Analysis: How private label discount supermarkets are resonating in Germany

According to an international survey now published by Mintel, 46% of Germans say they do not spot any differences in quality between private label and manufacturers’s branded products.

This is high by international comparison, and contrasts with a band of just 31% to 34% in Spain, Italy, France and Poland.

“Germany now features one of Europe’s most pleasing grocery landscapes”

In the same survey meanwhile, 86% of Germans said they had purchased private label products in the previous three months – as opposed to only 52% who had bought manufacturers’s branded products in the same period.

High ratio of discounted supermarkets

Clearly, the discounters (mainly Aldi, Lidl, Netto, Penny and Norma) are all over the place, with a forecast 17,750 outlets to be spread across Germany by the end of this year, combining to hold a 41% share of the grocery market.

While it is worth mentioning that historically – unlike in many other European markets – private label in Germany has meant ‘economy label’, the country is no longer at the peak of its thriftiness.

In 2008, 53% of Germans said that price was the number one criteria for them when shopping, but that has dropped to 48%.

Clearly, there is a shift taking place and millennials appear to value experience over consumption. The latest generation of grocery stores reflects this.

The big wave of store upgrades in Germany’s supermarket landscape was thought to be kick-started by Rewe in 2004, which created pilot stores modelled after British best practice – when UK grocery retail was at the forefront of the European shopping experience.

Keeping up the pressure

Edeka joined the bandwagon shortly after, fully refocusing on its home market operations, and the discounters have been polishing up their store networks since 2012.

Germany now features one of Europe’s most pleasing grocery landscapes.

At the same time, consumers still take competitive prices for granted on their basic shopping trips, so margins remain thin and discounters are still strong in Germany.

And they are keeping up the pressure on manufacturers’s brands, in terms of both price and quality, as Mintel’s survey has shown.

This has been possible due to large numbers of specialised private label manufacturers.

Rising expectations in terms of shopping experience are also being served well with the latest generation of stores.

This is just one more detail highlighting how the rise of the discounters in Western Europe’s key grocery markets should be expected to continue outside that German grocery island.

And that includes the UK.