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Food and Non-food Discounters - UK - September 2017

“Over the past 10 years the discount sector, both food and non-food, has shown that it is highly adaptable, succeeding to thrive in both market conditions which favoured a low-cost alternative and in conditions where traditionally there would have been less demand. With an uncertain economic outlook in the short term the sector is well placed to make further gains and capitalise on likely consumer desire to cut back on expenditure.”

Nick Carroll, Senior Retail Analyst

This report looks at the following areas:

  • What do Brexit and uncertainty mean for the discounters?
  • The move to multi-price in non-foods
  • Glass or concrete: What is the ceiling for the food discounters?

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Table of contents

  1. Overview

    • What you need to know
      • Areas covered in this Report
        • What is a discounter?
        • Executive Summary

            • The market
              • Discounter sector continues to grow strongly
                • Figure 1: All discounters’ sector size (Ex-VAT), 2012-22
              • Inflation on the rise
                • Figure 2: Consumer price inflation: overall index and key categories, January 2016-July 2017
              • Real incomes now falling
                • Figure 3: Real wages growth: Wage growth vs inflation, January 2012-August 2017
              • Companies and brands
                • Combined Aldi and Lidl account for over half of the overall discount market…
                  • Figure 4: Leading discounters’ estimated share of all discount sales, 2016
                • …and also over 10% of the grocery sector
                  • Figure 5: Grocery market share: The Big Four v the Food Discounters, 2010-16
                • The consumer
                  • Nine in 10 shop with a discounter
                    • Figure 6: Use of food and non-food discounters, by age, July 2017
                  • Poundland attracts the highest number of shoppers, but food discounters are most used
                    • Figure 7: Discounters used and used most often in the last three months, July 2017
                  • Food discounters straddle the line between convenience and supermarkets
                    • Figure 8: Food missions completed within food discounters, July 2017
                  • Household non-foods the most popular purchase at discounters
                    • Figure 9: Non-food products purchased at discounters in the last three months, July 2017
                  • Satisfaction high amongst discount shoppers but there are areas to improve
                    • Figure 10: Key drivers of overall satisfaction with discount retailers, July 2017
                  • The move to multi-price is likely to be a positive for the fixed-price players
                    • Figure 11: Attitudes towards the discounter shopping experience, July 2017
                  • What we think
                  • Issues and Insights

                    • What do Brexit and uncertainty mean for the discounters?
                      • The facts
                        • The implications
                          • The move to multi-price in non-foods
                            • The facts
                              • The implications
                                • Glass or concrete: What is the ceiling for the food discounters?
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • Real incomes are now falling
                                        • Consumer confidence has taken a hit but remains broadly positive
                                          • Retail sales have remained positive in the first half
                                            • Growth remains strong but has been slowing in the discount sector
                                              • Food discounters the driver
                                                • Non-food discounters evolving
                                                • Market Drivers

                                                  • Inflation on the rise
                                                    • Figure 12: Consumer price inflation: overall index and key categories, January 2016-July 2017
                                                  • Real incomes now falling
                                                    • Figure 13: Real wages growth: Wage growth vs inflation, January 2012-August 2017
                                                  • Consumer confidence
                                                    • Figure 14: Consumers’ view on their current and future financial situation, January 2014-July 2017
                                                  • Value sales remain strong…
                                                    • Figure 15: Value retail sales (ex-fuel): food and non-food growth, non-seasonally adjusted, July 2016-June 2017
                                                  • …but in volume terms there are signs of consumers cutting back
                                                    • Figure 16: Volume retail sales (ex-fuel): food and non-food growth, non-seasonally adjusted, July 2016-June 2017
                                                • Market Size and Forecast

                                                  • Discount sector continues to grow strongly
                                                    • Figure 17: All discounters’ sector size (Ex-VAT), 2012-22
                                                    • Figure 18: All discounters’ sector size (Ex-VAT), detailed forecast at current and constant prices, 2012-22
                                                    • Figure 19: Discount sector size as a percentage of all retail sales (ex-fuel), 2008-17
                                                  • The food discounters segment
                                                    • Figure 20: Food discounters’ sector size (ex-VAT), 2012-22
                                                    • Figure 21: Food discounters’ sector size (ex-VAT), detailed forecast at current and constant prices, 2012-22
                                                  • The non-food discount segment
                                                    • Figure 22: Non-food discounters’ sector size (ex-VAT), 2012-22
                                                    • Figure 23: Non-food discounters’ sector size (ex-VAT), detailed forecast at current and constant prices, 2012-22
                                                  • Forecast methodology
                                                  • The Consumer – What You Need to Know

