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Food and Non-food Discounters - UK - September 2019

“The discount sector continues to enjoy positive growth and the main players across both food and non-food discounting continue to build their store estates through organic openings. Aldi and Lidl are increasingly blurring the lines between discount and convenience in the UK. The non-food discounters, however, are making fewer strides to adapt to the modern consumer. While they remain popular retailers and see good usage numbers, they are not immune to falling behind in the long term.”

– Priya Chandarana, Senior Research Analyst

This report examines the following issues:

  • Food discounters are becoming increasingly convenient
  • How can non-food discounters ensure that they remain relevant?

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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
              • Discount retail sector growth slows down
                • Figure 1: All discounters’ sector size (ex-VAT), 2014-24
              • Food discounters account for 14% of the grocery market
                • Companies and brands
                  • Market leader Aldi delivers £11.3 billion in latest sales
                    • Figure 2: Leading discounters’ estimated share of all discount sales, 2018
                  • Aldi leads as favourite brand
                    • Figure 3: Attitudes towards and usage of selected brands, July 2019
                  • The consumer
                    • Most of the nation are shopping at discounters
                      • Figure 4: Discounters shopped at within the last three months, June 2019
                    • Discounters appeal to shoppers of all ages
                      • Figure 5: Discount shoppers, by age, June 2019
                    • Number of discount shoppers shopping online grows to 34%
                      • Figure 6: Online shoppers at discounters, 2018 and 2019
                    • Fresh and chilled are key frequency drivers in food discounters
                      • Figure 7: Frequency of food purchasing at food discounters, June 2019
                    • Household and cleaning products most frequently shopped across non-food categories
                      • Figure 8: Non-food products purchased at discounters in the last three months, by frequency of purchase, June 2019
                    • Value for money is the top satisfaction factor amongst discount shoppers
                      • Figure 9: Levels of satisfaction among discount shoppers in the last three months, June 2019
                    • Over half of shoppers describe discounters as a unique and exciting shopping experience
                      • Figure 10: Attitudes towards drivers of use, June 2019
                    • What we think
                    • Issues and Insights

                      • Food discounters are becoming increasingly convenient
                        • The facts
                          • The implications
                            • How can non-food discounters ensure that they remain relevant?
                              • The facts
                                • The implications
                                • The Market – What You Need to Know

                                  • Inflation steady in 2019 as real incomes grow
                                    • Consumer confidence picks up
                                      • Discount retail sector growth slows down
                                        • Aldi and Lidl continue to drive the sector
                                          • Growth slows down in non-food discount sector
                                          • Market Drivers

                                            • Food and drink prices unsteady as overall inflation increases marginally in 2019
                                              • Figure 11: CPIH, monthly percentage change over 12 months, June 2018-June 2019
                                            • Real earnings on the rise
                                              • Figure 12: Real average weekly earnings (seasonally adjusted), single month % change year-on-year, January 2016-July 2019
                                            • Spending on food and drink behind overall spend in 2018
                                              • Figure 13: Growth in total and food and drink consumer spending, 2014-18
                                            • Consumer confidence on the up in first half of 2019
                                              • Figure 14: Consumer confidence tracker, January 2017-May 2019
                                            • Spend in food and non-food retail
                                              • Figure 15: Annual percentage change in all retail sales, food retailers and non-food retailers, non-seasonally adjusted value series, January 2017-July 2019
                                          • Market Size and Forecast

                                            • Discounter growth slows down
                                              • Figure 16: All discounters’ sector size (ex-VAT), 2014-24
                                              • Figure 17: Discount sector size as a percentage of all retail sales (ex-fuel, ex-VAT), 2014-19
                                              • Figure 18: All discounters’ sector size (ex-VAT), detailed forecast at current and constant prices, 2014-24
                                            • The food discount sector
                                              • Figure 19: Food discount sector size as a percentage of all retail sales (ex-fuel, ex-VAT), 2014-24
                                              • Figure 20: Food discount sector size (ex-VAT), detailed forecast at current and constant prices, 2014-24
                                            • The non-food discount sector
                                              • Figure 21: Non-food discount sector size as a percentage of all retail sales (ex-fuel, ex-VAT), 2014-24
                                              • Figure 22: Non-food discount sector size (ex-VAT), detailed forecast at current and constant prices, 2014-24
                                            • Forecast methodology
                                            • The Consumer – What You Need to Know

