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Germany: Interview Lebensmittelzeitung DRC Discount Retail Consulting GmbH

Mr. Houppermans, why are #Aldi and #Lidl in Germany currently lagging behind those of the major supermarket operators in terms of their development?

Due to the Covid-19 crisis, the discounters are concentrating on the operative business, which is at the expense of expansion and modernization. #Edeka and #Rewe, on the other hand, score highly in their function as local suppliers with a full range of products. At the same time, the perceived price difference between discounters and supermarkets is significantly reduced. Among other things, because the latter are expanding their own brand ranges. Edeka and other leading supermarket chains have also clearly worked on the attractiveness of their in-out ranges.

Where do you see the reasons for the sometimes double-digit growth rates of the discounters in Eastern Europe?

In general, Eastern European consumers prefer to buy from Western European chain stores and have a particularly high level of trust in the top brand “#Germany”. For success, however, it is crucial to understand the respective country market and to build up your own local ranges of excellent quality. Then there is the “#supermarketization” trend. Lidl has listed several hundred items in the region in a very short time - mostly national brands - and thus appeals to more affluent sections of the population. This means that the Schwarz discounter is perceived as a better “value-for-money” alternative than other retailers. The Eastern European markets are also more lucrative than the home market from an investment point of view. The cost level is significantly lower in comparison, but the price level is often similar. An #Ebitda of 10 percent is not unusual here.

In your opinion, how does the pandemic affect the development of discounters?

For many consumers, the current situation means economically uncertain future prospects. When shopping, therefore, the focus is primarily on high-quality basic items at a low price. The processing should also take place as quickly and stress-free as possible. Discounters enjoy a high level of trust with customers and can offer exactly this combination.

Do you see new opportunities for hard discount formats like the Russian retailer #Mere?

For the emerging countries in Eastern Europe there are market opportunities for such hard discount formats with sufficient investment capital, especially since the local discount market leaders are also moving upwards. For the more developed markets of Western Europe, I doubt whether the conventional hard discount concept can appeal to a wide range of customers in the long term. Possibly as a niche format in cities.

And how do you see the expansion of German discounters abroad?

A discounter without growth is like an airplane without kerosene. I assume that we will see more acquisitions in the future than before. Both Lidl and Aldi have gained their experience in this area over the past few years. This not only applies to entering new markets, but also to acquisitions in existing foreign markets. For Aldi in particular, this offers a strategic opportunity in countries where market share has come under pressure.

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