                                                    • Nine in 10 consumers have shopped at a discounter
                                                      • Poundland the most visited discounter
                                                        • Food discounters providing a viable alternative to convenience
                                                          • Household purchases popular within the discount sector
                                                            • Overall satisfaction high with the discount experience but there is room for improvement
                                                              • The move to multi-price
                                                                • New ranges keep the shopping experience fresh
                                                                  • Food discounters doing well in the premium stakes
                                                                  • Where They Shop

                                                                    • Poundland shows the highest number of shoppers
                                                                      • Figure 24: Discounters used and used most often in the last three months, July 2017
                                                                    • Discount use on the up
                                                                      • Figure 25: Discounters visited in the last three months, 2015-17
                                                                    • Food discounters are visited most frequently
                                                                      • Figure 26: Discounters visited in the last three months, by frequency of visitation, July 2017
                                                                    • Repertoire of discount stores visited
                                                                      • Figure 27: Repertoire of discount stores used in the past three months, July 2017
                                                                  • Demographics of Discount Use – Retailer Comparison

                                                                      • Discount use skews younger
                                                                        • Figure 28: Use of food and non-food discounters, by age, July 2017
                                                                      • Food discounter use peaks amongst high earners
                                                                        • Figure 29: Use of food and non-food discounters, by gross annual household income, July 2017
                                                                      • Discounter usage peaks in Scotland
                                                                        • Figure 30: Use of food and non-food discounters, by region, July 2017
                                                                      • Retailer comparisons: younger consumers clearly driving the market
                                                                        • Figure 31: Use of food discounters, by age, July 2017
                                                                        • Figure 32: Use of non-food discounters, by age, July 2017
                                                                    • Food Purchasing at Discounters

                                                                      • Discounters popular in traditional convenience categories
                                                                        • Figure 33: Food missions completed within food discounters, July 2017
                                                                        • Figure 34: Food missions completed within food discounters, by region, July 2017
                                                                      • Food purchasing within non-food discounters
                                                                        • Figure 35: Types of food and drink purchased at non-food discounters, July 2017
                                                                    • Non-food Purchasing at Discounters

                                                                      • Household products popular at discounters
                                                                          • Figure 36: Non-food products purchased at discounters in the last three months, July 2017
                                                                        • Older shoppers most likely to buy items for the home
                                                                          • Figure 37: Non-food products purchased at discounters in the last three months, by age, July 2017
                                                                        • Aldi shoppers buy more non-foods
                                                                          • Figure 38: Non-food products purchased at discounters in the last three months, by food discounter used most often, July 2017
                                                                          • Figure 39: Non-food products purchased at non-food discounters in the last three months, by food discounter used most often, July 2017
                                                                        • Repertoire of non-food products purchased
                                                                          • Figure 40: Repertoire of product categories purchased from in the last three months, July 2017
                                                                      • Satisfaction with Shopping at Discounters

                                                                        • Overall levels of satisfaction high with discounters
                                                                          • Figure 41: Satisfaction with factors at the discounter shopped with most often, July 2017
                                                                        • Key Driver Analysis: a greater focus on customer service needed?
                                                                          • Figure 42: Key drivers of overall satisfaction with discount retailers, July 2017
                                                                          • Figure 43: Correlation (R) values with overall satisfaction key driver output, July 2017
                                                                        • Retailer comparisons
                                                                            • Figure 44: Level of positive satisfaction with factors, by type of discounter shopped at most often, July 2017
                                                                            • Figure 45: Level of positive satisfaction with factors, by type of discounter shopped at most often, July 2017
                                                                          • Methodology
                                                                          • Attitudes towards Discounters

                                                                            • Fluid product offerings lead to fresh experiences
                                                                              • Figure 46: Attitudes towards the discounter shopping experience, July 2017
                                                                            • It is not just cheap and cheerful
                                                                              • Figure 47: Attitudes towards quality, sourcing and pricing at discounters, July 2017
                                                                              • Figure 48: Attitudes towards quality, sourcing and pricing at discounters, by type of discounters shopped with most often, July 2017
                                                                            • Food discounters doing well in the premium stakes
                                                                              • Figure 49: Attitudes towards food discounters’ premium and healthy ranges, July 2017
                                                                            • More affluent consumers stronger in their demand for healthier options
                                                                              • Figure 50: Attitudes towards food discounters’ premium and healthy ranges, by socio-economic group, July 2017
                                                                          • Leading Retailers – What You Need to Know

                                                                            • Aldi and Lidl take fifth and seventh spot within the grocery sector
                                                                              • B&M the non-food leader but is looking to expand into food
                                                                                • The move to multi-price
                                                                                  • Food discounters score more highly on brand trust
                                                                                  • Leading Players – Key Metrics

