Market share data: Is Aldi losing shoppers to Lidl’s loyalty scheme?

While falling grocery price inflation, a continued customer focus on own-brand products and looking ahead to a super summer of sport all topped Kantar grocery market share data headlines yesterday, there’s more going on than meets the eye.

As the seasons turn and grocery’s wheel of fate grinds ever on, some retailers climb up and some slip down. As the two-and-a-half-year cost-of-living nightmare finally seems to be drawing to a close, pureplay grocer Ocado celebrated its third straight month as the fastest-growing food retailer in the UK.

Comparatively, for the last 12 weeks at least, it was Asda’s turn to find itself at the bottom of the pile, with sales growth dropping 2%, while Tesco and Sainsbury’s continued their inexorable onward march and a resurgent Morrisons enjoyed a 3.1% sales uptick.

But perhaps the most intriguing story to emerge from Kantar’s market share data this year is the ongoing battle between Aldi and Lidl.

May represented the eighth month in a row that Lidl had grown at a faster rate than its larger cousin Aldi, according to Kantar. In the 12 weeks to May 14, 2024, Lidl grew sales by 9.4%, compared with Aldi’s 2.2%.

In terms of year-on-year market share change, Lidl’s jumped to 8.1% from 7.7%, while Aldi’s over the same period inched down from 10.1% to a flat 10%.

After struggling somewhat during Covid, the bounce back that Aldi has enjoyed over the last two years has been exceptional. Is it simply experiencing a natural reset in terms of market share after two years of supercharged growth? Or is something wrong at the discounter?

Members only

One of the key differentiators Kantar pulled out between Aldi and Lidl is the former’s lack of a membership offer which customers have grown to really value in recent years.

Kantar’s strategic insight director Thomas Steel says the Lidl Plus app has given the discounter a point of difference to Aldi that it has been able to leverage in its marketing.

“The likes of Sainsbury’s and Tesco have got really strong and established loyalty card schemes. Lidl, as well, is making sure that their membership scheme is front and centre of everything they’re doing and with the offers they’re providing through the Lidl Plus app.

“Lidl is really trying to encourage people to make more shopping trips and encouraging them to come into store with the Plus app.”

Steel says Lidl’s membership app and corresponding vouchers has also allowed the discounter’s bakery offer to outstrip Aldi’s during the period – with sales up 40% on in-store bakery items.

“That’s something we’re particularly seeing driving Lidl’s performance: tying in that in-store bakery offer with the Lidl Plus app.”

While the lack of a membership scheme does appear to be hurting Aldi, Steel also says that easing cost-of-living pressures are seeing some of the customers it won over from the big four switch back to shopping with those supermarkets online.

“With Aldi, we’re also starting to see some of the spend that it won during the cost-of-living crisis switching back to the likes of Tesco, Sainsbury’s and Morrisons online, in a way that we’re not seeing with Lidl.”

Steel says this is likely down to the demographics of the customers who switched to Aldi during the cost-of-living crisis.

Playing catch up

Shore Capital analyst Clive Black says that Aldi is still performing strongly, “given the incredibly steep comparatives it’s currently lapping” and it isn’t going to “implode” any time soon.

However, Black says the last few months have reinforced his opinion that of the two “formidable operators”, Lidl is the stronger.

“Aldi really got out of the blocks in the UK faster, but I do sense that Lidl is now demonstrating some better retail strengths, not just around loyalty. I think it’s got the superior bakery offer. Its fresh food offer is better. It has a better brand versus private label mix, and I think its wine offering is performing more strongly.”

While Aldi continues to perform strongly and maintain a healthy market share lead over Lidl, Black says that Lidl is growing more confident and is no longer afraid of competing with its discounter cousin more directly.

“For many years, Aldi and Lidl avoided each other like the plague,” says Black. “But as the two brands have matured – they’re both going over 1,000 stores now – they’re starting to compete more directly with each other and Lidl is more than holding its own on that front.”