Lidl goes USA
Schwarz Group boss Klaus Gehrig: "We will start in the USA, the timing is right"
If all goes to plan, its first 100 stores could be opened on the heavily-populated East Coast in 2015 as part of an estimated €500m initial investment.
A four-member team, headed by Ireland country manager Kenneth McGrath (37) and colleague Kevin Proctor (40), is already sounding the market. It is also searching for suitable store, DC, and head-office sites.
Clearly Lidl is looking for a strategic alternative to Europe, where it has businesses in 25 countries outside Germany but doesn’t see major growth potential.
The no-frills retailer’s expansion plans on the continent are relatively modest. Only entries into Serbia and Lithuania, two relatively small countries, are still on the books for next year.
Aldi USA in turbo drive
Presumably, the euro crisis will have played a role in the discounter’s decision to swim the Pond although France, Spain and Italy, which have been hard hit in the recession, generate particularly good revenues for the company.
Doubtless the steady growth of Aldi in the USA since 1976 (cf. interactive chart below) will also have influenced Lidl's expansion plans. In fact, the arch-rival's 1,250 hard discount viz. limited assortment grocery stores in the US have gone into overdrive since the beginning of the financial crisis with double-digit annual sales increases.
Lidl already makes more than two-thirds of its net revenues outside its mature German home market and is keen to internationalise its value channel concept further.
Top management has also been exploring chances in Russia, Turkey, Brazil and Asia, but clearly prefers the US as a business destination for reasons of legal security and political stability.
This isn’t the first time that the multiple has eyed North America. It took a serious look at the States six years ago, and there was talk of entry for 2012. But Klaus Gehrig, CEO of parent company Schwarz Group, called these off at the time as he felt that Lidl still needed to consolidate its position in Europe.
With plans to push through the €70bn-annual-revenues-mark this year, Schwarz Group obviously now feels strong enough to take the plunge. After years of rapid expansion, followed by a phase of consolidation, there are apparently no major loss-making countries in its international portfolio anymore.
The retail giant wants to complete all larger investment projects, including a store modernisation programme in northern Germany, before the start in America.
Thus, it will not be necessary to increase current annual capex of €3bn. The group feels that it is strong enough even to take three-digit million losses, if necessary, during the initial investment phase.
Big Boy in Germany
Neckarsulm-based Schwarz-Gruppe, which includes a manufacturing division, posted revenues of €67.6bn for 2012/13 making it Germany's largest retailer.
The group has two retail arms. The larger one runs 9,850 “Lidl” hard discount stores in Europe with net revenues of €48.9bn as per the business year to the end of February 2013. A third of these (3,300) are situated in Germany, where annual revenues are €15.8bn, or an estimated €4.8m per outlet.
Lidl’s discount superstore sister operates 1,100 “Kaufland” branches in Europe with revenues of €18.7bn. Over half of these (630) are in Germany where the company made €12.5bn, or an estimated €20m per store.
According to TradeDimensions, Schwarz-Gruppe ranks number four in German food retailing after Edeka Group, Rewe Group and Metro Group. With an estimated market share of 12.7 per cent it has pushed rival Aldi firmly into fifth place (10.9 per cent) -- surely no mean achievement by anyone’s standards.
Like the Roman empire, Schwarz Group wasn’t built in a day. But give the Swabians time and, clearly, anything is possible.
Related article in German: Lebensmittel Zeitung, no. 24, 14.06.2013 by Jan Mende, Christiane Ronke & Angela Wisken
Readers are recommended to view an interactive map, compiled by LZnet editor Marco Kitzmann, showing the store networks of Aldi South (hard discount stores) and Aldi North (Trader Joe's) in the USA
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