We have watched events in the grocery sector in April with interest as we can all learn something from the very public battles which are taking place.
The month started with news that Aldi had leapfrogged Waitrose to be the 6th biggest supermarket by market share, continuing the discounters dilution of the ‘Big 4’s’ dominance, which now resides at its lowest level for a decade.
Aldi is using this traction to increase its floor space and will open more new retail space in 2015 than Tesco, Sainsbury’s and Morrison combined.
Then, last week we saw the impact of Aldi’s growth as Tesco announced its results which did not make for good reading. Whilst Tesco admitted that Aldi, Lidl and the other competition had made inroads into its like for like sales, it also used 2014/15 to write down property values, write off debt and basically have a bit of a shakedown of its accounts following a tough year all round.
Much was made of the way Tesco seemed to purge itself in its annual results – getting all of the bad news out in one go rather than enduring a protracted series of announcements which only heap more pressure on them – but only time will tell whether a £6.4bn loss is enough to get them back into shape to keep fighting.
So what can we in the SME sector learn from these battles?
Think of Aldi and Tesco as a pair of lifts servicing a tall building, each heading in opposite directions – potentially to meet in the middle, or at least narrow the gap between the very top and the very bottom. The Aldi story reminds us that it can take time to muster the traction to start the rise to the top and if you manage growth steadily it can pay dividends.
But equally Aldi, like all other small guys and underdogs in every sector, needs to pay attention to the Tesco story and remember that whilst the express lift to the top can be exciting and profitable, once you are at the top there is only one place to go and at that point you remember you are on the express lift!