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UK Food and Non-food Discounters market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Food and Non-food Discounters market, and the behaviours, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Areas covered in this Report

We split the discount sector into two main segments: food and non-food.

The food discounters are Aldi, Lidl and Netto (which ceased to exist in the UK, for the second time, in August 2016). The non-food discounters include those stores whose focus is on mixed goods, although for some, food can be one of their main product categories this is confined almost entirely to ambient groceries with little or no fresh, chilled or frozen products.

We break the non-food discounters down into two further categories:

  • The fixed-price discounters, which include traditional ‘pound shops’ such as Poundland and Poundworld.
  • The multi-price discounters, which include a wide range of retailers with the largest being B&M Bargains, Home Bargains and Wilko.

What is a discounter?

One of the challenges with the discount market is that it is a broad term rather than a clearly identifiable segment.

As a result we have decided that the best way forward is to identify specific retailers that fall into our definition of a ‘Discounter’.

Our definition of a discounter is a store that uses price as its defining feature but it must also follow the discount model of having extremely tight cost control and very focused buying. Finally, it must, for the bulk of its stock at least, deliver consistent product lines, so we exclude outlet stores like TK Maxx or Bargain Crazy.

This means that our market size is based on a fairly limited list but we think that is right because true ‘discounting’ is for large retailers, with smaller stores unable to truly achieve the economy of scale required.

Expert analysis from a specialist in the field

Written by Nick Carroll, a leading analyst in the Retail sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

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

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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
              • Overall the discount sector is growing strongly…
                • Figure 1: All discounters’ sector size (ex-VAT), 2013-23
              • … but the food discounters are leading the way
                • Figure 2: Historical and forecast growth rates in the food and non-food discount sectors, 2015-23
              • Inflation is easing
                • Figure 3: CPIH, monthly percentage change over 12 months, July 2016-July 2018
              • Companies and brands
                • Aldi and Lidl account for half of the discount sector, whilst B&M and Home Bargains are the biggest non-food players
                  • Figure 4: Leading discounters’ estimated share of all discount sales, 2017
                • Combined, the food discounters now account for over 10% of the grocery market
                  • Figure 5: Grocery market share: The Big Four vs The Food Discounters, 2010-17
                • Aldi excelling in the experience stakes
                  • Figure 6: Key metrics for selected brands, July 2018
                • The consumer
                  • Nine in 10 shopped with discounters in the past three months
                    • Figure 7: Discounters shopped with in the last three months, June 2018
                  • Younger consumers more likely to shop with discounters
                    • Figure 8: Food discounters: Usage of Aldi and Lidl on a total and most often basis, by household income, June 2018
                  • Over a quarter of discount shoppers shop online, but there is demand for more to launch in the space
                    • Figure 9: Discounters shopped with online in the past three months, June 2018
                  • Chilled and fresh drivers for food discounters
                    • Figure 10: Frequency of food purchasing at food discounters, June 2018
                  • Household cleaning, and health and beauty key categories in non-food discounting
                    • Figure 11: Non-food products purchased at discounters in the last three months, by frequency of purchase, June 2018
                  • Wider ranges and an easier checkout two priories for improvements
                    • Figure 12: Improvements needed at discounters, by rank, June 2018
                  • Most feel there is less stigma to shopping with discounters, and their use is impacting price perception elsewhere
                    • Figure 13: Attitudes towards price, premium, and online at discounters, June 2018
                  • What we think
                  • Issues and Insights

                    • Tesco enters the discount market with Jack’s
                      • The facts
                        • The implications
                          • Necessary consolidation in the non-food discount sector
                            • The facts
                              • The implications
                                • Premium value: the rising importance of premium at the food discounters
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • Inflation is easing and in turn so has pressure of consumer finances
                                        • Consumer confidence recovers in 2018
                                          • Overall the discount sector is growing strongly…
                                            • … but the food discounters are leading the way
                                            • Market Drivers

                                              • Inflation drops back in 2018
                                                • Figure 14: CPIH, monthly percentage change over 12 months, July 2016-July 2018
                                              • Real earnings eroded by inflation in 2017
                                                • Figure 15: Real average weekly earnings (seasonally adjusted), single month % change year-on-year, February 2014-June 2018
                                              • Spending on food and drink grows faster than total spending
                                                • Figure 16: Consumer spending, 2013-17
                                              • Consumer confidence recovers in 2018
                                                • Figure 17: Consumer confidence tracker, January 2016-August 2018
                                              • Consumers turn to the discounters to save money on food bills
                                                • Figure 18: Preferred ways to save money on food bills, February 2018
                                              • Discounters benefit from increasingly fluid shopping habits
                                                • Figure 19: How they shop for groceries, 2015-17
                                            • Market Size and Forecast

