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America's next import: Lidl, another limited-assortment chain from Germany, is poised to be the next foreign supermarket to come to the U.S. retailers need to get up to speed on this potential competitor.

THE SCHWARZ GROUP OF GERMANY IS VIRTUALLY UNKNOWN TO MANY U.S. SUPERMARKET EXECUTIVES, despite being the fifth largest food retailer in the world after Carrefour, Metro Group (Germany), Tesco and Wal-Mart. According to Planet Retail, it is also larger than its compatriot Aldi, with annual sales of more than $80 billion U.S. versus Aldi's $66 billion.

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Getting to know the Schwarz Group better would be a good idea for many North American retailers, given that it reportedly plans to enter the U.S. and/or Canada with its Lidl format in 2012.

The Schwarz Group is based in Neckarsulm, Germany and, like Aldi, is a secretive privately held family firm. It operates about 9,300 stores in 17 countries under three main banners: Handclshof supermarkets, Kaufland discount supermarkets/hypermarkets and Lidl limited-assortment stores.

There are more than 500 Kaufland stores in Germany and more in Eastern Europe. A recent visit to a unit in Prague (Czech Republic) suggests that Kaufland may have been a "model" for Food Lion's Bottom Dollar format. However, it is the Lidl format that is reportedly under consideration for the U.S. and Canada.

The first Lidl hard discount store opened in 1973 as a copy of Aldi and the chain has now grown to about 6,000 units. As would be expected, the largest market for Lidl is Germany (3,000 stores), followed by France (1,350), the U.K. (505) and then the Netherlands (400).

France is reportedly Lidl's most profitable market and, together with Aldi, Lidl has been a key reason for the recent price-perception problems of the French hypermarket operators, such as Carrefour. American retailers be warned.

The Lidl stores are very similar to Aldi, although more colorful and promotional. Our consumer research in the U.K. indicates that Lidl's price-perception is just as sharp as that of Aldi.

In Germany, Lidl's average weekly sales per store are about $95,000 U.S. in units ranging from 8,000 square feet to 16,000 square feet and averaging 13,350 square feet. The Lidl stores have the usual spartan fixtures and decor, a limited product range of about 1,200 SKUs (but growing) and are served by between 100 and 150 parking spaces. When they arrive in the U.S., they will be looking for sites between from one acre to three acres.

Like Aldi, Lidl is strongly anti-Union, demanding of its employees and reportedly even tougher with its suppliers.

The main differences with Aldi are that the Lidl stores can be larger (up to 19,000 square feet in the U.K.), typically have better parking (in Europe), have wider selections (including nonfoods), offer more (unpacked) fresh produce, feature alcoholic beverages and carry more name brands (about 20% of the range versus 10% at Aldi).

Lidl seriously evaluated the Canadian market for entry in 2003--even setting up an office in the Toronto suburbs--but it pulled back in 2004 in favor of expansion in Eastern Europe, especially Hungary. Its renewed interest in North America now includes the U.S. market, which only has about 2,600 limited-assortment stores. This is a ratio of only one store for every 118,000 Americans.

Real estate availability should not be a problem for Lidl--even in the Northeast--because of its small footprint and the growing supply of retail space due to the recession. Interestingly, the main impediment for Lidl's arrival and expansion may be the continued growth of dollar store chains such as Dollar General, Dollar Tree and Family Dollar. In effect, these retailers are filling the current limited-assortment store void.

Lidl's slogan, "Where Quality Costs Less" will have obvious, if not urgent, appeal to a growing proportion of American consumers who are struggling with declining living standards and, as a result, are increasingly open to the appeal of private brands sold in spartan environments.

Dr. David Rogers is president of DSR Marketing Systems, based in Northbrook, Ill. He can be reached at 847-412-4677, or at dsrms@sbcglobal. net.
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Title Annotation:FOOD FORUM
Author:Rogers, David
Publication:Grocery Headquarters
Article Type:Company overview
Date:Dec 1, 2009
Words:667
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