the 4ps of lidl - doing business in...

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Left Margin Right Margin

The 4Ps of Lidl

Understanding Lidl’s US Entry and

Working with Walmart to Protect Your

Business

Mike Paglia, Director

Laura Kennedy, Director

April 20, 2017

Doing Business in Bentonville

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Copyright © 2017 Kantar Retail. All Rights Reserved.

501 Boylston St., Suite 6101, Boston, MA 02116

T: +1 (617) 912 2828

[email protected]

No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information

storage and retrieval system now known or to be invented, without the express written permission of Kantar Retail.

The printing of any copies for backup is also strictly prohibited.

Disclaimers

The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views expressed do not necessarily reflect the views of the

management of the retailer(s) under discussion.

This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within

the following slides.

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Agenda

Source: Sample source runs here 3

Lidl’s Here: Why It Matters

The Walmart Impact

• What Suppliers Need to Do

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Lidl is a European Powerhouse

Source: Kantar Retail analysis 4

SALES CAGR

2011-2016E

4-7%

7-12%

13-19%

20%+

$95 BILLION

10,888 STORES $95,276 $102,731 $111,335 $119,777 $128,621 $137,390

10,888

11,124

11,491

11,847

12,194

12,540

10,000

11,000

12,000

13,000

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

2016E 2017E 2018E 2019E 2020E 2021E

Sales Stores

Sale

s U

SD

Billi

on

s

No

. Sto

res

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It’s For Real: Lidl is Coming!

Source: Kantar Retail analysis, Washington Post 5

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Lidl’s Anticipated First Wave in the US

Source: Kantar Retail analysis; Google Maps; Supermarket News 6

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Overall Sales Forecast

(USD Billions)

Store Growth Forecast

Lidl Will Grow into a Formidable Retailer Within Five Years

Source: Kantar Retail analysis

$0.1 $0.7

$2.1

$3.8

$5.4

$7.1

$8.8

2017E 2018E 2019E 2020E 2021E 2022E 2023E

20

120

230

330

430

530

630

2017E 2018E 2019E 2020E 2021E 2022E 2023E

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Many People Have the Wrong Idea About Lidl

The Misconception:

Lidl operates down market discounters with a corresponding in-store

experience. Its shoppers are predominately low income, coming from poor

areas, who do most of their shopping there. Lidl competes primarily with

other discounters like Aldi.

The Reality:

Lidl operates a variety of no-frills, midmarket stores that are pleasant to

shop. Its shoppers, who come from a wide range of income brackets, are all

price-sensitive. They demand a fast, easy fill-in trip, but for different reasons.

Lidl attracts shoppers from larger-format supermarkets and supercenters.

Source: Kantar Retail analysis

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The Big Surprise is Who is Leaking Share to Lidl

Lidl £m switching gains of +£ 367m

Source: Kantar Worldpanel 9

Tesco £102

0 120 100 80 60 40 20

£102 Asda

£72 Sainsbury’s

£58 Morrisons

£12 Waitrose

£9 Co-op

£6 In deps &

Symbols

£5 Aldi

£1 Iceland

£m Switching Note: 52 weeks ending Jan. 1, 2017

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Lidl Will Surprise Many as a Mid Market Retailer


44% 42% 35% 34% 33% 31% 30%

24% 21% 19% 19% 18% 19% 17% 13% 13% 13%

14% 12%

15% 13% 13% 13% 15%

11% 13%

12% 11% 11% 10% 10%

9% 9% 7%

11% 17% 18%

19% 19% 17% 20%

18% 18%

15% 19% 19% 16% 18%

17% 17% 15%

18% 15% 19% 18% 18% 25% 22%

26% 26%

28% 27% 29% 30% 28%

30% 29% 28%

13% 14% 14% 16% 16% 15% 15% 21% 22%

26% 25% 23% 25% 27% 31% 32%

36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Lid

l H

ere

?

< $25k

$25k –

$49.9k

$50k –

$74.9k

$75k –

$99.9k

$100k+

Household

Income

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Walmart Is at High Risk

Many will feel pressure, but not all equally


Low Risk

Wegmans

Target

Publix

Dollar Tree

Family Dollar

Dollar General

Medium Risk

Safeway

Stop & Shop

Harris Teeter

Kroger

Acme Markets

Aldi

High Risk

Winn Dixie

Giant Foods

Bi-Lo

Walmart

Food Lion

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How Does Lidl Approach the Four P’s?

Source: Kantar Retail aanalysis 12

Unconventional

Reconfigurable

Disruptive Innovative

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Lidl has a Rotational Assortment Strategy

Nothing lasts forever


Time

Sales

Assumes meet/exceed velocity hurdles

Time

Sales

Launch & investment

Rampup

Begin recoup investment

“Soft landing” exit

Traditional

Lidl

Item #1 Item #2 Item #3

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Private Label is Central to the Assortment


Private Label Architecture

PREMIUM

STANDARD

BUDGET

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Lidl Has Identified Critical Categories To Help Them Drive Traffic


Hero Categories

Wine

Produce

Meat & Fish

Bakery

HBC

F2G

Check-Out

Ethnic

Limited Offer

Core Offer

Total Offer

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Brands Have Five Distinct Roles in Lidl’s Stores


• Drive shopper/household penetration through helping to develop the discounters’ image as an acceptable place to shop.

1. Acceptance

• Leading brands help to convert discounter shoppers to purchase in the category. Drive penetration in existing categories or help launch new categories.

2. Conversion and Penetration

• Provide a basis for comparison to private label brands.

