February 16, 2017

Lidl plans first US store in Virginia this summer

Kickstarter in the US (photo: Dean Drobot/Shutterstock)
Kickstart: Will Lidl speed growth in the US with an acquisition?
It is doubtful whether Donald Trump knows Lidl, and it is unlikely that Melania or Ivanka will ever go shopping in one of its no-frills stores. But, if the US president-in-tweet really means what he says about American jobs and putting more spending money in the pocket of the Average Joe, then he should be one of the very first to welcome the German discounter.

We now know that Lidl will enter the US this summer, at least six months ahead of schedule. Twenty stores are planned for Virginia, North Carolina and South Carolina in a first wave and up to 100 outlets across the East Coast by mid-2018. This will create around 4,000 new jobs over the same period.

That's quite a bold start, but it took arch-rival Aldi 40 years to become even America's 20th-largest retailer. So, if Lidl doesn't want to wait most of this century before it joins the US big league, could the company go an a buying spree?

Lidl's first US store in Fredericksburg/Virginia (photo: Lidl)
Made in Germany: Lidl's first US store in Fredericksburg/Virginia
At first blush, Lidl seems to be banking on organic growth and has developed a new store concept for the US. The format is still under wraps, but will be unveiled soon in Fredericksburg/Virginia. With shopping space of about 21,000ft² (1,950m²), this is around a third bigger than the company's largest stores in Europe.

Looking like a car showroom with lots of glass and a little bit of brickwork, we shall soon see whether this "tweener" concept – larger than Aldi, but smaller than a supermarket − is capable of seducing the US consumer in his or her increasing desire for a convenient food shopping trip.

So far so good, but it is hard to see Lidl matching the 2,000 stores Aldi wants to have by 2020. So could the Schwarz Group subsidiary hit the acquisitions trail, despite the current strength of the dollar vis-à-vis the euro? There are certainly countless small-sized chains in the US that could be targeted. But it is hard to imagine that Lidl would gain from buying regional companies of only 30 or 40 stores.

There are a lot of other possibilities, though. Kmart is falling apart and has many locations, but runs much larger stores. Food Lion is about the right-size box and also has almost the same state profile in the Southeast of the US. However, it is very unlikely that partner Ahold would let it go after harping on so much about the synergies of last year's merger.

"Better late than never" sign (photo: creative soul -- fotolia)
Atlantic crossing: Lidl will finally come to America this summer – 41 years after Aldi
Another candidate could be The Fresh Market which runs stores of about 20,000ft² and which is based in North Carolina where Lidl is expanding. The question is whether its new private equity owners will not want to refresh, renew and reposition the concept first in order to realise a higher price later when they exit.

So the most likely move would probably be in the discount arena itself. Former Supervalu division Save-A-Lot has a very similar format, which is not done nearly as well. It is hard to know how the Family Dollar-Dollar Tree merger is proceeding, but there are few signs of progress some 18 months down the road.

With estimated annual sales in the US and Canada of around $12bn, Dollar Tree, Inc would make Lidl a middleweight in the US food retailing industry and nearly as large as Aldi, Inc.

Given Lidl's tight-lipped approach to life, we are not likely to hear in advance any strategic move the retailer is going to make on its 28th international market. But Lidl could surprise us all yet and make what the Donald calls "a beautiful deal".


Related article: "Lidl startet bereits im Sommer in den USA" by Mike Dawson & Hans Jürgen Schulz on page 6 of Lebensmittel Zeitung, no. 7, 17.02.2017


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