance and priority of each category within the business.
Strategic Category Management - Roles
Destination followed by Preferred categories will be the drivers of frequency growth, developing higher loyalty in Aldi customers and capturing shoppers from the competition.
As proposed by the Category team, in order to drive growth in frequency we could consider a change in Aldi's discount principles which still allows profitability but weights discount in favour of Destination categories.
The below summarises how this approach would need to be taken:
Strategic Category Management - Structure
Maximising sales and profitability
The below discount structure has been created by the Category team as an example of how the discount could be adapted to focus on the key Destination categories where we are seeing most threat from Lidl, and which have the biggest impact on Aldi's ability to attract switching from other retailers.

All options are profitable, and account for the impact on volume where retail may increase.
Lidl have strong performance in the same categories as Aldi – Destination categories which are crucial to a customer’s decision of store
- both retailers are fighting to attract the same customers from the Big 4
Speed to market – following Aldi's range, launching products quickly after we do – they are not so far behind in their range offer as before
- increased incentive for customers to switch, advancing share ahead of Aldi
Aggressively approaching Aldi's supply base for Aldi's NPD
- easier route to market
Focus on taste matching rather than spec matching of product
- lower cost model, increasing commercial threat
Suppliers see Lidl growth rate ahead of Aldi and
choose to work with Lidl as a discounter of choice
- Challenging Aldi's supplier relationships and ability to
execute stronger ranging
Aldi shoppers are increasing their spend with Lidl
Strong improvements in scoring metrics for product quality
and range
- Risk of increased losses if this continues
Summary – Key Threats from Lidl
Summary – Threats from other retailers
It is clear that Lidl are a direct competitor to Aldi, and that this threat needs to be managed in light of recent performance figures. However, there are several reasons to be wary that the threat to Aldi may not be Lidl, but where the greatest opportunity for share gains also lies - the Big 4, Waitrose, and Marks and Spencer.
With most other retailers continuing to report negative performance and lose share, we have to consider how long they will allow Aldi to make gains and what their strategy will be.
Aldi Defensive Strategy
Tender selectively for new products
Assess new suppliers thoroughly before disclosing tender details
Agree exclusivity on NPD
Strengthen existing and build further strategic partnerships to remain attractive to key suppliers
Create an aggressive NPD programme across all categories
Challenge launch timeframes to allow for speed of reaction where critical
Assess product launch windows and develop a process for urgent launches
Recognise emergent and exciting markets to grow range breadth
Replicate unique Lidl products where appropriate to minimise switching
Create an aggressive NPD programme across all categories
Challenge launch timeframes to allow for speed of reaction where critical
Assess product launch windows and develop a process for urgent launches
Recognise emergent and exciting markets to grow range breadth
Replicate unique Lidl products where appropriate to minimise switching
Looking Forwards - Growth
Following where Lidl growth was ahead of Aldi growth, for the 2 latest 12 week periods Aldi has returned to lead position in growth. As shown below Lidl appear to have a consistent trend of decline in growth since the end of February 2016. Aldi’s Share of Trade has remained ahead of Lidl despite this challenging time, and the gap is continuing to widen. Switching has also remained in Aldi’s favour for the latest 2 periods.

Looking Forwards - Switching
Lidl’s are seeing a slowing in growth in all measures, with declines in frequency and penetration being the biggest contributors.
They have seen a recent drop in switching gains from Asda, Sainsbury’s and Morrison’s, and are now losing through switching to Aldi and Co-Op.
Looking Forwards - Tiering
It is possible that Lidl’s strong performance in premium own label sales and NPD has been at the expense of standard own label, which holds the majority share of sales but has seen a steady decline in growth where other tiers have maintained performance. This should be a cautionary note to Aldi when considering future NPD strategy, as standard tier should not be ignored.
Looking Forwards - Frequency
Lidl are maintaining growth in basket size, which is one of their biggest areas of opportunity due to the gap between their items per trip (13) and Aldi’s (18). However they are now seeing a decline in frequency. As frequency is predicted to be the key future growth opportunity for Aldi, the decline shown by Lidl, along with a return to switching gains, is promising.
Highlights
Aldi own 10 different types of returnable equipment;
Produce trays
Meat trays
Potato shippers
UDPs
1 litre beverage trays
2 litre beverage trays
Euro Pallets
D Pallets
UK Pallets
Plant Trollies
Lidl currently use 8 different types of equipment in store;