3. Comparison

• Using Brands to expanded categories help to build total basket size

4. Build Basket

• Time sensitive in and out promotions

5. Drive Frequency

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Lidl’s Disruptive Approach to Branded Pricing

Source: Kantar Retail analysis, mysupermarket.co.uk 17

Retailer Subtotal

Lidl Index

to

Retailer

Subtotal

Lidl Index

to

Retailer

Subtotal

Lidl Index

to

Retailer

SubtotalLidl Index

to RetailerAmount

Lidl Index

to Retailer

Lidl 6.38£ - 40.55£ - 25.55£ 18.31£ - 90.79£ -

Tesco 6.35£ 100 46.56£ 87 28.00£ 91 23.40£ 78 104.31£ 87

Asda 6.60£ 97 46.56£ 87 32.00£ 80 22.00£ 83 107.16£ 85

Baby Care Edible Household Personal Care TOTAL BASKET

Double digit

discounts at the

basket level….

…reinforced by deeper

more punctuated

discounts on KVIs

Index: Lidl to Asda – Personal Care Sub-basket

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Lidl’s Private Label Pricing is No Less Disruptive

Source: Kantar Retail analysis, mysupermarket.co.uk 18

Retailer SubtotalLidl Index

to RetailerSubtotal

Lidl Index

to RetailerSubtotal

Lidl Index

to RetailerAmount

Lidl Index

to Retailer

Lidl 3.27£ - 4.68£ - 8.92£ - 16.87£ -

Tesco 4.55£ 72 5.49£ 91 11.75£ 85 21.79£ 89

Asda 4.45£ 73 5.01£ 93 10.02£ 89 19.48£ 87

HBA NonedibleEdible TOTAL BASKET

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Lidl Leverages Brands to Make its Initial Price Impression


Branded Prices

Private Label Prices

Private Label Quality

Fresh Category Offering

TR

IP F

RE

QU

EN

CY

TIME (3-4 Years)

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Themes are Central to Lidl’s Promotional Efforts

Source: Kantar Retail analysis, company materials 20

Week 5

Week 10

Week 1

Week 6

Week 2

Week 7

Week 3

Week 8

Week 4

Week 9

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There’s More to Lidl’s Promotions Than Selling Ad Blocks

Source: Kantar Retail analysis, company materials 21

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This is a Small Supermarket

Source: Kantar Retail analysis; Kantar Retail Virtual Reality 22

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Stores Will be Modular and Reconfigurable

Source: Kantar Retail analysis; Kantar Retail Virtual Reality 23

Phase 1 Phase 1

Phase 2 Phase 2

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Lidl Is a Multi Dimensional Disruptor


Unconventional

Reconfigurable

Disruptive Innovative

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The Walmart Impact

2.

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How Will Walmart Compete with Lidl’s Proposition?

Putting supplier implications into focus


Broad assortment,

services

One-stop shop

Asymmetric

EDLP Solutions

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Product: Emphasizing the Consistent, Broad Assortment, and Quality

Source: Kantar Retail research and analysis 27

Supplier to-do:

• Highlight innovative and new products, and especially exclusive or unique

items that are not easily comparable

• Understand private label’s role in your merchandising ladder

• Link to differentiating services—especially pharmacy—whenever possible

‒ Broad cross-box assortment

‒ Highlighting quality, differentiated products,

exclusives (including private label)

‒ Elevating unique offers around fresh,

services

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Price: Selective, Careful Price Cuts, and a Focus on Private Label


Supplier to-do:

• Understand your items’ elasticity using analytics: how deep do price cuts need to go? How much (or

little) can your item sustain?

• Prioritize your items and what they offer: is there another item that would be better to price match?

• Determine how price gaps affect the full pricing ladder, including Walmart’s private labels.

‒ Selective cuts on key SKUs

‒ Elevation of private label value:

deep price cuts as well as

emphasis on quality

‒ Emphasis on elasticities across

merchandise ladders

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Promotion: Driving Solutions Across the Box


Supplier to-do:

• Continue emphasis on basket-building

• Look for new and unique occasions around which to craft solutions

and messaging—beyond the traditional seasons

‒ Point to benefits of broad

assortment

‒ Elevate the “Walmart Calendar” to

hone seasonal cross-

merchandising and theming

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Place: Elevating the One-Stop Shop and Convenience


Supplier to-do:

• Emphasize Walmart’s “hero” departments—baby, toy, entertainment,

pharmacy and health—and link them with consumables

• Drive conversion on Pickup and Online Grocery

• Keep close track of performance of stores in the new Lidl stores’ trading area

‒ Store enablement of flexibility and

convenience: Pickup, Online Grocery

Pickup

‒ Availability of extended aisle online

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Capitalize on Walmart’s Asymmetric Advantages vs. Lidl


Broad assortment,

services

One-stop shop

Asymmetric

EDLP Solutions

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32

Walmart & Sam’s Club

Workshop Nov 8-9, 2017, Bentonville, AR

Join Kantar Retail’s experts on Walmart, Sam’s

Club, and the Walmart shopper to learn how to

best align your plans.

Don’t Miss Out!

Mass/Club/Discounter

Retail Webinar Series

Enterprise wide with access to recordings

Next up:

Driving a Differentiated

Multichannel Experience at

Walmart

May 11, 2017

To register visit https://KRevents.cvent.com/ or email [email protected].

https://krevents.cvent.com/

https://krevents.cvent.com/

mailto:[email protected]

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For further information please refer to

www.kantarretailiq.com

Contact:

Laura Kennedy

T: +1 617 912 2851

[email protected]

@LauraWK_KR

www.kantarretail.com

33

Contact:

Mike Paglia

T: +1 617 912 2855

[email protected]

@KanRetMP

www.kantarretail.com

http://www.kantarretailiq.com/



http://www.kantarretail.com/



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