Research suggests discounters are eroding the value of established food and drink brands

The rise of discounters continues to have profound implications for grocery brands.

Discounters’ strong focus on own label (consider that only around 7% of Aldi’s lines are brands) means shoppers are becoming increasingly used to shopping in retail environments where brands have limited presence. This alone is eroding the importance of brands in many shoppers’ minds. Furthermore, as the Big Four rationalise their ranges to become more competitive against discounters, the threat of delist for many brands has become a major concern. All of the Big Four have been clear in their preference to invest in their own labels as a means to differentiate.

Look at our research and we see shoppers’ perceptions of brands are changing. Over two-thirds (70%) of shoppers say they are less loyal to brands than they were 10 years ago, while 66% think brands are less relevant than they were 10 years ago. 62% of shoppers say they typically buy own brand products over branded alternatives. Drill into the attitudes of younger shoppers and the findings paint a bleaker picture for brand owners.

What’s more, Savvy’s research suggests that discounters still have substantial scope to grow, so the pressure on brands is set to intensify further.

How big can discounters grow?

60%of UK shoppers would like it if Aldi and Lidl opened stores closer to their home. In Germany the discount channel accounts for 34% of the grocery market according to the IGD. Aldi currently operates about 750 stores and has ambition to reach 1,000 by 2022

 

A look at their market share in their home market of Germany may provide a clue. There the discount channel accounts for 34% of the grocery market according to IGD – almost three times their UK share.

Analysis of their store estates also suggest substantial growth potential. Aldi currently operates about 750 stores and has ambition to reach 1,000 by 2022. Given that there are currently hundreds of towns – especially in the south-east – that do not have a store already, each of these stores would drive incremental market share.

Finally, Savvy’s own shopper research implies significant upside. 60% of shoppers say they would like it if Aldi and Lidl opened a store closer to their home.

 

This is an excerpt from Savvy’s latest research paper, The Evolving Landscape of Grocery Retail. To read the full report please contact Taj Sur.