                                              • Aldi is the most visited discounter
                                                • Discounters are attracting younger consumers
                                                  • Over a third of discount shoppers shop online
                                                    • Top food discount categories shopped more than once a week by half of shoppers
                                                      • Non-food discounters increasingly used to shop electrical products and toys & games
                                                        • Discount shoppers least satisfied with product sourcing information
                                                          • Speed of shop and checkout options are areas of improvement
                                                          • Where They Shop

                                                            • A third are shopping at discounters more
                                                              • Figure 23: Discount shopping compared to the last 12 months, June 2019
                                                            • Aldi is the UK’s most popular discounter
                                                              • Figure 24: Discounters shopped at within the last three months, June 2019
                                                            • Food discounters see most frequent visitation
                                                              • Figure 25: Frequency of discounters visitation in the last three months, June 2019
                                                            • Heron Foods and Aldi shoppers visit respective stores most often
                                                              • Figure 26: Frequency of discounters visitation in the last three months, shoppers only rebase, June 2019
                                                            • Repertoire of stores visited
                                                              • Figure 27: Repertoire of discounters visited in the last three months, June 2019
                                                          • Retailer Demographic Comparison

                                                            • Discounters are used by all ages
                                                              • Figure 28: Discount shoppers, by age, June 2019
                                                            • Food discounters: most used by 25-34 year olds
                                                              • Figure 29: Food discounters usage in the past three months, by age, June 2019
                                                            • Food discounters: Aldi attracts all ages while Lidl has an older demographic
                                                              • Figure 30: Age profile of those who shopped with Aldi and Lidl most often, June 2018 and 2019
                                                            • Non-food discounters: attracting more high-income, value-seeking shoppers
                                                              • Figure 31: Non-food discounters usage in the past three months, by household income, June 2019
                                                            • Non-food discounters: increasing number of Londoners visiting these stores
                                                              • Figure 32: Non-food discounter usage in the past three months, by region, June 2019
                                                          • Discounters and Online

                                                            • Aldi is the most used discounter online
                                                              • Figure 33: Online shoppers at discounters, 2018 and 2019
                                                            • Almost a third of frequent Aldi shoppers do so online
                                                              • Figure 34: Discounters shopped at online in the past three months, by discount retailers used most often, June 2019
                                                          • Frequency of Food and Drink Purchases at Food Discounters

                                                            • Fresh and chilled are categories most frequently shopped in food discounters
                                                              • Figure 35: Frequency of food purchasing at food discounters, June 2019
                                                            • Alcohol category attracts more shoppers
                                                              • Figure 36: Frequency of food purchasing at Aldi and Lidl, June 2019
                                                            • Alcoholic drinks and frozen categories gain more weekly shoppers
                                                              • Figure 37: Frequency of food purchasing at food discounters, by socio-economic group, June 2018 and 2019
                                                          • Frequency of Non-food Purchasing at Discounters

                                                            • Household and health and beauty products continue to drive spend at non-food discounters
                                                              • Figure 38: Non-food products purchased at discounters in the last three months, by frequency of purchase, June 2019
                                                            • Electrical products and toys and games attract more shoppers
                                                              • Figure 39: Non-food purchases in the last three months, June 2018 and 2019
                                                            • 25-34 year olds buy non-foods most frequently from discounters
                                                              • Figure 40: Non-food products purchased at discounters in the last three months, by age, June 2019
                                                          • Satisfaction with Discount Retailers

                                                            • Discount shoppers have an excellent level of satisfaction overall
                                                              • Value for money is the top satisfaction factor amongst discount shoppers
                                                                • Figure 41: Levels of satisfaction among discount shoppers in the last three months, June 2019
                                                              • Aldi shoppers are the most satisfied
                                                                • Figure 42: Satisfaction of food discount shoppers, by food discounter shopped at most often, June 2019
                                                              • Home Bargains shoppers are satisfied across most factors
                                                                • Figure 43: Satisfaction of non-food discount shoppers where they shop the most, June 2019
                                                            • Key Driver Analysis

                                                              • Discounters to consider ranges and improve ease of checkout
                                                                  • Figure 44: Provenance App
                                                                  • Figure 45: Key drivers of overall satisfaction with discounters, July 2019
                                                                  • Figure 46: Overall satisfaction with discounters – Key driver output, July 2019
                                                                • Methodology
                                                                • Attitudes towards Shopping at Discounters

