Lidl and Aldi: How discounters 'decided to strike' as Tesco's 'real struggles' revealed

Today, Tesco is the UK’s largest food retailer and enjoys more than a 25 percent share of the market, with more than 6,800 stores in seven countries across Asia and Europe. Founded in 1919 by Jack Cohen, the group diversified in the Nineties, which saw Tesco reposition itself from a low-cost retailer to one that appeals to many social groups by offering a range of own-label selections, from ‘Tesco Value’ items to its ‘Tesco Finest’ range. Since then, German discounters Lidl and Aldi have soared in popularity among Britons, mainly spurred on from the financial crisis of 2008, and now the pair hold just shy of 14 percent of the market.

But Channel 5’s ‘Panic in the Aisles’ series revealed how the Big Four supermarket faced some turbulent times in its recent history.

Presenter Fiona Phillips said in May: “Throughout the 20th century, the company played a big role in feeding the nation, but was their success in danger of making Tesco’s managers complacent?

“Everything the company touched seemed to turn to gold.

“It had almost 32 percent of the British grocery market, it was opening stores overseas, it was expanding into new areas from gardening to clothes.

“There seemed to be a new store opening every week.”

Aldi and Lidl 'decided to strike' Tesco

Aldi and Lidl ‘decided to strike’ Tesco (Image: GETTY)

Jack Cohen founded Tesco in 1919

Jack Cohen founded Tesco in 1919 (Image: GETTY)

Former Tesco director John Longworth admitted: “They came to the conclusion that in order to succeed, all you really need to do was plant a big superstore on every roundabout of every ring road in Britain.”

Former Waitrose Managing Director, Mark Price, detailed the chain of events from his point of view.

He said: “I think what Tesco realised in terms of buying land was that the number one reason people choose one supermarket over another is they go to the one closest to them.

“For me at Waitrose, and for Sainsbury’s and everyone else, they set the benchmark.

“So Tesco would say ‘we can afford to pay this amount per square foot’ and we’d have to sit back and say ‘can we make that work based on our economic model?’

READ MORE: ‘Thought they could walk on water’ How Tesco’s profits were halved after serious setback

Tesco tried to crack the American market

Tesco tried to crack the American market (Image: CHANNEL 5)

“Quite often it was hard to do that, so Tesco was simply able to outbid people in a very straightforward way.”

Ms Philips then outlined how Tesco tried to “crack America”.

She said: “In the first decade of the 21st century, Tesco almost trebled the number of stores it had across Britain.

“It could often afford to pay more for land to build the stores, pricing others out of the market.

‘Tesco may have thought it could take on the world, but events were about to prove otherwise.

“For the first time since the days of Jack Cohen, the store would experience a serious setback.

Former Waitrose Managing Director, Mark Price

Former Waitrose Managing Director, Mark Price (Image: CHANNEL 5)

Marketing expert Mark Ritson

Marketing expert Mark Ritson (Image: CHANNEL 5)

“In 2007, Tesco launched a new chain of stores in the US, called ‘Fresh and Easy, complete with glossy TV ads.”

Marketing expert Mark Ritson claimed many in the industry thought Fresh and Easy was destined to fail.

He said: “If you want to look for Tesco’s Waterloo if you will, it’s almost certainly America.

“There was tremendous scepticism from analysts, from retail experts that anyone, even the great Tesco, could crack America.

“There were constant reports coming back that the concept wasn’t quite right, the numbers weren’t in the right place.

Tesco faced several issues in 2013

Tesco faced several issues in 2013 (Image: GETTY)

“I can’t remember a time when anyone ever thought Fresh and Easy was going to be a success.”

In 2013, Tesco announced it was pulling out of the US and the group’s pre-tax profits had halved.

Author Judi Bevan noted: “They thought they could walk on water, but they couldn’t and it cost them a lot of money.”

Ms Phillips revealed how the problems did not stop for Tesco and the German discounters knew it.

She added: “Worse was to come, it was at this moment that the German discounters decided to strike.

“Aldi and Lidl had been in the UK since the mid-Nineties, but they’d struggled to win over sceptical shoppers wary of the quality of cut-price food.

“To get the message across that buying discount didn’t mean missing out on quality, Lidl turned to TV advertising. 

“By 2013, it became clear that Tesco was having to fight battles on many fronts.”

In 2013, Tesco would see themselves involved in a horse meat scandal which affected several UK supermarkets.

Mr Ritson said the supermarket was being hit with problems from all angles.

He noted: “I think it’s fair to say, in this period, that all the distractions finally come home to roost.

“I think Tesco begins to really struggle to keep up and that’s why when the horsemeat scandal hit, it hits so much harder.”



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