                                              • Discount sector grew strongly in 2017 but slowdown expected in 2018
                                                • Figure 20: All discounters’ sector size (ex-VAT), 2013-23
                                                • Figure 21: Discount sector size as a percentage of all retail sales (ex-fuel, ex-VAT), 2013-18
                                                • Figure 22: All discounters’ sector size (ex-VAT), detailed forecast at current and constant prices, 2013-23
                                              • The food discounters’ segment
                                                  • Figure 23: Food discounters’ sector size (ex-VAT), 2013-23
                                                  • Figure 24: Food discounters’ sector size (ex-VAT), detailed forecast at current and constant prices, 2013-23
                                                • The non-food discount sector
                                                  • Figure 25: Non-food discounters’ sector size (ex-VAT), 2013-23
                                                  • Figure 26: Non-food discounters’ sector size (ex-VAT), detailed forecast at current and constant prices, 2013-23
                                                • Forecast methodology
                                                • The Consumer – What You Need to Know

                                                  • Nine in 10 shopped with discounters in the past three months
                                                    • Younger consumers more likely to shop with discounters
                                                      • Over a quarter of discount shoppers shop online, but there is demand for more to launch in the space
                                                        • Chilled and fresh drivers for food discounters
                                                          • Household cleaning, and health and beauty key categories in non-food discounting
                                                            • Wider ranges and an easier checkout two priorities for improvements
                                                              • Most feel there is less stigma to shopping with discounters, and their use is impacting price perception elsewhere
                                                              • Where They Shop

                                                                • Aldi and Poundland the most visited discounters
                                                                  • Figure 27: Discounters shopped with in the last three months, June 2018
                                                                • Food discounters see most frequent visitation
                                                                  • Figure 28: Frequency of discounters visitation in the last three months, June 2018
                                                                  • Figure 29: Frequency of discounters visitation in the last three months, shoppers only rebase, June 2018
                                                                • Repertoire of stores visited
                                                                  • Figure 30: Repertoire of discounters visited in the last three months, June 2018
                                                              • Retailer Demographic Comparison

                                                                • Discounter use is (broadly) universal
                                                                  • Food discounters: favoured by younger shoppers
                                                                    • Figure 31: Food discounters usage in the past three months, by age, June 2018
                                                                    • Figure 32: Food discounters: Age profile of those who shopped with Aldi/Lidl most often, June 2018
                                                                  • Food discounters: breaking away from a natural audience
                                                                    • Figure 33: Food discounters: usage of Aldi and Lidl on a total and most often basis, by household income, June 2018
                                                                  • Food discounters: room for expansion for Heron Foods
                                                                    • Figure 34: Food discounters: usage of food discounters, by region, June 2018
                                                                  • Non-food discounters: Poundland striking a cord with 16-24s
                                                                    • Figure 35: Non-food discounters usage in the past three months, by age, June 2018
                                                                  • Non-food discounters have not broadened the appeal in the same way as the food discounters
                                                                    • Figure 36: Non-food discounters usage in the past three months, by household income, June 2018
                                                                  • Lack of capital coverage for the big-box players
                                                                    • Figure 37: Non-food discounters usage in the past three months, by household income, June 2018
                                                                • Discounters and Online

                                                                  • Wilko most used online
                                                                    • Figure 38: Discounters shopped with online in the past three months, June 2018
                                                                    • Figure 39: Discounters shopped with online in the past three months, by discount retailers used most often, June 2018
                                                                  • Demand is there for an online discount offer
                                                                    • Figure 40: Attitudes towards discounters and online, June 2018
                                                                    • Figure 41: Agreements to attitudes towards discounters and online, by age, June 2018
                                                                • Frequency of Food & Drink Purchasing at Discounters

                                                                  • Chilled and fresh drivers for footfall for food discounters
                                                                    • Figure 42: Frequency of food purchasing at food discounters, June 2018
                                                                  • Lower frequency of fresh purchasing amongst ABs, but alcohol is a driver for this group
                                                                      • Figure 43: Frequency of food purchasing at food discounters, by socio-economic group, June 2018
                                                                      • Figure 44: Frequency of food purchasing at food discounters, by socio-economic group, June 2018
                                                                    • Lidl’s bakery a driver, but Aldi scores greater frequency on fresh
                                                                      • Figure 45: Frequency of food purchasing at food discounters, by socio-economic group, June 2018
                                                                  • Frequency of Non-food Purchasing at Discounters

                                                                    • Household and beauty products most popular purchases at non-food discounters
                                                                      • Figure 46: Non-food products purchased at discounters in the last three months, June 2018
                                                                    • Household cleaning products a key driver for patronage
                                                                      • Figure 47: Non-food products purchased at discounters in the last three months, by frequency of purchase, June 2018
                                                                    • Younger consumers generally more likely to buy non-foods from discounters
                                                                      • Figure 48: Non-food products purchased at discounters in the last three months, by age, June 2018
                                                                  • What Can Be Improved at Discounters?

