Opening soon: Inside Lidl's blueprint to invade the US grocery market
At an event in New York Tuesday night, the much-hyped German retailer offered a taste of its low price, quality goods — and previewed its strategy to stand out in the U.S.
After two years of rethinking grocery — and inspiring quite a bit of speculation among U.S. retailers, analysts, food manufacturers and shoppers — executives at discount supermarket chain Lidl shared their vision and master plan with members of the media at an event in New York on Tuesday night.
Lidl will show even more of its hand on June 15, when the first Lidl stores in the U.S. open their doors, U.S. CEO Brendan Proctor announced at the event.
The announcement marks the German retailer's highly anticipated entry into the U.S. market, which many observers believe could disrupt the grocery landscape due to Lidl's low prices and high quality products. The retailer is gearing up for the big event — launching social media accounts, producing ads and videos, and even inviting celebrity chef Amanda Freitag to use Lidl products to cook gourmet appetizers and promote the products’ quality.
Lidl already has more than 10,000 stores in 27 countries. But this summer, 20 new stores will open in the United States. Proctor said specific details about store opening dates will be released in the coming weeks, but the first stores opening this summer will be in North Carolina, South Carolina and Virginia.
By the end of 2018, Lidl plans to have 100 stores operating up and down the East Coast. Sites from New Jersey to Georgia have already been secured for the new stores. When all those stores are operational, Lidl USA will have about 5,000 employees working at those stores and three distribution centers. Currently, about 1,400 jobs have been filled.
“We offer the experience of grocery retooled, rethought and refreshed."
CEO, Lidl US
Lidl will bring American consumers something they have been missing in grocery shopping so far, Proctor said at the event.
“We offer the experience of grocery retooled, rethought and refreshed,” he said.
If shoppers are as interested in the concept as Lidl thinks they might be, the discount chain sees the potential to secure a deep foothold in the U.S. grocery market — and force more traditional grocery retailers to re-examine the way they do business.
How Lidl plans to stand out
In a nation full of grocery stores, Lidl faces the challenge of differentiating itself.
The U.S. iteration of a Lidl store has been in development for two years, Proctor said. And while the chain has seen global success, every country and every store are different based on the people who shop there, he added.
“We’re agile as a retailer,” he said. “We’re able to adapt and learn from the markets we’ve gone into. … Personally, I believe one of our strengths is adapting to the customer’s needs and what the customer wants, and greatly curating the range around that.”
There are many ways that Lidl's U.S. stores will stand out to shoppers, Proctor said. Much of the company's planning was based on focus groups, and participants overwhelmingly said the same thing about the shopping experience: They were interested in high quality items, but they didn’t want to pay high prices.
Lidl believes it has the recipe to meet those desires. The grocer offers both quality and low prices through several avenues, Proctor said — about 90% of the products available in stores will be private label or Lidl exclusives, which helps control quality. Produce and flowers will also undergo strict quality controls, with measurements taken of size, color and taste.
“We believe that is essential because that is our promise,” he said. “We have the best product at the best prices. That’s what we do.”
“We have the best product at the best prices. That’s what we do.”
CEO, Lidl US
A short video shared at the event outlined how Lidl will leverage discounters' tricks of the trade: Packaged goods will be placed on shelves in their cartons, eliminating the work that would go into unpacking. Produce displays will not be precariously stacked, making all the fruits and vegetables equally accessible to shoppers. And shoppers will bring their own bags and bag their own groceries, eliminating the cost of paper or plastic bags as well as employees’ time and effort in bagging.
Proctor said he believes that Lidl can hit the high points of quality and low price in any market — and beat established discounters like Wal-Mart.
On Tuesday evening, executives wouldn’t directly compare Lidl to any other store in the U.S. Instead, they reiterated that Lidl will be unique with its combination of high quality, low prices, and fresh products. Boudewijn Tiktak, the retailer’s executive vice president and chief commercial officer, explained to Food Dive how Lidl’s quality will shine through in its U.S. stores.
“We have fresh bakery in our stores,” he said, gesturing toward a display of the varieties of bread and pastries that will be sold in Lidl’s U.S. locations. “So we bake from morning to evening, multiple times a day, fresh loaves, fresh breads, cookies, pastries.”
All the chain's beef will come from black angus, Tiktak said. It will all have a USDA choice rating and have been aged for 21 days.
Certifications will be in place for many of the products. All of the seafood sold by the retailer will meet sustainability sourcing standards set by the Marine Stewardship Council, Best Aquaculture Practices or the Aquaculture Stewardship Council. And the chocolate sold by the retailer will all either be Fair Trade or UTZ certified.
