There is a misconception among US FMCG suppliers that Lidl is planning to exclusively distribute private label products in the USA. Perhaps some of this misconception is down to the fact that the penetration of private label products is in general much lower in the US than it is in the EU.
An EDLP player, such as Lidl with a limited range entering the market may be perceived as PL only (to be fair the promotional stance has evolved so much that maybe Lidl isn’t really EDLP anymore in the strictest sense). However in the EU it is no secret what a massive success brands in discounters have turned out to be, both from the retailer’s and the manufacturers’ perspective.
In the EU the percentage share FMCG brands take of the Lidl range is around 10-15%, depending on store, catchment and region. In the US this percentage share will be around 30-40% of Lidl’s range – in other words it will be more than double of that what it is in the EU.
Lidl will flex its model and start with more brands in the USA than they have in the EU. This is a concession to the US shopper who is not yet familiar with Lidl’s proposition (no matter how often they have shopped in Aldi or Trader Joe’s before).
Apart from attracting footfall and building a price leadership reputation on the back of well known brands at a keen price point the other reason is that Lidl have not managed to persuade all of their private label suppliers to come to the USA with them. Thirdly, perhaps an almost too obvious point to state, as Lidl is only beginning to conquer the market the vertical integration of owning many of the production sites that is such an asset of the EU business has not happened in the USA yet.
For the roll out Lidl will use their latest thinking, which means the latest store concept, the latest marketing initiatives and latest range composition with the focus on fresh to brands.
As range in Lidl is limited (small store footprint) there’s only room for one or two top brands per category, usually the category leaders that will attract the US shopper – so there is a chance for FMCG suppliers to cement a relationship with Lidl early on and keep competitors out. Some categories are up for grabs and as Lidl has already become the EU’s biggest retailer, there is every chance that they will make a success of the US expansion as well. After all Aldi and Trader Joe’s are demonstrating what is possible in the US for a disciplined discounter operation.