Euro Pallets (LPR & CHEP)
D Pallets (LPR & CHEP)
White Pallets (Lidl Pool)
2 litre beverage trays
Plastic UDP
Plant Trollies
Nestable Euro Pallets (Cabka and Pooling Partners)
Lidl SKU’s that are pallet merchandised;

4 SKU’s on Euro Pallets – 2 Additional at the front of the store
48 SKU’s on D Pallets
Merchandising Category Overviews
Fresh Meat
Lidl have focused on their British meat, POS above fresh meat products all include labelling of “We Love British”. POS signs are directly above the Chillers, which are customers eye-level.
Aldi have focused on promoting their British meat, POS above fresh meat products all include labelling of “100% British Farmed”.
POS signs hang from the ceiling above chiller space.
Fresh Meat
Lidl in Republic of Ireland use clear POS signs detailing “100% Irish Beef” and include the Irish tricolour flag, this is the same for all fast moving core range protein products.
Products in Republic of Ireland include a Bord Bia quality assured label or they will display a green “Produced in Ireland” label.
Lidl in Northern Ireland use clear POS signs detailing “100% Northern Irish Beef”. Lidl use “100% Northern Irish” on all fast moving core range proteins such as chicken and eggs, these products do not include the Irish tricolour flag. Other products are Republic of Ireland range with Bord Bia quality assured labelling.

Fresh Meat
Lidl in Scotland use Scottish flag POS behind all price card information for all Scottish products such as meat, eggs, ice cream, bread and cake products.
POS sticker on the floor by the bakery products explaining the price card POS to all customers
Scottish products are clearly visible with a Scottish Ramsay Blue Hunting background. There is also a Scottish Beef logo for all beef products.
Fresh Meat
International Lidl stores continue with the same messaging focusing on developing provenance within the local market. For example Lidl Stores in Spain use the below POS.
Select Beef
“If it’s fresh, it’s Lidl”
“Fresh from our farms”
Fresh Meat
Fresh Poultry, Beef and Lamb are all merchandised in chest chillers.
Total Linear Meterage = 30m
Fresh Meat
Fresh Meat is merchandised in upright chillers, products are merchandised in SRP’s with the exceptions of meat joints and whole chickens which are loose on the shelf.

Specially Selected products are merchandised on the top shelf.
Total Linear Meterage = 38.5m
Fresh Meat
Linerless Label
Silver metallic ink
Gloss varnish
Red spot used on the back of pack
Deluxe range products
Specially Selected products
Reverse printed sleeve
Silver metallic ink
Basic Matt varnish
Pantone Blue
Vacuum packed product
Linerless Label
Gold metallic ink on product title
CMYK logo
Gloss varnish
Gold Foil
Matt Varnish Sleeve
Process Blue
Fresh Meat
Labelled as “British Pork”
Red Tractor label
British flag background
Red Tractor label
Product Count = 120 (mixed cases to be separated)

Unique Products = 25
(products not stocked by Aldi)

Brands Count = 0
Product Count = 146 (mixed cases to be separated)

Unique Products = 49
(products not stocked by Lidl)

