the twin disruptors: how aldi and lidl are poised to shake ... · the twin disruptors: how aldi and...

The Twin Disruptors:

How Aldi and Lidl are Poised to

Shake Up the US Retail

Landscape

PLMA 2017 Private Label Trade

Show

Mike Paglia, Director

14 November 2017

Kantar Retail © 2017

Agenda

2

Surveying the Macroeconomic Backdrop

Aldi and Lidl’s Five Pillars of Disruption

How Manufacturers Should Respond

Kantar Retail © 2017

A ‘Post-Recovery’ Macro Environment

Mixed indicators relative to pre-recession

3Source: U.S. Department of Labor, gasbuddy.com, Kantar Retail analysis

4.4%

10.0%

4.2%

$0

$40,000

$80,000

$120,000

2004 2008 2012 2016SS

Tailwinds

Benefiting Retail

Unemployment Rate

Household Net Worth

0.0%

2.0%

4.0%

6.0%

2003-2007 2010-2015 2016

Re

ce

ssio

n

Headwinds

Dampening Retail

Wage and Salary Growth

Uneven Regional Job Trends

0%

1%

2%

3%

4%

5%

2013 2014 2015 2016 2017

Renewed/Sustained

Challenges

Growth in Healthcare Costs

Gasoline Prices

Kantar Retail © 2017

The “Big Middle” Gets Smaller as Demographic, Economic, and Retail Trends Bifurcate

4Source: Kantar Retail

Middle income

suburban family

RETAIL FORMAT

Online

Small box,

limited assortment

consumables retailers

Big Box Mass

HOUSEHOLD

Empty nesters/

Retiring boomers

Millennial households

without children

Families

INCOME BIFURCATION

Have

Have Not

Middle Income

GEOGRAPHY

Big city/urban

Small city/Rural

New Suburbs

Kantar Retail © 2017

‘Shopper DNA’ Continues to Evolve

Demand for stress-free shopping and value essentially now equal

5Source: Kantar Retail ShopperScape®, April 2016-March 2017

65%

64%

60%

48%

44%

37%

27%

19%

16%

11%

11%

Minimizing spending

Feeling like I got a "good deal"

Stress-free shopping

Shopping in one place

Completing shopping quickly

Purchasing high-quality products

Having fun/enjoying myself

Employee interaction

Discovering new products/brands

Having acccess to info

Shopping to reflect my values

What Matters to Shoppers(% ranking factor among top four most important when shopping in general)

Engagement

Convenience

Value

Note: Arrows indicate direction of change vs. previous year.

Kantar Retail © 2017

How Will the Value Shopper Change Over Time?

6Source: Kantar Retail

Income Growth

5.5% 4.0%

Slower than prerecession

Core Goods

Spending

5.3% 3.3%Slower

Value Brands:

Private label, limited

assortment, single-price

point, large/small pack size,

versatility/utility

Fragmentation

Divides Shoppers’

Brand Choice

• Have/Have Not

• Big City/Small City

• Boomer/Millennial

• B&M/Online

Traditional

Brands

Premium Brands:

