UK Shoppers and the Discounters. What Do They Really Think?

UK Shoppers and the Discounters. What do they really think?

September 2014

For more detail and analysis contact Roger Jackson, Global Vice President, Shopper Research: [email protected] Methodology

This study was carried out among the 80,000 + shoppers taking part in the 2014 UK Shopper iQ post shop measurement program, using a post shop on line survey

Were regular Were asked their Had bought a supermarket percepons about speciﬁc category shoppers Lidl and Aldi

So our focus is on what Were purchasers of one of Recruited on the basis of having shoppers in the shopped in Tesco, Asda, 140+ speciﬁc supermarket “mainstream Sainsbury, Morrisons or categories on their last supermarkets” think of the Waitrose in the last few days shop Discounters

32,000 shoppers took part in this study between March and July 2014

1. The discounters have achieved a very high level of trial with 14% of the top four supermarket's shoppers duplicang regularly for a limited range. 72% of all shoppers responding use at least one of the Discounters nowadays (rising to 76% for Morrisons shoppers) 2. Price is the leading driver for trial, mainly in fresh fruit, vegetables, milk, bread and other commodies, but other factors such as connental specialies, locaonal convenience and one-off bargain offers contribute specific addional appeal.

3. Repeat buying is high with the majority of categories approaching 90%. Most shoppers expect to increase their shopping within the discounters in the future.

4. Quality within the discounters is considered to be high with over two thirds of shoppers believing it to be at least as high, or higher than in their primary supermarket.

5. The limited range carried by the discounters forces the majority of shopper back into their main supermarket on a regular basis so there is a frequent opportunity to win back lost custom. However, only Asda shoppers believe that even on promoon prices come near to those in the discounter.

6. The most 'at risk' to the discounters are Asda's and Morrisons' shoppers, but Asda's promoons are liming the price diﬀerence. Tesco is not especially more vulnerable to the discounters than Sainsbury for shopper reasons, so to aribute their current market share challenges solely to the discounters is an over simpliﬁcaon.

7. Although Aldi and Lidl are similar in many ways, they have slightly differing appeal with Aldi being more sharply focused on price and Lidl appealing through the theatre of occasional connental speciales and fast revolving one-off offers of quality household and DIY goods. Lidl has a stronger upmarket shopper presence

8. The key baleground is led by the key commodity sectors of fresh fruit and vegetables, milk and bread. Fresh ﬁsh, toiletries and healthcare products are the discounters' weaker categories where there appears plenty of room for future growth. Shoppers are gradually discovering signiﬁcant savings in historically brand led categories.

Asda and Morrisons have the higher overlap, Sainsbury the lowest.

All buying in Both Aldi and Neither Aldi or n= Aldi only* Lidl only* Discounters at Lidl* Lidl* least rarely Total 32118 41% 17% 14% 28% 72% Tesco 9091 39% 17% 15% 30% 70% Sainsbury’s 8096 35% 15% 15% 34% 66% Asda 7891 45% 19% 12% 24% 76% Morrisons 7040 45% 18% 13% 24% 76%

Discounters are a familiar part of the UK retail landscape

* Shop at Aldi or Lidl regularly, occasionally or somemes

In general, Discounters appeal more to older shoppers but the proﬁle is remarkably even

n= Both Aldi and Lidl * Aldi only* Lidl only* Neither Aldi or Lidl*

18 to 34 6959 36% 19% 12% 33%

35 to 54 13281 41% 16% 14% 29%

55 plus 11750 43% 17% 15% 25% Upmarket 11902 41% 15% 14% 29% (ABC1) Down-market 17991 41% 19% 13% 27% (C2DE)

Lidl have a parcularly presence with more aﬄuent homes

Discounters are penetrang the enre shopper community in the UK

14% and 10% of shoppers regularly shop at each of Aldi and Lidl

Just under 30% of shoppers have yet to trial either of Aldi/Lidl

Shoppers of the "top 4" - overlap with Discounters

35%

29% 30% 28%

24% 25% 23% 22% 21% 20% 17% 14% 14% 15% 10% 10%

0% I shop there regularly I shop there I shop there but only I have shopped there I have never shopped occasionally rarely in the past but don't there shop there nowadays

