Quality and variety can help Lidl achieve its US growth goals

January 25, 2018
4 min read

German retailer Lidl opened its first grocery stores in the US in June 2017 and expanded quickly thereafter with nearly 50 stores open by the end of the year. Despite the rapid start, reports started to surface in late 2017 that the retailer was decelerating its expansion plans to have more than 100 stores open in the US by September 2018. Although the retailer is new to the US, Lidl operates around 10,000 stores in 27 countries, following a business model of smaller format stores stocked with a selective assortment that is focused on private label at discounted prices compared with traditional grocery retailers.

45% of US grocery shoppers bought food at value-oriented stores more often in 2017.
Lidl’s arrival in the US comes at the right time because 45% of US grocery shoppers are more often buying food at value-oriented stores such as Walmart, mass merchandisers, dollar stores or discount grocers in 2017 compared to the year prior, according to Mintel’s US report on grocery retailing. In fact, the pursuit of deals on their groceries might motivate some consumers to shop across a variety of retailers. Only 30% of US grocery shoppers shop at only one store for their routine grocery purchases. In order to gain more traction with consumers, Lidl can emphasize its award-winning private label, in-store bakeries and a rotating selection of ‘Surprises.’

The expansion of private label-focused retailers in the US such as Aldi and Trader Joe’s, as well as other retailers’ investment in private label, finds two in five US grocery shoppers often buying private label or store brand items because the quality is just as good as national brands. In Lidl’s case, the retailer can publicize that the awards won by some of its private label products, including private label Icelandic-style yogurt and wines. Lidl’s wines, many of which retail for less than $20, won more than 100 medals at two 2017 international wine competitions.

Fresh bakery items also provide Lidl with another advantage compared with some other discount grocery stores. The quality of fresh baked goods appeals to the six in 10 US adults who agree that freshly baked tastes better than packaged, according to Mintel’s report on in-store bakeries. Showcasing the differentiation provided by in-store bakeries, Aldi has begun to test in-store bakeries in some of its stores, according to reports. The addition of in-store bakeries at Aldi reflects the direct competition between Aldi and Lidl, both of which are smaller format German retailers focused on private label products sold at discounted prices.

An additional attribute of Lidl is the ‘Surprises’ section that is located in the middle of its stores and features a rotating selection of consumer goods such as clothing, fitness accessories, small household appliances and toys. This section is refreshed each week with new items, providing consumers with more reasons to return to the store regularly to find deals on items other than groceries. The range of goods stocked in the ‘Surprises’ section could help Lidl compete more closely with mass merchandisers, a channel where 95% of consumers shopped for food in 2017.

lidl surprises

What we think

Lidl’s award-winning private label products and fresh bakery section are two assets of its food and drink that can be promoted to help to set the retailer apart from other US value-focused grocery retailers. Furthermore, Lidl’s rotating ‘Surprises’ section that features deals on a range of consumer items could help drive traffic from consumers who are looking for discounts and are used to buying more than just groceries when they shop.

Jenny Zegler is the dedicated trends analyst on Mintel’s Food & Drink platform, blending Mintel Trends expertise with food and drink specific topics, such as health and wellness, formulation, sustainability and premiumization. In addition to contributing analysis to Mintel Food & Drink, Jenny has been part of the team that creates Mintel’s annual cross-category trends since 2014.

Jennifer Zegler
Jennifer Zegler

Jenny Zegler is the Director of Food and Drink at Mintel. Jenny blends her trends expertise with food and drink topics such as health, formulation, sustainability and premiumization.

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