17/09/22: There's a new big 4 in town

What happened?

- Supermarket chain, Aldi, has joined Tesco, Sainsburys and Asda on the board as the top 4 supermarkets in the UK.

- They have overtaken Morrisons, which is now in 5th place.

Source: Timeout.com

Why have I chosen this story?

When I'm home, my main grocery shops tend to be at Iceland, Sainsburys and Tesco. When I'm at university, I tend to shop at Aldi, Asda, or the local corner shop. Sometimes I shop at Co-op, but I *try* to avoid them because some of their items are just overpriced in my opinion haha.

I've had a positive shopping experience at Aldi and the items I purchase are always good quality.

What I'm trying to say is that I've experienced shopping in a range of stores, and my total is always lower at Aldi and co, compared to Co-op or Tesco. As a student, I try my best to save money on this essential shop and if I can get some good quality food for less, then I'll go for it.

A little bit of extra information:

Before Aldi joined the top 4 club, Tesco, Sainsburys, Asda and Morrisons were enjoying their positions for a good while.

Aldi was founded in 1961, by the Albrecht Family in Germany. The first Aldi store was opened in Iowa in 1976, whilst the first UK store was opened in 1990 in Birmingham. Since the company has expanded across Europe. Aldi's net sales in 2021, was just under 134 billion US dollars.

Tesco has maintained its number one position for quite some time too. By 1995, it had become the largest food retailer in the UK. The type of stores they have introduced, which include Tesco Metro, Tesco Extra and Tesco Express may be a reason for their large market share in the UK supermarket.

According to research firm Kantar, compared to a year earlier, Aldi's sales rose by almost 18.7% in the 12 weeks to 4 September. This rise increased their market share to 9.3%. Morrisons' sales declined by 4.1% over the same time period, lowering its market share to 9.1%.

Source: Reuters.com

Possible factors:

- Rising food prices. As a result of the war in Ukraine, certain commodities, such as wheat/grain and fertilisers, have seen an increase in price. These price rises are being felt by consumers all over the world.

In the UK, it has meant that customers are now:

- Spending less on their grocery shopping

- Buying less food (due to the higher prices)

- Buying more store -owned items

- Shopping more at discounted stores, such as Aldi

As a result of this factor, and others which will be stated below, discounted stores have been benefitting from the increase in people coming through their doors.

Source: Trang Doan, Pexels.com

- Inflation. This closely links to my first point. In July 2022, inflation hit double digits of 10.1%. This was mainly driven by a rise in food and non-alcoholic drink prices. Even though inflation has fallen to 9.9% as of now, it is still at a 40-year high, and you can probably guess one of the reasons for this again-food. The price of cheese, milk and eggs have helped to push up food inflation to a 14-year high (these are popular items found in most households too). The Bank of England is expected to raise interest rates again in the future, in a bid to tackle high inflation.

All of these factors make up the cost-of living crisis the UK is currently in. Even with Truss' 2 year Energy Price Guarantee plan, many households budgets are still being squeezed, especially those who are less financially stable.

Source: eu.usatoday.com

- They are expanding. Aldi have a number of upcoming store openings, not just in the UK, but internationally as well. Take the US for example-they have opened 200 new stores in last 2 years and expect to open over 20 new stores before the end of 2022 alone. There's also an expectation that Aldi could become the third largest grocer store in the US by the end of 2023. In the UK, expansion has meant that they can further cater to those who want quality items, for a low budget, and the cost of living crisis has heightened the number of such people.

Source: Ketut Subiyanto, Pexels.com

Analysis (S.W.O.T):

S- After suffering during the 2020 pandemic, as a result of the lockdowns, this is good news for the supermarket chain. It means that they will also bring in more revenue and profit this year. At their current rate, Aldi could be adding more than a billion pounds of sales each year. Many of Aldi's rivals are also not expanding. With central banks expected to increase their interest rates, inflation still high in many countries, as well as disruptions as a result of the war in Ukraine, Aldi could be benefitting for a while.

W- Although Aldi is a discounted store, many chains, such as Sainsbury's and Tesco are 'price-matching' key items to Aldi. It means that customers may be drawn to Aldi's rivals for these staple items, and Aldi would have to think of even more ways to make them more appealing to customers.

Unlike many of its rivals, such as Asda or Morrisons, Aldi doesn't have a home delivery service. It means that Aldi's customers have to physically walk into the store to do their grocery shopping. It could give Aldi's rivals a competitive edge, as there has been a significant uptick in the amount of people who complete their grocery shopping online.

O- Even though Aldi don't have a home delivery service right now, it doesn't mean that they will not have one in the future. The extra revenue they are brining in, can be used as an opportunity to introduce their own home delivery service, which could be a blow to their competitors.

Source: Marketingweek.com

T- Aldi's market share in the UK stands at 9.3%. Asda stands at 14.1%, Sainsbury's stands at 14.6%, whilst Tesco takes the number 1 spot at 26.9%. Number 5 goes to Morrisons at 9.1%-not too far off from Aldi. If things go back to 'normal', and inflation (including food inflation) decrease, then consumer spending patters on groceries could shift once more- or they could stay. It all depends. Some customers may realise that they can still purchase quality food from a discounted store, like Aldi, and may make a more permanent move to stick with it. Others may be shopping at such discounted stores on a more temporary basis, and will go back to the store they are used to when they can.

Source: Skynews.com

My thoughts:

Even though the cost of living crisis is a major reason for this move up the board, I think it's time that discounted supermarket chains enjoy the spotlight. It goes to show that even if you do suffer a blip, various factors can turn this on its head, and you could benefit from this.

I think we'll be seeing this customer trend for a while, because no-body knows when things will end. The Ukraine war? Who knows. High inflation? We could be experiencing this for a while.

Although the likelihood that a discounted store, such as Aldi will reach the top spot (for now even?), it could be a sign that people aren't just shopping here because they have to, but because they want to as well.

Do you think Morrison's will make a roaring comeback? Will other discounted stores, such as Lidl, join the club? As always, I'd love to know your thoughts!

Until next time, stay curious!