                                                                    • A wider range the top improvement called for by discount shoppers
                                                                      • Figure 49: Improvements needed at discounters, by rank, June 2018
                                                                      • Figure 50: Improvements needed at discounters, any rank by age, June 2018
                                                                    • Lidl shoppers want checkout improvements, B&M shoppers want online
                                                                      • Figure 51: Select improvements needed at discounters, any rank by discount retailer shopped at most often, June 2018
                                                                      • Figure 52: Select improvements needed at discounters, any rank by discount retailer shopped at most often, June 2018
                                                                  • Attitudes Towards Price and Premium at Discounters

                                                                    • Any stigma about shopping at discounters has fallen away
                                                                      • Figure 53: Attitudes towards price and shopping at discounters, June 2018
                                                                      • Figure 54: Agreement to attitudes towards price and shopping at discounters, by financial situation, June 2018
                                                                    • European heritage allows food discounters to provide something outside the norm
                                                                      • Figure 55: Attitudes towards food discounters, June 2018
                                                                      • Figure 56: Attitudes towards food discounters’ premium ranges, by current financial situation, June 2018
                                                                  • Leading Retailers – What You Need to Know

                                                                    • Aldi and Lidl continue to lead the market
                                                                      • Combined, the food discounters now account for over 10% of the grocery market
                                                                        • Aldi excelling in the experience stakes
                                                                          • A quarter of space of Poundland is now given over to fashion
                                                                          • Key Metrics

                                                                            • Revenue
                                                                                • Figure 57: Leading discounters’ sales, 2013/14-2017/18
                                                                              • Operating profits and margins
                                                                                • Figure 58: Leading discounters’ operating profits, 2013/14-2017/18
                                                                                • Figure 59: Leading discounters’ operating margins, 2013/14-2017/18
                                                                              • Stores and sales-per-outlet
                                                                                • Figure 60: Leading discounters’ outlet numbers, 2013/14-2017/18
                                                                                • Figure 61: Leading discounters’ sales per outlet, 2013/14-2017/18
                                                                            • Market Shares

                                                                              • Food discounters account for over half the market
                                                                                • Figure 62: Leading discounters’ estimated share of all discount sales, 2017
                                                                                • Figure 63: Leading 10 discounters’ share of all discount sales, 2013-17
                                                                              • Food discounters: Aldi and Lidl still applying pressure on the big four
                                                                                • Figure 64: Estimated share of all grocery retail sales (ex-VAT, ex-fuel) by the leading players, 2017
                                                                                • Figure 65: Grocery market share: The Big Four vs The Food Discounters, 2010-17
                                                                              • Non-food discounters: context within the mixed-goods sector
                                                                                  • Figure 66: Non-food discounters’ share of all mixed goods retail sales, 2008-17
                                                                                • Savers: a small but significant player in the health and beauty market
                                                                                  • Figure 67: Savers: Market share of the specialist health and beauty sector (ex-VAT), 2011-17
                                                                              • Space Allocation Summary

                                                                                  • Food discounters – Summary
                                                                                    • Figure 68: Food discounters: Summary shelf frontage space allocation estimates, September 2018
                                                                                  • Food discounters - Detailed space allocation
                                                                                    • Figure 69: Food discounters: Detailed shelf frontage space allocation estimates, September 2018
                                                                                  • Non-food discounters – Summary
                                                                                      • Figure 70: Non-food discounters: Summary shelf frontage space allocation estimates, September 2018
                                                                                    • Non-food discounters – Detailed space allocation
                                                                                      • Figure 71: Non-food discounters: Detailed shelf frontage space allocation estimates, September 2018
                                                                                  • Retail Product Mix

                                                                                        • Figure 72: Leading discounters estimated sales mix, 2017
                                                                                        • Figure 73: Leading discounters: estimated sales by product, 2017
                                                                                        • Figure 74: Leading discounters, estimated sales per square metre, 2017
                                                                                    • Innovation and Launch Activity

                                                                                      • Lidl showcases bakery innovation
                                                                                        • Poundland capitalising on growth in skincare market with own-brand launch
                                                                                          • Car-sharing service for shoppers
                                                                                            • Lidl launches AI wine chatbot
                                                                                              • Tesco discount store rumours
                                                                                                • New ‘softer’ Netto store concept
                                                                                                  • Figure 75: Netto new 3.0 concept store, Copenhagen
                                                                                                • Lidl seduces Parisians with luxury pop-up store
                                                                                                  • Cheap food and drink online
                                                                                                  • Advertising and Marketing Activity