Tiktak said that the retailer’s produce will be at its freshest, delivered to stores daily.
Aside from the food items, Lidl plans to differentiate itself through its specials on non-food items, Proctor said. These specials could be anything from yoga pants to lawnmowers to leather jackets.
“It brings a little bit more excitement,” he said. “We find it works very well. Every time you come into the store, you get a bit of a different experience.”
The consumer is at the heart of Lidl US, according to Proctor. While the chain’s stores are successful in other countries, it wouldn't make sense to take a German-style Lidl and locate it in the U.S., Proctor said.
Store designs and formats from Europe were shown to U.S. consumers — and they were not particularly impressed, he said.
“They said it looks like a car dealership,” Proctor told Food Dive.
By working with focus groups, Lidl came up with its own basic store design, which boasts abundant natural light and a curved roof.
“We believe the customer experience will be a positive experience,” he said. “We understand it’s important to have a lot of natural light coming in. … It’s an open area. We will have people coming in, feeling comfortable in the stores.”
The retailer plans to streamline the grocery shopping experience and pare down customer choices. Proctor said that the product selection will be curated so that shoppers will not be overwhelmed with too many choices for staples like ketchup. Instead of multiple varieties of the same product, shelf space will be devoted to different kinds of items.
“We believe the customer experience will be a positive experience.”
CEO, Lidl US
Lidl stores will have just six aisles. Shelves will be clearly marked so shoppers will be able to find what they’re looking for. Shoppers will be able to get in, quickly find what they’re looking for, and check out, he said.
As far as products go, some of them will be similar to Lidl’s most popular products in stores abroad. However, the company's purchasing agents as well as Proctor and Tiktak all said they have undergone some formula and recipe changes to better suit American preferences and palates.
Even though Lidl has done extensive consumer research already, Proctor and Tiktak both said Lidl will learn from consumers after the retailer’s doors open. They’ll pay attention to the way products sell, as well as how store formats are working.
Global purchasing power
As a large retailer with agreements already in place throughout Europe, some of that flavor and flair will be coming to U.S. stores. Baguettes, croissants and seed rolls that are popular in Europe will be produced in the stores' bakeries.
Lidl’s U.S. stores will also have large confectionery departments. While there will be some Lidl-branded versions of American mainstays like Hershey’s chocolate, the store will also feature some finer European varieties.
“We want to bring consumers something they’ve never tried before,” Senior Purchasing Manager Anna Sadovskaya told Food Dive.
Lidl’s strong global presence makes imports of premium Belgian chocolates and Italian cookies to the U.S. much easier and more affordable. Lidl’s Preferred Selection brand features the flag of the item's country of origin on the label.
The retailer's global purchasing power will also be apparent in Lidl’s wine selection. The bottles on Lidl’s shelves will come from places including California, France and Chile. Through rigorous tasting and testing, the wines that will be sold at Lidl are are personally curated and carefully selected by wine expert Adam Lapierre. Lapierre said that some of the wines at Lidl may be found at other retailers, but the majority will be Lidl exclusives.
“We’re looking for the best quality for the price,” Lapierre told Food Dive.
Lidl prefers to have long-term relationships with its suppliers, Proctor said. If consumers don’t like a product, the retailer may work with a supplier to help develop something that they are looking for — a move that he said increases quality.
However, U.S. Lidl stores will not only feature products from abroad. In fact, Proctor said about 85% of the items sold on Lidl’s shelves will come from the U.S.
With its aggressive expansion in the works, Lidl has already purchased all of the locations for the 100 planned stores. Lidl is starting from scratch on all of its locations so far, Proctor said, building from the ground up instead of converting existing and abandoned stores throughout the country.
“Regardless of where the stores go… it’s important to us that we have the quality we’re looking for in multiple locations,” he said.
“Regardless of where the stores go… it’s important to us that we have the quality we’re looking for in multiple locations.”
CEO, Lidl US
Lidl has already completed two of its distribution centers — one in Virginia and one in North Carolina. A third is under construction.
For the time being, Proctor said the supermarket chain will concentrate on locations on the East Coast. He said that will provide many different learning experiences and opportunities for Lidl to adapt.
Lidl will also concentrate on brick-and-mortar stores for shopping. There are no plans to work on e-commerce models, at least for now. People still prefer going to the grocery store over ordering online, he said.
Proctor and other executives at the event were optimistic about Lidl's future in the U.S. — as well as their chances of beating the competition.
“Our customer is anybody who grocery shops,” Proctor said. “We believe we have the market for them."
Jeff Wells contributed to this story.
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