                                                                                    • Revenues
                                                                                      • Figure 51: Leading discounters’ sales, 2012/13-2016/17
                                                                                    • Operating profits and margins
                                                                                      • Figure 52: Leading discounters’ operating profits, 2012/13-2016/17
                                                                                      • Figure 53: Leading discounters’ operating margins, 2012/13-2016/17
                                                                                    • Stores and sales per outlet
                                                                                        • Figure 54: Leading discounters’ outlet numbers, 2012/13-2016/17
                                                                                        • Figure 55: Leading discounters’ sales per outlet, 2012/13-2016/17
                                                                                    • Market Shares

                                                                                      • Food discounters account for half of the market
                                                                                        • Figure 56: Leading discounters’ estimated share of all discount sales, 2016
                                                                                        • Figure 57: Leading 10 discounters’ share of all discount sales, 2012-16
                                                                                      • Aldi and Lidl now account for over 10% of all grocery sales
                                                                                        • Figure 58: Estimated share of all grocery retail sales (ex-VAT, ex-fuel) by the leading players, 2016
                                                                                        • Figure 59: Grocery market share: The Big Four v the Food Discounters, 2010-16
                                                                                      • Non-foods disrupting the mixed goods sector
                                                                                        • Figure 60: Non-food discounters’ share of all mixed goods retail sales, 2008-16
                                                                                      • Savers in the health and beauty space
                                                                                        • Figure 61: Savers: Market share of the specialist health and beauty sector (ex-VAT), 2011-16
                                                                                    • Space Allocation Summary

                                                                                        • Food discounters – Summary
                                                                                          • Figure 62: Food discounters: Summary shelf frontage space allocation estimates, September 2017
                                                                                        • Food discounters - Detailed space allocation
                                                                                          • Figure 63: Food discounters: Detailed shelf frontage space allocation estimates, September 2017
                                                                                        • Multi-price non-food discounters – Summary
                                                                                          • Figure 64: Multi-price non-food discounters: Summary shelf frontage space allocation estimates, September 2017
                                                                                        • Multi-price non-food discounters – Detailed space allocation
                                                                                          • Figure 65: Multi-price non-food discounters: Detailed shelf frontage space allocation estimates, September 2017
                                                                                        • Fixed-price non-food discounters – Summary
                                                                                          • Figure 66: Fixed-price non-food discounters: Summary shelf frontage space allocation estimates, September 2017
                                                                                        • Fixed-price non-food discounters – Detailed space allocation
                                                                                          • Figure 67: Fixed-price non-food discounters: Detailed shelf frontage space allocation estimates, September 2017
                                                                                      • Retail Product Mix

                                                                                          • Figure 68: Leading discounters: estimated sales by product, 2016
                                                                                          • Figure 69: Leading discounters estimated sales mix, 2016
                                                                                          • Figure 70: Leading discounters, estimated sales per square metre, 2016
                                                                                      • Innovations and Marketing Activity

                                                                                        • Aldi and Lidl look to online
                                                                                          • Lidl and Heidi Klum team up to launch affordable fashion line
                                                                                            • Poundland launches its first 50p sale
                                                                                              • Poundland ramps up Pep & Co concessions
                                                                                                • Poundworld shelves selling products costing more than £1
                                                                                                • Advertising and Marketing Activity

                                                                                                  • Total advertising spend by the sector’s leading retailers down by nearly 60%
                                                                                                    • Figure 71: Recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, 2012-17
                                                                                                  • Lidl and Aldi accounted for 88.6% of total sector adspend in 2015
                                                                                                    • Advertising spend peaks around Easter and in the run-up to Christmas
                                                                                                      • Figure 72: Recorded above-the-line, online display and direct mail total advertising expenditure by leading discounter, by month, 2016
                                                                                                    • TV accounts for the majority of adspend among discounters
                                                                                                      • Figure 73: Recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, by media type, 2012-17
                                                                                                    • Nielsen Ad Intel coverage
                                                                                                    • Brand Research

                                                                                                        • Overview
                                                                                                          • Brand map
                                                                                                            • Figure 74: Attitudes towards and usage of selected brands, July 2017
                                                                                                          • Key brand metrics
                                                                                                            • Figure 75: Key metrics for selected brands, July 2017
                                                                                                          • Brand attitudes: Aldi and Lidl most likely to be seen as socially responsible
                                                                                                            • Figure 76: Attitudes, by brand, July 2017
                                                                                                          • Brand personality: Poundland lagging behind in the fun stakes
                                                                                                            • Figure 77: Brand personality – Macro image, July 2017
                                                                                                          • Aldi most likely to be seen as the trendsetter in the discount space
                                                                                                            • Figure 78: Brand personality – Micro image, July 2017
                                                                                                          • Brand analysis
                                                                                                            • Aldi: functional but fun
                                                                                                              • Figure 79: User profile of Aldi, July 2017
                                                                                                            • Home Bargains: lower awareness but excelling in experience
                                                                                                              • Figure 80: User profile of Home Bargains, July 2017
                                                                                                            • Lidl: lagging behind its food discount rival
                                                                                                              • Figure 81: User profile of Lidl, July 2017
                                                                                                            • B&M: struggling to connect with younger consumers?
                                                                                                              • Figure 82: User profile of B&M, July 2017
                                                                                                            • Poundland: seen as widely available but basic
                                                                                                              • Figure 83: User profile of Poundland, July 2017
                                                                                                          • Aldi Stores Ltd