Brands Count = 0
Fresh Meat
Source: Kantar Worldpanel data (Key Measures Data Table), 23/05/2015 – 22/05/2016
Lidl currently have a higher % category contribution, the main contributing sub commodities are;
62/01 Fresh Poultry = 0.50%
62/03 Fresh Pork = 0.33%
62/03 Fresh Beef = 0.36%
Market share
% spend growth
Category share
Under (-)/ Over (+) Trade £000s
% Category contribution
52 week ending data
52 week ending data
Market share
% spend growth
Category share
Under (-)/ Over (+) Trade £000s
% Category contribution
Fresh Meat
Source: Kantar Worldpanel data (Key Measures Data Table), 23/05/2015 – 22/05/2016
Lidl currently have a higher % category contribution, the main contributing sub commodities are;
62/01 Fresh Poultry = 0.48%
62/03 Fresh Beef = 0.58%
12 week ending data
Market share
% spend growth
Category share
Under (-)/ Over (+) Trade £000s
% Category contribution
Market share
% spend growth
Category share
Under (-)/ Over (+) Trade £000s
% Category contribution
12 week ending data
Logistics and Supply Chain
Logistics and Supply Chain
12 stores within the M50
17 stores within the M50
Logistics and Supply Chain
Store Distribution (Southern Ireland)
(2 are replacement RDC’s)
Future RDC Networks
2 planned multi temperature sites:
Cardiff 2016/17
Isle of Sheppey in 2019
Single temperature national distribution: Under review
IRE: Naas & Mitchelstown
All Non-Food Specials products are disposed of if they are damaged, if it’s a low value/ low volume product this will be sent to grand openings or if it’s a high value/ high volume product this will be kept for future on sale dates which will be decided by the buyer.

Single temperature NFS rework / Storage

This is replicated in each country.

Generally there are no textiles or food products that are returned to the National Distribution Centre.

No Gatehouse, Hauliers have to manage themselves in the yard.

Previously Lidl fined suppliers for late delivery. This practice has now stopped.
Lidl have announced plans to relocate this RDC to West Lothian. This facility will be 71,000m2 which is much larger than the current 28,000m2 site. This will fully encompass the new Scottish buying department.
Lidl UK RDCs
Lidl Northfleet RDC
Fishers Way, Belvedere DA17 6BS
Regional Product site servicing South East England and East Anglia.
Servicing approximately 65 stores.
Lidl RDC Summary
Lidl RDC Summary
Lidl is currently (14.08.16) in the process of mounting a challenge to the ruling that it should recognise the GMB workers union

GMB have currently won the right to negotiate on behalf of its 220 members at the Bridgend RDC

The central arbitration committee has ruled in what could be a landmark case that the workers in Bridgend should be viewed as a separate entity and not part of the wider Lidl workforce
Lidl UK RDCs Recruitment
Lidl UK RDCs Recruitment
Lidl have announced plans to invest around €70 million to develop a new Regional Distribution Centre in Spain.
Currently under construction in Alcalá de Henares – Spain this will become the biggest distribution centre in Europe. The 71,800m2 facility will employ 275 workers and supply more than 150 stores in central Spain.

The distribution centre will have a storage area for 10,000 pallets, as well as 12,000 square metres set aside for cold-room storage.

“This will be the biggest distribution platform in the whole of Europe, the most technologically advanced and the most sustainable,” said Javier Suárez, Lidl’s director of expansion and real estate.

Lidl RDCs - European
Transportation and Consolidation
Lidl currently run three Non-Food central distribution centres in Germany:
Berlin
Koblenz
Neckarsulm

They are planning on opening a forth non-food distribution centre in Germany, in the Magna-Park in Langgöns close to Giessen.
Each store has a set day each week for the re-work of specials collections for delivery into the National Distribution Centre in Walsall. The store will receive a pick list for the return of stock which has been decided by the buyer, this is communicated to the store by bulletin.
Lidl currently use 3 different types of Logistics for Non-Food Specials;

Direct deliveries with suppliers from Europe
Delivered Duty Paid
Ex-works using OVIM (Lidl owned company)
Uncooked Bacon, Gammon and Sausages are merchandised on the shelves, this is merchandised with Sliced Meat & Sausages. Most joints are merchandised SRP’s.
Deluxe range products are merchandised on the second and third shelf – which is eye level for the customer.
Each chiller has dividers with some sections including multiple products. This has been updated in their new stores to be merchandised in upright chillers.
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