Aldi, Lidl Gain U.K. Grocery Market Share as Food Prices Rise

Discounters Lidl and Aldi Group increased their share of the U.K. grocery market in the last three months as rising prices for food and fuel caused shoppers to divert more of their spending to budget products.

Germany’s Aldi took 3.1 percent of the market in the 12 weeks through March 21, up from 2.8 percent in the same period a year earlier, according to Kantar Worldpanel data released today. Lidl’s share rose to a record 2.5 percent from 2.3 percent. Tesco Plc (TSCO) and Wal-Mart Stores Inc. (WMT)’s Asda, the U.K.’s two largest supermarket chains, both saw their share narrow 0.1 percentage point, to 30.2 percent and 17 percent, respectively.

The popularity of discount grocers increased during the economic slowdown of 2008, before tailing off by the end of 2009 as consumers returned to the branded labels of larger chains. Grocery price inflation now stands at 4 percent, Kantar said, causing shoppers to return to budget chains. Iceland Foods Ltd. and Farm Foods also outperformed the market, Kantar said.

“While there are no signs yet of the explosive growth in economy own-label ranges that we saw in 2008, there are now clear indications that value-for-money is driving retailer performance,” Edward Garner, communications director at Kantar Worldpanel, said in the statement.

Sales growth across the food-retail industry averaged 2.6 percent in the last 12 weeks, compared with the 3.9 percent reported last month, Kantar said. It’s the first time the market growth rate has fallen below food inflation since July 2009.

J Sainsbury Plc (SBRY), the third-largest supermarket chain, held its market share at 16.3 percent compared with a year earlier, Kantar said. The retailer this month reported a slowdown in revenue growth as higher fuel costs weighed on shoppers.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net