Germany’s discounters, the dominant force in the country’s food retail sector, are “at a crossroads” and must adapt to ensure they can continue to grow sales in the future, industry watchers said today (18 June).
Go deeper with GlobalData
Since their birth in the late 1950s, retailers including Aldi and Lidl, have grown to run over 15,000 stores in Germany and account for 40% of sales, making food prices in the country some of the lowest in Europe.
However, according to management consultants Accenture and market research firm GfK, the discounters are reaching saturation point as Germany’s population ages and key consumers begin to see quality as more important than price.
“We see lots of challenges and believe that discounters need to do something fundamental with their overall business model,” said Gerhard Hausruckinger of Accenture. “There are early signals that their growth will not continue forever. The German consumer is not only about price.”
The warning comes as some German retailers look to expand their discount networks. Last November, Edeka, owner of the Netto chain in Germany, signed a deal to take control of rival Tengelmann’s discount stores. Local retail giant Rewe, meanwhile, is also looking to expand its Penny discount chain.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataHowever, speaking at the CIES World Food Business Summit in Munich, Hausruckinger said the growth of Germany’s discount retailers was slowing.
Discount retailers saw sales rise on average by 6% between 2001 and 2004, Hausruckinger said, but sales growth slowed to an average of 3% between 2004 and 2007. He also pointed to Aldi, which saw annual sales in Germany fall for the first time last year.
“When you achieve a penetration of 98% of the German population and you are accepted by all consumer segments, where do you go from here?” Hausruckinger asked.
Germany’s older consumers, with higher disposable income, are the growing consumer segment in the country, the Accenture-GfK report said. Those consumers care less about private-label products – the mainstay of Germany’s discounters – and are demanding more regional, organic and environmentally-friendly products.
Discounters, Hausruckinger said, needed to adapt to these new consumer trends or face reaching saturation point or even losing market share.