                                                                                                    • Total advertising spend down 14.4% year-on-year in 2017
                                                                                                      • Figure 76: Total recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, 2013-17
                                                                                                    • Food discounters are the biggest advertising spenders
                                                                                                        • Figure 77: UK leading discounters: recorded above-the-line, online display and direct mail total advertising expenditure, 2013-17
                                                                                                      • Advertising expenditure peaks around key seasonal events
                                                                                                        • Figure 78: Total recorded above-the-line, online display and direct mail total advertising expenditure by UK leading discounters, by month, 2017
                                                                                                      • 80% of advertising expenditure channelled through TV and press
                                                                                                        • Figure 79: Total recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, by media type, 2013-17
                                                                                                      • What we’ve seen in 2018
                                                                                                        • Nielsen Ad Intel coverage
                                                                                                        • Brand Research

                                                                                                            • Brand map
                                                                                                              • Figure 80: Attitudes towards and usage of selected brands, July 2018
                                                                                                            • Key brand metrics
                                                                                                              • Figure 81: Key metrics for selected brands, July 2018
                                                                                                            • Brand attitudes: Food discounters lead on trust and innovation
                                                                                                              • Figure 82: Attitudes, by brand, July 2018
                                                                                                            • Brand personality: Poundland lacks excitement
                                                                                                              • Figure 83: Brand personality – macro image, July 2018
                                                                                                            • Aldi offers innovation, aspiration, and reliability
                                                                                                              • Figure 84: Brand personality – micro image, July 2018
                                                                                                            • Brand analysis
                                                                                                              • Aldi stands apart with the strongest brand
                                                                                                                • Figure 85: User profile of Aldi, July 2018
                                                                                                              • Home Bargains the best performing brand of the non-food discounters
                                                                                                                • Figure 86: User profile of Home Bargains, July 2018
                                                                                                              • B&M stands out despite lower recommendation levels
                                                                                                                • Figure 87: User profile of B&M, July 2018
                                                                                                              • Lidl loses ground to Aldi
                                                                                                                • Figure 88: User profile of Lidl, July 2018
                                                                                                              • Poundland is most used but least recommended
                                                                                                                • Figure 89: User profile of Poundland, July 2018
                                                                                                            • Aldi Stores Ltd

                                                                                                                • What we think
                                                                                                                  • Figure 90: Aldi, London, February 2018
                                                                                                                • Background
                                                                                                                  • Company performance
                                                                                                                    • Figure 91: Aldi Stores Ltd (UK & Ireland): Group financial performance, 2013-17
                                                                                                                    • Figure 92: Aldi Stores Ltd (UK & Ireland): Outlet data, 2013-17
                                                                                                                  • Retail offering
                                                                                                                  • Lidl (UK)

                                                                                                                      • What we think
                                                                                                                        • Background
                                                                                                                          • Company performance
                                                                                                                            • Figure 93: Lidl (UK): Group financial performance, 2013/14-2017/18
                                                                                                                            • Figure 94: Lidl (UK): Outlet data, 2013/14-2017/18
                                                                                                                          • Retail offering
                                                                                                                          • B&M European Value Retail

                                                                                                                              • What we think
                                                                                                                                • Background
                                                                                                                                  • Company performance
                                                                                                                                    • Figure 95: B&M European Value Retail: Group financial performance, 2012/13-2017/18
                                                                                                                                    • Figure 96: B&M Retail Ltd: Outlet data, 2012/13-2017/18
                                                                                                                                  • Retail offering
                                                                                                                                  • Home Bargains (TJ Morris Ltd)

                                                                                                                                      • What we think
                                                                                                                                        • Background
                                                                                                                                          • Company performance
                                                                                                                                            • Figure 97: TJ Morris Ltd: Group financial performance, 2012/13-2017/18
                                                                                                                                            • Figure 98: TJ Morris Ltd: Outlet data, 2012/13-2017/18
                                                                                                                                          • Retail offering
                                                                                                                                          • Poundland Ltd (UK)

                                                                                                                                              • What we think
                                                                                                                                                • Background
                                                                                                                                                  • Company performance
                                                                                                                                                    • Figure 99: Poundland Ltd: Group financial performance, 2013/14-2017/18
                                                                                                                                                    • Figure 100: Poundland Ltd: Outlet data, 2013/14-2017/18
                                                                                                                                                  • Retail offering
                                                                                                                                                  • Wilko Retail Ltd

                                                                                                                                                      • What we think
                                                                                                                                                        • Background
                                                                                                                                                          • Company performance
                                                                                                                                                            • Figure 101: Wilko: Group financial performance, 2013/14-2017/18
                                                                                                                                                            • Figure 102: Wilko: Outlet data, 2013/14-2017/18
                                                                                                                                                          • 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