Aldi Lidl

Discounters have considerable room for growth

Asda shoppers, closely followed by Morrisons’ see the greatest ‘parcipaon’ with Discounters Tesco and Sainsbury have less overlap, with Sainsbury marginally below Tesco Waitrose have signiﬁcantly lower overlap and a far higher level of “non trial” of Aldi

Frequency of Buying in Discounters Main supermarket buyers duplicang with Aldi

100%

90% I have never shopped there

80%

70% I have shopped there in the past but don't shop there nowadays 60%

50% I shop there but only rarely 40%

30% I shop there occasionally 20%

10% I shop there regularly 0% Main 4 Asda Morrisons Tesco Sainsburys Waitrose

Tesco are not especially vulnerable compared to Asda & Morrisons © Copyright Shopper iQ Shopper Proﬁle of Discounter Parcipaon

More women visit Discounters regularly Older shoppers likewise More likely to be family households

Aldi Shoppers - how oen do you visit Gender Age Household SINKS Young and Middle Mature Empty Total Male Female 18 - 34 35 - 54 55+ DINKS Family Families Nesters

n= 32118 13391 18727 6959 13281 11750 5065 7570 5645 13838 I shop there regularly 14% 13% 15% 14% 14% 15% 11% 16% 15% 14% I shop there occasionally 22% 21% 22% 20% 21% 23% 18% 22% 23% 23% I shop there but only rarely 22% 23% 21% 21% 22% 23% 22% 21% 23% 22% I have shopped there in the past 14% 14% 14% 18% 14% 11% 18% 14% 13% 12% but don't shop there nowadays I have never shopped there 28% 29% 28% 27% 29% 28% 30% 26% 26% 29%

Mainstream supermarkets need to sasfy older, female, family shoppers beer as a priority

There is some modest evidence that less sasﬁed shoppers in the top 4 are more likely also to shop at Aldi.

Aldi Shoppers - how oen do you visit Top 4 Sasfacon Promoters Passives

n= 13799 18319 I shop there regularly 13% 15% I shop there occasionally 22% 21% I shop there but only rarely 23% 22% I have shopped there in the past but don't shop there nowadays 14% 13% I have never shopped there 27% 29%

Is dissasfacon with their regular shop part of the problem?

Waitrose shoppers are less likely to stay with Discount shopping, Morrisons most likely Lidl “lapse” rates are higher than Aldi

Lapse Rates of Lidl / Aldi shopper By main supermarket shopped

24% Waitrose 27%

25% Sainsburys 22% Lidl 24% Tesco 21% Aldi

24% Asda 18%

21% Morrisons 17%

0% 5% 10% 15% 20% 25% 30%

Lapse rate = no longer shop/ever shopped

Discounters give Morrisons shoppers more of what they seek © Copyright Shopper iQ What is shoppers’ own view of the future for Discounters?

Few shoppers today see their use of Aldi declining Asda shoppers show most inclinaon to use them more

Do you expect to buy more or less of your shopping at a Discount store in the future? (Aldi Shoppers) Morrison Waitros Asda Tesco s Sainsburys e Buy a lot more 13% 12% 12% 11% 8% Buy a lile more 28% 27% 25% 26% 20% Buy the same as I do now 56% 59% 61% 61% 70% Buy a lile less -2% -1% -2% -2% 1% Buy a lot less 0% 0% -1% 0% 0% n= 2334 2089 1962 1631 322

Mainstream retailers are right to make this a high priority

Cheaper prices for basics are the key driver of the trip

Important reasons to choose Aldi

I can do my shop quickly there

Genuine connental specialies

Convenient to get to

One oﬀ bargains eg in household items, electonics, clothing

Cheaper prices on well known brands

Own branded products are good quality

Cheaper prices on own branded products

Cheaper for fresh basics like milk, bread,meat, fruit and veg

0% 10% 20% 30% 40% 50% 60% 70%

Most Important All Important

Discounter expansion of their Fresh oﬀer has been key to their growth in the UK

© Copyright Shopper iQ How does this diﬀer by diﬀerent retailer shoppers Tesco and Sainsbury shoppers value cheap fresh foods more, but less so for Asda and Waitrose Waitrose shoppers are parcularly impressed by Aldi own brand and the specialies/bargains

70% Main 4 Tesco Sainsburys Asda Morrisons Waitrose 60%

50%

40%

30%

20%

10%

0% Cheaper for Cheaper prices Own branded Cheaper prices One oﬀ bargains Convenient to Genuine I can do my shop fresh basics like on own branded products are on well known eg in household get to connental quickly there milk, products good quality brands items, specialies bread,meat, fruit electonics, and veg clothing