                                                                  • A unique shopping experience and driving excitement are key drivers to discount stores
                                                                    • Figure 47: Attitudes towards drivers of use, June 2019
                                                                  • Driving excitement is important in both food and non-food discounters
                                                                    • Figure 48: Attitudes towards discounters, by retailer shopped at most often, June 2019
                                                                  • Food discount shoppers agree that own-brand products are just as good as big brands
                                                                      • Figure 49: Attitudes towards food discounters, June 2019
                                                                  • CHAID Analysis – Food and Non-food Discounters

                                                                    • Methodology
                                                                      • Urban Millennial families favour British sourcing
                                                                        • Figure 50: Attitudes towards discounters – CHAID – Tree output, July 2019
                                                                        • Figure 51: Attitudes towards discounters – CHAID – Table output, July 2019
                                                                    • Leading Retailers – What You Need to Know

                                                                      • Aldi leads the discount market with sales over £10 billion
                                                                        • Food discounters steal more share of the grocery market
                                                                          • Aldi sets itself apart with strongest brand image
                                                                            • Homeware and décor biggest overall occupier of shelf space
                                                                            • Leading Retailers – Key Metrics

                                                                              • Revenue
                                                                                  • Figure 52: Leading discounters’ sales, 2014/15-2018/19
                                                                                • Operating profits and margins
                                                                                  • Figure 53: Leading discounters’ operating profits, 2014/15-2018/19
                                                                                  • Figure 54: Leading discounters’ operating margins, 2014/15-2018/19
                                                                                • Stores and sales per outlet
                                                                                  • Figure 55: Leading discounters’ outlet numbers, 2014/15-2018/19
                                                                                  • Figure 56: Leading discounters’ sales per outlet, 2014/15-2018/19
                                                                              • Market Share

                                                                                • Food discounters account for almost two thirds of the market
                                                                                  • Figure 57: Leading discounters’ estimated share of all discount sales, 2018
                                                                                  • Figure 58: Leading 10 discounters’ share of all discount sales, 2014-18
                                                                                • Food discounters: combined market share of 12.9% in 2018
                                                                                  • Figure 59: Estimated share of all grocery retail sales (ex-VAT, ex-fuel) by the leading players, 2018
                                                                                  • Figure 60: Grocery market share: the big four vs the food discounters, 2011-18
                                                                                • Non-food discounters: driving growth in the mixed goods sector
                                                                                  • Figure 61: Non-food discounters’ share of all mixed goods retail sales, 2009-18
                                                                                • Savers: a growing discount player in health and beauty
                                                                                  • Figure 62: Savers: market share of the specialist health and beauty sector (ex-VAT), 2012-18
                                                                              • Space Allocation Summary

                                                                                  • Food discounters – Summary
                                                                                    • Figure 63: Food discounters: summary shelf frontage space allocation estimates, August 2019
                                                                                  • Food discounters – Detailed space allocation
                                                                                    • Figure 64: Food discounters: detailed shelf frontage space allocation estimates, August 2019
                                                                                  • Non-food discounters – Summary
                                                                                      • Figure 65: Non-food discounters: summary shelf frontage space allocation estimates, August 2019
                                                                                    • Non-food discounters – Detailed space allocation
                                                                                        • Figure 66: Non-food discounters: detailed shelf frontage space allocation estimates, August 2019
                                                                                    • Retail Product Mix

                                                                                          • Figure 67: Leading discounters estimated sales mix, 2018
                                                                                          • Figure 68: Leading discounters: estimates sales by product, 2018
                                                                                          • Figure 69: Leading discounters, estimates sales per square metre, 2018
                                                                                      • Launch Activity and Innovation

                                                                                        • New UK market entrants
                                                                                          • Figure 70: Jack’s, April 2019
                                                                                        • Flexing store size
                                                                                          • Targeting on-the-go shoppers with convenience
                                                                                            • Expanding with health and wellness
                                                                                              • Action on plastic
                                                                                                • Driving sales with new online ventures
                                                                                                  • Online to offline: Aldi opens new physical stores in China
                                                                                                    • German Chatbot LiA
                                                                                                      • Discount partnerships
                                                                                                      • Advertising and Marketing Activity

                                                                                                        • Total advertising spend down 12.4% year-on-year in 2018
                                                                                                          • Figure 71: Total recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, 2014-18
                                                                                                        • The food discounters continue to spend the most on advertising
                                                                                                          • Figure 72: UK leading discounters: recorded above-the-line, online display and direct mail total advertising expenditure, 2014-18
                                                                                                        • 2018 sees advertising peaks during various seasonal periods
                                                                                                          • Figure 73: Total recorded above-the-line, online display and direct mail total advertising expenditure by UK leading discounters, by month, 2018
                                                                                                        • Over half of spend on TV
                                                                                                          • Figure 74: Total recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, by media type, 2014-18
                                                                                                        • What we’ve seen in 2019
                                                                                                          • Nielsen Ad Intel coverage
                                                                                                          • Brand Research

