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In the 12 months to July, Tesco and Sainsbury's shares fell by 4% and 2.5% respectively on the back of worse than expected sales. Where did the sales go? The big German discounters Lidl and Aldi were the main winners both increasing their market share and improving their share price even further (>10% increase!)
Back in March it was announced that the Germans were also taking market share from Asda and Morrison's so we already knew that they were on the rise and TBF the quality of Lidl and Aldi's stuff is nowadays comparable with the "Big 4" - but a lot cheaper.
Great for British consumers because basically we are getting decent food cheaper than we have ever done.
But I'm wondering what will happen going forward bearing in mind that buying in cheap European goods is affected by the exchange rate?
A year ago we were laughing. The pound was worth 1.4 and a bit euros, although that was near the peak and it gradually fell back to stabilise at just under 1.3. But instead of fighting back as the pound had in the past, we had the referendum and down it went again. After a rough week or so it started to stabilise again - but at a much lower level and for the last three weeks it's been steady between 1.18. and 1.2 so that is starting to look like the new baseline which we'll have to get used to - a devaluation of about 8 to 9% minimum.
My understanding is that both Lidl and Aldi buy centrally in Germany so the exchange rate shouldn't affect their procurement as they'll be buying in Euros whereas the likes of Tesco and Sainsbury's will have to buy with pounds which will drive their prices up even further. Asda (Walmart) might be OK if their American bosses procure for them.
So it all looks set for even more foreign supermarkets coming in and those that are here taking even more market share from British supermarkets.
But there is another factor at play. If Lidl and Aldi keep their prices at or about current levels their profits will fall significantly because they are selling in pounds which are worth a lot less since the referendum - and that won't please their shareholders.
I'm thinking that the British supermarkets will have to increase their prices - or lower their quality - and that the German and other foreign discounters will also have to increase their prices - but will retain/grow their market share anyway as they'll still be cheaper than the Brits.
What do you reckon will happen?
Back in March it was announced that the Germans were also taking market share from Asda and Morrison's so we already knew that they were on the rise and TBF the quality of Lidl and Aldi's stuff is nowadays comparable with the "Big 4" - but a lot cheaper.
Great for British consumers because basically we are getting decent food cheaper than we have ever done.
But I'm wondering what will happen going forward bearing in mind that buying in cheap European goods is affected by the exchange rate?
A year ago we were laughing. The pound was worth 1.4 and a bit euros, although that was near the peak and it gradually fell back to stabilise at just under 1.3. But instead of fighting back as the pound had in the past, we had the referendum and down it went again. After a rough week or so it started to stabilise again - but at a much lower level and for the last three weeks it's been steady between 1.18. and 1.2 so that is starting to look like the new baseline which we'll have to get used to - a devaluation of about 8 to 9% minimum.
My understanding is that both Lidl and Aldi buy centrally in Germany so the exchange rate shouldn't affect their procurement as they'll be buying in Euros whereas the likes of Tesco and Sainsbury's will have to buy with pounds which will drive their prices up even further. Asda (Walmart) might be OK if their American bosses procure for them.
So it all looks set for even more foreign supermarkets coming in and those that are here taking even more market share from British supermarkets.
But there is another factor at play. If Lidl and Aldi keep their prices at or about current levels their profits will fall significantly because they are selling in pounds which are worth a lot less since the referendum - and that won't please their shareholders.
I'm thinking that the British supermarkets will have to increase their prices - or lower their quality - and that the German and other foreign discounters will also have to increase their prices - but will retain/grow their market share anyway as they'll still be cheaper than the Brits.
What do you reckon will happen?
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