Asda appear to be holding back the appeal of discounters in Fresh

Quality is a strong driver as well as price Key negave is choice but shoppers feel its worth an extra trip – despite needing sll to do a shop at their usual supermarket Simplicity of shop at a discounter is not a key aribute

Their quality is comparable with the best brands despite having lower prices in Agreement rangs general I go there to get good prices on basics but sll need to do a shop at a normal 66% supermarket 59% Its worth an extra trip there to save the money 58% I somemes buy their interesng limited availability bargains in non food Availability of genuine connental specialies make shopping there more 53% interesng 42% Its hard to do a full shop there because they don't have much choice on oﬀer 37% Its more convenient to get everything at a RETAILER 35% I am not tempted to buy things I don't need there 12% Its quicker to shop there because there is less choice, so its less confusing Prices there are similar to those in RETAILER if you take into account promoon 6% oﬀers and own labels -25% Its not very enjoyable or interesng to shop there -25% Their fresh food (eg bakery, meat, veg and fruit) are not parcularly good -38%

The shopper is not “lost” to the mainstream stores

Percepons Aldi: Net Agreements

Their fresh food (eg bakery, meat, veg and fruit) are not parcularly good Waitrose Morrisons Its not very enjoyable or interesng to shop there Asda Prices there are similar to those in RETAILER if you take into account Sainsburys promoon oﬀers and own labels Tesco Its quicker to shop there because there is less choice, so its less confusing

I am not tempted to buy things I don't need there

Its more convenient to get everything at a RETAILER

Its hard to do a full shop there because they don't have much choice on oﬀer Availability of genuine connental specialies make shopping there more interesng I somemes buy their interesng limited availability bargains in non food

Its worth an extra trip there to save the money I go there to get good prices on basics but sll need to do a shop at a normal supermarket Their quality is comparable with the best brands despite having lower prices in general -80% -60% -40% -20% 0% 20% 40% 60% 80% Disagree Agree

Asda have built insulaon to the price message © Copyright Shopper iQ Aldi and Lidl have slightly diﬀerent store images Lidl has somewhat more strength in specialies and bargains Aldi is a lile stronger on the core proposion of Price

Diﬀerence between Aldi & Lidl All Reasons (Main 4)

I can do my shop quickly there -2%

Genuine connental specialies 9%

Convenient to get to 1%

One oﬀ bargains eg in household items, electonics, 2% clothing

Cheaper prices on well known brands 2%

Own branded products are good quality -9%

Cheaper prices on own branded products -11%

Cheaper for fresh basics like milk, bread,meat, fruit and -6% veg

Advantage to Aldi Advantage to Lidl

Lidl’s connental offerings appeal to more upmarket shoppers? © Copyright Shopper iQ Top Category Parcipaon at Aldi Have you bought PRODUCT, specifically, at a discounter (Lidl/Aldi) in the last year or so? (Shoppers of the Main 4) 1 Fresh Vegetables 77% 2 Fresh Fruit 69% Aside from Impulse purchases 3 Sugar Confeconery 61% most categories showing highest 4 Confeconery 58% “ever bought” rangs at Aldi are 5 Cooked Meats 55% in fresh food, and wine 6 Produce 55% 7 Root Vegetables 54% 8 Crisps, Snacks & Nuts 54% 9 Wine 53% 10 Total Wine & Sparkling 52% 11 Green Vegetables 52% 12 Frozen Food 50% 13 Sweet biscuits 49% 14 Total Cooked Meat 48% 15 So Fruit 48% If wine, then what 16 Sparkling Wine 48% else? 17 Wrapped Bread 47% 18 Apples & Pears 46% 19 Milk 45% 20 Wrapped Bakery Snacks 44% © Copyright Shopper iQ Sample by category differs Lowest category parcipaon

Have you bought PRODUCT, speciﬁcally, at a discounter (Lidl/Aldi) in the last at Aldi year or so? (Shoppers of the Main 4)