Unprocessed/natural,

exclusivity, authenticity,

solution oriented, reflects

personal affiliation & values

Almost three out of every

four dollars spent on

services, automobiles,

and gasoline by 2022

Kantar Retail © 2017

Agenda

7

Surveying the Macroeconomic Backdrop

Aldi and Lidl’s Five Pillars of Disruption

How Manufacturers Should Respond

Kantar Retail © 2017

Aldi and Lidl Are Growing at a Time that Maximizes Their Disruptive Potential

8Source: Kantar Retail

$14,477 $16,184

$17,913 $19,791

$21,770 $23,997

1,757

1,902 2,032

2,167

2,307

2,447

-

500

1,000

1,500

2,000

2,500

3,000

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

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

Sales Stores

US

D M

illio

ns

ALDI US

$122 $653

$2,493

$3,776

$5,415

$7,080

25

120

230

330

430

530

0

100

200

300

400

500

600

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

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

Sales Stores

LIDL US

US

D M

illio

ns

Kantar Retail © 2017

Both Retailers Are Riding Global Momentum

9Source: Kantar Retail

^Walmart ex. Sam’s Club

Rank RetailerRetail Sales in $US Billions

Sales Added

($US Billions)Sales CAGR

% of KR

Total Added

% of Global

Retail Growth

2012 2017E 2022E '12-'17E '17E-'22E '12-'17E '17E-'22E '12-'17E '17E-'22E

1 Walmart^ $ 397 $ 457 $ 507 $ 60 $ 50 2.8% 2.1% 3% 1%

2 Amazon.com $ 59 $ 155 $ 248 $ 96 $ 94 21.3% 9.9% 6% 2%

3 Schwarz Group $ 89 $ 138 $ 191 $ 49 $ 53 9.2% 6.7% 3% 1%

4 Costco $ 99 $ 126 $ 172 $ 27 $ 46 4.9% 6.4% 3% 1%

5 Carrefour $ 115 $ 123 $ 136 $ 8 $ 12 1.4% 1.9% 1% 0%

Top 5 Retailers $ 759 $ 999 $ 1,253 $ 240 $ 254 5.6% 4.6% 16% 4%

6 Kroger $ 92 $ 115 $ 142 $ 23 $ 27 4.6% 4.2% 2% 0%

7 Aldi $ 78 $ 111 $ 145 $ 33 $ 34 7.4% 5.5% 2% 1%

8 Seven & I $ 94 $ 101 $ 116 $ 7 $ 15 1.5% 2.9% 1% 0%

9 Home Depot $ 74 $ 99 $ 125 $ 25 $ 26 6.0% 4.7% 2% 0%

10 Walgreens Boots Alliance $ 70 $ 98 $ 125 $ 28 $ 27 7.1% 5.0% 2% 0%

Top 10 Retailers $ 1,166 $ 1,523 $ 1,907 $ 357 $ 384 5.5% 4.6% 24% 7%

All Other KR Chains $ 4,356 $ 5,202 $ 6,451 $ 845 $ 1,249 3.6% 4.4% 76% 22%

Total KR Chains $ 5,522 $ 6,725 $ 8,358 $ 1,202 $ 1,633 4.0% 4.4% 100% 28%

Global Formal Sales $ 16,381 $ 20,133 $ 25,941 $ 3,753 $ 5,808 4.2% 5.2% n/a 100%

Kantar Retail © 2017Source: Kantar Retail

Let’s Look Beyond the Buzz

What do Aldi’s and Lidl’s presence really mean?

Kantar Retail © 2017

Five Pillars of Disruption

11Source: Kantar Retail

Trip

Missions

Price

PointsFormats

Quality

ExpectationsAssortment

Kantar Retail © 2017Source: Kantar Retail

Blurring the Lines Between Formats

Lidl is one box that can “be” multiple formats

12

Frozen Foods Beer/Wine

Lidl surprises

Lidl surprises

Packaged Goods

Packaged Goods

Packaged Goods

Packaged Goods

Meat Meat Packaged Goods

Chilled Items

Dairy

Fro

ze

n F

oo

ds

Freezer Theme Weeks

Household

Household

Essentials

Household

Essentials

Household

Essentials

Checkout

Produce

Bakery

Flowers

Entrance

Kantar Retail © 2017Source: Kantar Retail

Blurring Lines Between Formats

Look how Aldi has elevated the discounter in-store experience

13

Kantar Retail © 2017Source: Kantar Retail

Format Takeaway:

14

On the One

Hand….

….But on the

Other Hand

Food Non food

Big box Small box

Supermarket Discounter

✓ “Hybrid” stores

✓ Defies classification

✓ Multiple behaviors and capabilities

✓ Historical channel/format taxonomy is

being challenged

Kantar Retail © 2017Source: Kantar Retail, company circular

Resetting Price Points

Core items, organics, and high quality general merchandise

15

Kantar Retail © 2017Source: Kantar Retail

Punctuated Discounting Impacts the Entire Box

16

-57%

-51%

-43%

-31%

-26%-23%

-21% -20% -19%

-14%-11% -10%

-4%-2%

0% 0%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Lidl Cheaper/Pricier By:

Lidl is less expensive than WMT

Lidl is more expensive than WMT

Kantar Retail © 2017Source: Kantar Retail

Pricing Takeaway:

