SEBASTIAN RENNACK: Lidl is fighting to regain its position as price leader in Lithuania

SEBASTIAN RENNACK specially for WiadomosciHandlowe.pl, 24.07.2024

Lidl’s “Price Leadership” campaign currently dominates in-store communication (photo by Sebastian Rennack)

Lidl is fighting to regain its position as price leader in Lithuania. But the competition is not letting up.

Lidl is trying to regain its growth momentum in Lithuania. Last year, the Schwarz Group’s low-price chain posted the lowest revenue growth among the country’s largest food retailers. The end of paper newspapers at the end of spring 2023 may have contributed to the decline in shoppers’ favour. Local competitors Maxima and Norfa compete effectively with Lidl’s concept of ‘low price’ supermarkets.

Lidl Lithuania announces 2024 financial results

Net sales in the period increased by 6.3% to €871 million, while net profit decreased from €46.6 million to €16.3 million, representing a net profit margin of 1.8% compared to 5.7% a year earlier.

More on that:

“Lidl Lietuva’s financial results for 2023… lower growth rate than Rimi Lietuva

Retail market in Lithuania in 2023

2023 m. mažmeninės prekybos rinka Lietuvoje

Competitors growing faster than Lidl

In the last financial year, Lidl’s Lithuanian unit continued to be one of the most profitable units in Central and South-Eastern Europe in terms of margin, followed by Slovakia (8.4%) and the Czech Republic (6.1%). The company cites the opening of its second logistics centre in the country in May this year, double-digit wage growth from 2022 and investments in pricing as key cost drivers. Profitability not only declined, but also sales growth was the lowest among leading retailers. Market leader Maxima Grupė increased net sales by 7.9 per cent, Iki (Germany’s Rewe Group) by 8.3 per cent and Norfa, the country’s fourth-placed retailer, by 15.4 per cent.

Petras Čepkauskas, Director of the Food Department of the Lithuanian market research company Pricer.lt, calculates that Lidl’s share of the food retail market fell from 13.0% to 12.7% in the last financial year.

The move away from paper newspapers

First, in May 2023. Lidl is moving away from paper newspapers. Later that year, they were relaunched again, but in a shortened version. According to Mr Čepkauskas, a large part of the international ‘Flavours of the World’ range and a large part of the high-margin non-food range continued to be available only online. This may have had an impact on Lidl’s store business, resulting in a reduction in footfall, sales and margin structure.

This policy may have been implemented in order to attract customers to the mobile loyalty app Lidl Plus. However, Mr Čepkauskas argues that the use of coupons on the app to create the image of a price leader may not reflect customers’ actual price perception. This is because prices are not communicated in the app in the same way as offline discounts. As a result, according to the expert, in the second half of 2023. “Lidl has reverted to the role of replicating the prices of market leader Maxima.

Self-service checkouts

In addition, the promotion of self-service checkouts may not have been in line with customer preferences. Last September, Lidl announced that it had equipped all its stores with these devices. In addition, the retailer announced that more than a third of its stores have been equipped with special XXL checkouts with larger scales to read larger purchases.

On the other hand, Mr Čepkauskas notes that competitors are responding effectively to Lidl’s discount concept. Maxima has improved its promotions, introduced a new private brand for mid-priced products, ‘Well Done’, and launched a more aggressive pricing policy. Norfa, the fourth-ranked Lithuanian operator in the national ranking, is using a strategy of everyday low prices. Norfa’s vertical integration of its production – meat factories, fruit and vegetable canneries, dairy processing plants and a central bakery – allows the retailer to maintain low everyday prices.

Regain your image as a price leader!

Lidl is fighting to regain its image as the price leader in Lithuanian food retail. According to a basket of 23 food products commissioned by the supermarket chain, the discounter has been the cheapest of the five largest food retailers in Lithuania for nine consecutive months. Lidl’s communication campaign “Price Leadership” is currently dominating in stores. However, Pricer.lt’s monthly basket comparison of dozens of basic food products shows that Lidl has ranked second on average over the last twelve months, behind the market leader and also the cheapest supermarket chain Maxima.

“Lidl Lithuania will be headed by Urbanskis

The German capital’s retail chain Lidl Lietuva will be headed from September by the current head of Lidl’s retail chains in Latvia and Estonia, Maciej Urbanski, Lidl Lietuva announced on Wednesday.

Armando Lopes, who has been Lidl Lietuva’s chief executive since January this year, will leave for France in September to take up a new position as chief financial officer of the Lidl network there.

Urbanski was the head of Lidl Lithuania for two years, from 2017 to 2019, and has served as a member of the board of Lidl Latvia and Estonia since 2019, and as head of Lidl Estonia since 2022.

Until January 2024, Lidl Lithuania was headed for nine years by Radostin Roussev-Peine, who has decided to return to Germany to start a new business.

Currently, there are 74 Lidl stores in Lithuania and two logistics centres in Vilnius and Kaunas. There are 30 stores in Latvia and 14 in Estonia, both using a logistics centre in Riga.

Source: “Lidl Lithuania” will be headed by Urbanski