Could this be the Aldi killer? German discount chain Lidl prepares to open in Australia

COLES and Woolies, watch out. It’s the discount chain which just beat Aldi to be named Britain’s best supermarket, and now it’s headed down under.

IT’S the discount chain which just beat Aldi to be named Britain’s best supermarket, and now it’s headed down under.

Coles and Woolworths are set to face even greater competition as German grocery store Lidl lays the ground to enter the local market, The Australian reports.

Lidl, ranked by Deloitte as the fourth-largest retailer in the world with $128 billion in annual sales, has reportedly been in discussions with logistics providers and has applied for a wide range of home brand trade marks.

According to The Australian, Lidl is seeking to protect its name and distinctive blue, red and yellow logo for a range of goods and services including food, coffee, alcohol, furniture, utensils and cleaning equipment.

Consumer group Choice has welcomed the entry of another discount chain to take the fight to Coles and Woolworths. Choice’s recent supermarket basket survey found consumers could cut their grocery bills in half by shopping at Aldi.

Lidl is seen as the chief competitor to discount chain Aldi, which came to Australia in 2001 and now holds nearly 11 per cent market share on the east coast, with 370 stores across the country.

“It is good news for consumers that Lidl is planning to enter Australia. On the back of Aldi’s rapid rise, Lidl’s future looks bright down under as consumers seek out more affordable groceries,” said Choice spokesman Tom Godfrey.

“With our latest consumer pulse report finding 75 per cent of Aussies are concerned about food and grocery prices, this latest news will be welcomed by consumers struggling to make ends meet.”

In a note to investors last June, UBS retail analysts Ben Gilbert and Craig Stafford singled out the German discounter as one potential threat to Aldi in Australia.

“Lidl has done a very good job of taking a similar model and refined it to include a mix of private label and loved branded product in (often) more appealing store environments,” they wrote.

“They run similar economics and are proving to be Aldi’s biggest global threat.”

Lidl follows a similar no-frills model as rival discounter Aldi.

Good news for consumers, bad news for the big supermarkets.

Lidl has just been named Britain’s best supermarket for the first time.

Mr Godfrey said for years shoppers had been bombarded by Coles and Woolworths jingles about how cheap their prices are, but with Lidl set to join Aldi, the prices at the big two “might actually start to go down down”.

“We welcome the prospect of Aldi and Lidl taking the price fight up to Coles and Woolworths. The big supermarket’s loyalty programs might not look so flash when the German juggernaut comes to town.”

Last year, a report by Morgan Stanley argued Aldi had reached “critical mass” in Australia, or the point at which private label scale is achieved.

The entry of another “hard discounter” into the $90 billion Australian supermarket industry is likely to put further pressure on the margins of Coles, Woolworths and Metcash, which face high fixed costs compared with the Aldi and Lidl models.

Commonwealth Bank analyst Andrew McLennan told The Australian the two European discounters could together claim as much as 20 per cent market share.

Yesterday, Lidl was named Grocer of the Year for the first time in its 21-year history at the prestigious Grocer’s Gold Awards in London, stealing the title from Aldi.

“More and more people are coming to Lidl for their full supermarket shop, with old preconceptions continuing to change all the time,” Lidl UK boss Ronny Gottschlich told The Mirror.

“We are committed to investing in our own brand ranges so that we can offer our customers premium products and ingredients at the lowest possible prices, helping them to shop a little smarter and save as much money as possible, every single day.”