Martin Flanagan: Aldi ups the pressure on big four

The market has noted the successive quarters of like-for-like sales recovery at Tesco, Morrisons and Sainsbury's after a lengthy malaise.

Aldi is piling the pressure on rivals by investing in its store estate. Picture: Michael Gillen

The previous chronic drift, softened a little now by the fledgeling recovery at those three food majors, has been fuelled by the remorseless rise of the discounters Aldi and Lidl, which now account for a combined near‑11 per cent of the UK’s supermarket sector.

The bad news for the big boys, however – Asda is flailing, in particular – is that the discounters show no sign of lowering their sights or their game in the ongoing battle for consumers’ minds and wallets.

The majors are showing some push-back, but it is still game on in the aisles. Aldi revealed yesterday that it is to invest a further £300 million in store refurbishments, particularly on the alcohol and fresh produce offerings, with more than 100 outlets expected to have been spruced up by end-2017.

And, in a worrying development for the competitors, Aldi is also to invest in its new “food to go” feature, a staple of the convenience store offering at Tesco and Sainsbury’s, in particular.

There is a something of a silver lining, however. The price promotions that have become the default position of the supermarket industry have also hit the upstarts.

Aldi’s sales in its latest financial year may have grown again to a new record of £7.7 billion, meaning that it has doubled its UK turnover in just three years. But profits have now fallen two years in a row. It and Lidl may have a bigger slice of the cake, but the cake is getting smaller.

Even so, the investment programme Aldi has unveiled – on top of the £1.7bn it has spent in the UK in the past five years – is a further upping of the ante by the discounter. It shows it believes that it can ride out any nascent Big Four fightback in terms of customer footfall and sales.

And many businesses could live with its current profit of £255 million. In short, the beggar-my-neighbour price-cutting is set to continue.

Click here to ‘Like’ The Scotsman Business on Facebook