Enter Lidl
We may sound like a broken record, but according to The Australian, Lidl has applied for a portfolio of trademark classes across thousands of supermarket products in Australia. The threat to your local supermarket may advance quicker than expected.
Like Aldi, Lidl is a German discount supermarket that drives efficiencies to lower product prices. The two companies have literally changed the supermarket landscape in Europe, decimating the margins of incumbents by driving price-based competition.
With over ten thousand stores in Europe, Lidl is running out of opportunities in its local markets and seems poised to follow Aldi’s lead into Australia.
Despite Aldi’s first mover advantage, there remains plenty of room for Lidl to compete, given the premium prices of Woolworths (ASX: WOW) and Coles (ASX: WES) and the large market share of IGA, which is sourced by Metcash (ASX: MTS).
After decades of intense competition in Europe, Aldi and Lidl are very adept at competing in the same market. We expect to see Aldi’s already low prices fall even further in response.
This isn’t going to happen overnight, but as value investors we must take a long-term perspective, and the investment case against Woolworths, Coles and IGA continues to strengthen.
Ben MacNevin is an Analyst with Montgomery Investment Management. To invest with Montgomery, find out more.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
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John Boardman
:
It is likely that consumers are shareholders in Woolworths and Coles through their superannuation, but would prefer to damage the value of their superannuation and send the Australian grocery industry profits offshore to a privately owned company in Germany (rather than to an Australian Company where the profits are paid out to the consumers superannuation fund).
Carlos Cobelas
:
Calin-Lupulescu,
part of that may be because of our low unemployment rate, and Australian wages are much higher than most of the world ,and we have a country which hasn’t had a recession since 1991, whereas many European countries have 30% unemployment ( my parents are Spanish ), deep recessions, and on the verge of bankruptcy. I know where I’d rather live, even if it means we have to pay more for groceries !
calin-lupulescu
:
Let them come… Anyway prices at Wollies and Coles are ridiculously expensive compared with Europe..