1 Stomach Remedy 4% 2 Fish Counter Fish 4% Discounters have least 3 Cough Medicine 5% category strength in medicines 4 Childrens Medicine 5% and personal care 5 Shave Cream/Gel 5% 6 Hair Colouring & Styling 6% 7 Male Facial Moisturisers 7% 8 Total Shaving 7% 9 Suncare 9% 10 Decongestant 10% 11 Balm/post shaves 10% 12 Male Deodorants 10% 13 Allergy Treatments 10% 14 Baby Milk 10% Is this a growth 15 Cold & Flu Medicine 10% opportunity or are the 16 Mouthwash 11% barriers too high? 17 Longlife Desserts/Custards 11% 18 Condioner 11% 19 Toothpaste 11%

Now thinking again speciﬁcally about PRODUCT, which best describes your view of the discounters Lidl or Aldi to buy PRODUCT in parcular. If you have not bought it there recently then just give us your general impression. (Main 4) % agree similar or beer

1 Boled Water 77% 2 Fresh Vegetables 76% Aldi shoppers have a very posive 3 Milk 73% view of their own label in fresh, and 4 Chocolate Confeconery 72% 5 Sugar Confeconery 71% in categories like confeconery, 6 Sugar 70% salty snacks and cleaners 7 Potatoes 70% 8 Sweet biscuits 69% 9 Bananas 69% 10 Cooked Meats 68% 11 Fresh Fruit 68% 12 Frozen Food 68% 13 Crisps, Snacks & Nuts 67% 14 Root Vegetables 66% Flagship 15 Produce 66% categories like 16 Herbs & Spices 64% chocolate can 17 Cleaners 64% 18 Wrapped Bakery Snacks 64% act as “quality 19 Rice & Pasta 63% markers” 20 World Foods & Sauces 63%

Much A bit cheaper cheaper

1 Fresh Vegetables 15% 44% 2 Fresh Fruit 8% 58% 3 Frozen Food 10% 43% As well as fresh foods key high value 4 Cooked Meats 10% 46% categories are scoring signiﬁcant “wins” 5 Sugar Confeconery 8% 37% for savings eg spirits, moisturisers 6 Salads 7% 53% 7 Sweet biscuits 6% 38% 8 Wrapped Bakery Snacks 6% 46% 9 Boled Water 14% 37% 10 Frozen Vegetables 8% 45% 11 Crisps, Snacks & Nuts 8% 36% 12 Chilled Fruit Juice 5% 40% 13 Chocolate Confeconery 7% 36% 14 Packaged Cakes 6% 37% 15 Deli Counter Meat 6% 47% Like for like own 16 World Foods & Sauces 6% 40% label pricing is a 17 Baking & Ingredients 7% 39% key bale ground 18 Spirits 6% 39% 19 Female Facial moisturisers 10% 38% 20 Frozen Desserts 4% 37%

Categories shoppers say they will likely buy “a lot more of” at Aldi or Lidl in the future

Buy a lot more of 1 Salads 7% 2 Nappies 6% 3 Clear Skin Creams & Treatments 6% 4 Sugar Confeconery 6% 5 Washing up/Dishwash 6% 6 Wine 5% 7 Champagne 5% 8 Milk 5% 9 Total Wine & Sparkling 5% 10 Fresh Beef 5% 11 Tissues 5% 12 Total Fresh Vegetables 5% 13 Cooked Meats 5% 14 Boled Water 5% 15 Frozen Vegetarian Food 5% 16 Shampoo 4% 17 Fresh Fruit 4% Connued growth is 18 In store Baked Bread 4% likely without step 19 Sparkling Wine & Champagne 4% 20 Baby 4% change by the top 4

For more detail and analysis contact Roger Jackson, Global Vice President, Shopper Research: [email protected]

2014 UK Programme:

Objecve Rigorous Benchmarking

• 120+ categories every year • Covering the whole of the store • 150 shoppers per segment per retailer • Meaningful diﬀerences colour coded

• Tracking since 2011

100- 150 shoppers per 100- 150 shoppers per 100- 150 shoppers per 100- 150 shoppers per category/segment category/segment category/segment category/segment + +

Conducted on line Each shopper Each category measured shortly aer rates one category with idencal last shopping trip in just that retailer quesonnaire

Shoppers are invited to take part aer a very recent shopping trip in one of the included retailers. We measure the views of each retailer’s own shopper not percepons of diﬀerent retailers from a single shopper. This makes Shopper iQ a fair and robust measure of how well each category and retailer delivers shopper requirements.