                                                                                                              • What we think
                                                                                                                • Built in poor economic times, consolidated in better ones
                                                                                                                  • The softening of the hard edges
                                                                                                                    • Straddling the lines
                                                                                                                      • Background
                                                                                                                        • Company performance
                                                                                                                          • Figure 84: Aldi Stores Ltd (UK & Ireland): Group financial performance, 2011-16
                                                                                                                          • Figure 85: Aldi Stores Ltd (UK & Ireland): Outlet data, 2011-16
                                                                                                                        • Retail offering
                                                                                                                        • Lidl (UK)

                                                                                                                            • What we think
                                                                                                                              • Background
                                                                                                                                • Company performance
                                                                                                                                  • Figure 86: Lidl (UK): Estimated group financial performance, 2011/12-2016/17
                                                                                                                                  • Figure 87: Lidl (UK): Outlet data, 2011/12-2015/16
                                                                                                                                • Retail offering
                                                                                                                                • B&M Retail Ltd

                                                                                                                                    • What we think
                                                                                                                                      • Background
                                                                                                                                        • Company performance
                                                                                                                                          • Figure 88: B&M Retail Ltd: Group financial performance, 2011/12-2016/17
                                                                                                                                          • Figure 89: B&M Retail Ltd: Outlet data, 2011/12-2016/17
                                                                                                                                        • Retail offering
                                                                                                                                        • TJ Morris Ltd (Home Bargains)

                                                                                                                                            • What we think
                                                                                                                                              • Background
                                                                                                                                                • Company performance
                                                                                                                                                  • Figure 90: TJ Morris Ltd: Group financial performance, 2012/13-2016/17
                                                                                                                                                  • Figure 91: TJ Morris Ltd: Outlet data, 2012/13-2016/17
                                                                                                                                                • Retail offering
                                                                                                                                                • Poundland

                                                                                                                                                    • What we think
                                                                                                                                                      • Background
                                                                                                                                                        • Company performance
                                                                                                                                                          • Figure 92: Poundland Ltd: Group financial performance, 2012/13-2016/17
                                                                                                                                                          • Figure 93: Poundland Ltd: Outlet data, 2012/13-2016/17
                                                                                                                                                        • Retail offering
                                                                                                                                                        • Poundstretcher Ltd

                                                                                                                                                            • What we think
                                                                                                                                                              • Background
                                                                                                                                                                • Company performance
                                                                                                                                                                  • Figure 94: Poundstretcher: Group financial performance, 2011/12-2015/16
                                                                                                                                                                  • Figure 95: Poundstretcher: Outlet data, 2011/12-2015/16
                                                                                                                                                                • Retail offering
                                                                                                                                                                • Poundworld Retail Ltd

                                                                                                                                                                    • What we think
                                                                                                                                                                      • Background
                                                                                                                                                                        • Company performance
                                                                                                                                                                          • Figure 96: Poundworld Retail Ltd: Group financial performance, 2011/12-2015/16
                                                                                                                                                                          • Figure 97: Poundworld Retail Ltd: Outlet data, 2011/12-2015/16
                                                                                                                                                                        • Retail offering
                                                                                                                                                                        • Wilko Retail Ltd

                                                                                                                                                                            • What we think
                                                                                                                                                                              • Background
                                                                                                                                                                                • Company performance
                                                                                                                                                                                  • Figure 98: Wilko: Group financial performance, 2012/13-2016/17
                                                                                                                                                                                  • Figure 99: Wilko: Outlet data, 2012/13-2016/17
                                                                                                                                                                                • Retail offering
                                                                                                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                  • Data sources
                                                                                                                                                                                    • Consumer research methodology
                                                                                                                                                                                      • VAT
                                                                                                                                                                                        • Financial definitions
                                                                                                                                                                                          • Abbreviations
                                                                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                                                                            • Forecast methodology
                                                                                                                                                                                            • Appendix – Key Driver Analysis

                                                                                                                                                                                                • Interpretation of results
                                                                                                                                                                                                  • Figure 100: Correlation (R) values with overall satisfaction – Key driver output, July 2017
                                                                                                                                                                                                  • Figure 101: Satisfaction with discount retailers, July 2017

                                                                                                                                                                                              Food and Non-food Discounters - UK - September 2017

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