Pricing becomes more than just a number

17

✓ Lowering pricing benchmarks

✓ Changing how pricing is

merchandised

✓ Reshaping shopper

expectations

✓ increased pressure on suppliers to lower

prices

✓ Even if you don’t sell to Lidl or Aldi, your

customers will be impacted

✓ Develop new ways to capitalize on

“stoppage” points

Kantar Retail © 2017Source: Kantar Retail

Elevating Quality Expectations

Private label stress tests the traditional value equation

18

Kantar Retail © 2017Source: Kantar Retail

Lidl and Aldi Extend the Private Label Value Equation

No tradeoffs

19

PRICE x xQUALITY CONVENIENCEFrozen Foods Beer/Wine

Lidl surprises

Lidl surprises

Packaged Goods

Packaged Goods

Packaged Goods

Packaged Goods

Meat Meat Packaged Goods

Chilled Items

Da

iry

Fro

ze

n F

oo

ds

Freezer Theme Weeks

Household

Household

Essentials

Household

Essentials

Household

Essentials

Checkout

Produce

Bakery

Flowers

Entrance36,000 sq ft

Kantar Retail © 2017Source: Kantar Retail

Quality Expectations Takeaway:

20

✓ Suppliers will have to meet elevated

expectations at the minimum

✓ Branded differentiation more

important than ever

✓ Invest in innovation

A small store (i.e. Lidl/Aldi) can now offer:

A curated, easy to shop assortment

AND

Low prices

AND

High quality products

Kantar Retail © 2017Source: Kantar Retail

Lidl and Aldi are Assortment Rotators

Nothing lasts forever

21

Time

Sales

Assumes item meets/exceedsvelocity hurdles

Time

Sales

Launchand investment

Ramp-up

Begin to recoup investment

“Soft landing” exit

Traditional

Lidl

Item #1 Item #2 Item #3

Kantar Retail © 2017Source: Kantar Retail

A Small Format Treasure Hunt

Creates excitement, generates repeat traffic

22

General merch

Private label

Urgency

Cross category

Kantar Retail © 2017Source: Kantar Retail

Assortment Takeaway:

The clock is ticking

23

Some long held truths being

challenged:

✓ You only have to sell the item

in once

✓ “Set it and forget it”

✓ Items have an indefinite

lifespan in the store

✓ Newness, surprise, and

discovery will matter more than

ever

✓ Applies to marketing, pricing,

promotion, even packaging

✓ Apply your rotational strategy

Kantar Retail © 2017Source: Kantar Retail, company circulars

Blurring Lines Between Trip Missions

Versatility drives value for shoppers

24

Fill in

Stock up

Kantar Retail © 2017Source: Kantar Retail

Lidl and Aldi Can Bridge Multiple Divides

25

TRIP TYPE

SH

OP

PE

R G

RO

UP

Kantar Retail © 2017Source: Kantar Retail

Trip Mission Takeaway:

Trip missions and formats will become decoupled

26

Aldi and Lidl can fulfill which trip mission?

A. Stock up

B. Fill in

C. Immediate consumption

D. Treasure hunt

E. Planned

F. Impulse

G. All of the above

Trip mission versatility will become a new

capability

Your items will have different roles…

…for different trip missions

…for different shoppers

…at different times

Link portfolio to new trip and shopper types

Kantar Retail © 2017

Five Pillars of Disruption

27Source: Kantar Retail

Trip

Missions

Price

PointsFormats

Quality

ExpectationsAssortment

Kantar Retail © 2017

Agenda

28

Surveying the Macroeconomic Backdrop

Aldi and Lidl’s Five Pillars of Disruption

How Manufacturers Should Respond

Kantar Retail © 2017

So, What Do Aldi and Lidl REALLY Mean for U.S. Retail?

Canaries in the coal mine?

29Source: Kantar Retail

“Multilingual”, multi-capable retailers Reshaping shopper expectations More innovation, agility, and

flexibility from suppliers

Kantar Retail © 2017

Supplier Action Items

For today and tomorrow

30Source: Kantar Retail

Trip Missions:

• Identify & classify

every item in your

portfolio

• Understand how the

role of your

category at either

retailer redefines

your competitive set

Quality

Expectations:

• Invest in

innovation

• Raise the bar

for branded

suppliers

Formats:

• What is your

playing field?

• Map your role in

the box

Price Points:

• Take price

reduction on

selected non-

core items that

Lidl doesn’t sell

• Reconsider

what the “right

price” is for your

item

Assortment:

• Create a sense of

newness,

excitement,

unexpected delight

around your items

• Treat Lidl and Aldi

like a small club

Kantar Retail © 2017 31

For further information please refer to

www.kantarretailiq.com

Contact:

Mike Paglia

Director

T: +1 (617) 912 2855

mike.paglia@kantarretail.com

@kantarretail

@KanRetMP

www.kantarretail.com

Kantar Retail © 2017

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