High commodity prices and tariffs are likely to hurt the production of traditional FMCG products, as supply chain costs are expected to go up. But Aldi and Lidl may be able to absorb the rise in prices, the research firm said.
“There are several factors which will help discounters Aldi and Lidl absorb the rise in food prices and inflation – namely the limited range, having the leanest supply chains in retail and most importantly their economies of scale.
“Crucially, in their attempts to position themselves as genuine weekly shopping destinations, both Aldi and Lidl have drastically increased and improved their fresh offer, with sales from fruit and vegetables, meat, poultry and bread now accounting for 50 per cent of sales.
“In this time, they have been the most proactive in driving provenance and localism, with Aldi implementing a 100 per cent British fresh meat policy. This heightened relationship with British farmers means they are in a stronger position than their rivals in the immediate term.”
“Lidl alone will invest £1.5bn over the next three years in building new stores, refurbishing existing ones and developing new product new lines. These investment plans are likely to remain unchanged and, with the value of the pound dropping, the billions of euros set aside are now set to go a lot further.
“As a result, Aldi and Lidl are certainly primed to be the least affected retailers. Indeed they may be the ones to benefit in the short and medium term,” said Kantar.