                                                                                                              • Brand map
                                                                                                                • Figure 75: Attitudes towards and usage of selected brands, July 2019
                                                                                                              • Key brand metrics
                                                                                                                • Figure 76: Key metrics for selected brands, July 2019
                                                                                                              • Brand attitudes: Lidl considered most innovative while Poundland leads on value
                                                                                                                • Figure 77: Attitudes, by brand, July 2019
                                                                                                              • Brand personality: food discounters considered more ethical and exclusive
                                                                                                                • Figure 78: Brand personality – Macro image, July 2019
                                                                                                              • Aldi considered to be aspirational, responsive and cutting edge
                                                                                                                • Figure 79: Brand personality – Micro image, July 2019
                                                                                                            • Brand Analysis

                                                                                                              • Aldi maintains strong brand image
                                                                                                                • Figure 80: User profile of Aldi, July 2019
                                                                                                              • Home Bargains most popular non-food discounter
                                                                                                                • Figure 81: User profile of Home Bargains, July 2019
                                                                                                              • B&M most trusted non-food discounter
                                                                                                                • Figure 82: User profile of B&M, July 2019
                                                                                                              • Lidl continues to fall behind Aldi despite having highest awareness
                                                                                                                • Figure 83: User profile of Lidl, July 2019
                                                                                                              • Poundland offers best value among non-food discounters
                                                                                                                • Figure 84: User profile of Poundland, July 2019
                                                                                                            • Aldi

                                                                                                                • What we think
                                                                                                                  • Figure 85: Aldi Local, Balham
                                                                                                                • Background
                                                                                                                  • Company performance
                                                                                                                    • Figure 86: Aldi Stores Ltd (UK & Ireland): group financial performance, 2014-18
                                                                                                                    • Figure 87: Aldi Stores Ltd (UK & Ireland): outlet data, 2014-18
                                                                                                                  • Retail offering
                                                                                                                  • Lidl

                                                                                                                      • What we think
                                                                                                                        • Background
                                                                                                                          • Company performance
                                                                                                                            • Figure 88: Lidl (UK): group financial performance, 2014/15-2018/19
                                                                                                                            • Figure 89: Lidl (UK): Outlet data, 2014/15-2018/19
                                                                                                                          • Retail offering
                                                                                                                          • B&M

                                                                                                                              • What we think
                                                                                                                                • Background
                                                                                                                                  • Company performance
                                                                                                                                    • Figure 90: B&M Retail Ltd: group financial performance, 2014/15-2018/19
                                                                                                                                    • Figure 91: B&M Retail Ltd: outlet data, 2014/15-2018/19
                                                                                                                                  • Retail offering
                                                                                                                                  • Home Bargains

                                                                                                                                      • What we think
                                                                                                                                        • Background
                                                                                                                                          • Company performance
                                                                                                                                            • Figure 92: TJ Morris Ltd: group financial performance, 2014/15-2018/19
                                                                                                                                            • Figure 93: TJ Morris Ltd: outlet data, 2014/15-2018/19
                                                                                                                                          • Retail offering
                                                                                                                                          • Poundland

                                                                                                                                              • What we think
                                                                                                                                                • Background
                                                                                                                                                  • Company performance
                                                                                                                                                    • Figure 94: Poundland Group: group financial performance, 2014/15-2018/19
                                                                                                                                                    • Figure 95: Poundland Group: outlet data, 2014/15-2018/19
                                                                                                                                                  • Retail offering
                                                                                                                                                  • Wilko

                                                                                                                                                      • What we think
                                                                                                                                                        • Background
                                                                                                                                                          • Company performance
                                                                                                                                                            • Figure 96: Wilko: group financial performance, 2014/15-2018/19
                                                                                                                                                            • Figure 97: Wilko: outlet data, 2014/15-2018/19
                                                                                                                                                          • Retail offering
                                                                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

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

                                                                                                                                                                      • Forecast methodology
                                                                                                                                                                      • Appendix – Key Driver Analysis

                                                                                                                                                                          • Interpretation of results
                                                                                                                                                                            • Figure 98: Overall satisfaction with discounters – Key driver output, July 2019
                                                                                                                                                                            • Figure 99: Satisfaction with discounters, July 2019

                                                                                                                                                                        Food and Non-food Discounters - UK - September 2019

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