Business Irish

Tuesday 16 July 2019

A Lidl taste of success

Exclusive behind the scenes access at the hugely profitable discount retailer Lidl reveals why the supermarket chain is growing so fast in bringing in new shoppers

FEEDING THE NATION: Lidl Ireland purchasing manager Ryan McDonald with senior buyers Brendan Conway, Liam Casey and John McDonagh in the supermarket chain’s tasting kitchen in their Newbridge headquarters. Photos: Tony Gavin
FEEDING THE NATION: Lidl Ireland purchasing manager Ryan McDonald with senior buyers Brendan Conway, Liam Casey and John McDonagh in the supermarket chain’s tasting kitchen in their Newbridge headquarters. Photos: Tony Gavin
Peter Hynes, Head of Logistics in the Lidl warehouse in Newbridge. Photo: Tony Gavin

John Reynolds

SELLING craft beers and taking part in a Dragon's Den-type nationwide TV competition for food producers are the latest tactics that Lidl (Ireland's fifth largest supermarket, according to consumer researchers Kantar Worldpanel) are deploying in the battle for a weekly shopping spend that is thought to be worth about €9bn a year.

On an exclusive visit to the privately-owned German retailer's Newbridge, Co Kildare, headquarters, as we stand in a tasting kitchen in front of a lavish spread of breads, cakes, stake, vegetables, bottles of beer and an Irish lager, whiskey and cooked vegetable dishes, I meet its three thirtysomething senior buyers - Liam Casey, Brendan Conway and John McDonagh - and purchasing director Ryan McDonnell.

If you've ever wondered who plays a significant part in deciding what ends up on its shelves and ultimately on our dinner plates, it's them.

The TV series, The Taste of Success meanwhile - produced in collaboration with RTE, presented by the chef and Lidl brand ambassador Paul Flynn and with a prize of €100,000 to be won seems to be a very clever move to capitalise on the popularity of the Irish and British Bake Off TV series - a media coup might just make its rivals green with envy.

"It'll be judged by our employees and features four chefs including Catherine Fulvio and Martin Shanahan as mentors. It's emphasising how we're open to new ideas and want to embrace creativity and any mad or funny ideas that people want to bring," enthuses 37-year-old Dubliner McDonnell as I try some stuffed pepper, followed by carrot and parsnip, red cabbage and creamy mashed potato - all very tasty.

Seen initially as a dour discounter when the company arrived here in 2000, the company has had to adapt to Irish tastes, he says, in what is his first ever media interview.

"We started out as a co-discounter, with a template from the German market, but we've evolved and developed to become more ingrained into the Irish retail landscape. We're buying far more local products and working to develop Irish brands. We've worked to ensure the quality, perception and trust is there."

With 141 stores and 3,500 employees here, the company now deals with about 200 Irish suppliers and its 60-strong buying team has doubled over the past two or three years, with plans to continue growing it.

The number of staff has outgrown this Newbridge HQ and the company plans to build a new head office on a site it has bought in Tallaght.

"At times, up to half of what we sell could be from Irish suppliers or producers," he says.

That's €375m worth of a total of €750m of groceries a year, going by Kantar's figures.

"To date, we've exported over €300m of Irish beef to Lidl stores in 14 countries overseas, and that's grown considerably over the past year and continues to do so. We've got excellent farming standards, the feed, the grass and the expertise," he maintains, as I taste a stout aimed to rival Smithwicks, then a "red ale," and the Irish lager - only a sip of each, mind: the legendary days of journalists having liquid lunches are long gone.

Processors Liffey Meats in Cavan and Slaney Foods - and farmers around the country that supply them are the main beneficiaries, while seafood, dairy produce, whiskey and liqueurs, cakes, jams, pork and plants and fruit and veg are also selling well in foreign outlets.

Enterprise Ireland have taken an interest in the export drive and along with Lidl will provide encouragement and support to producers who start off as artisans with good products and ideas.

"There's a few I've identified so far who might not make it on their own, but need help developing and achieving their full potential," he affirms.

While the senior and junior buyers use the kitchen we're in regularly for tastings, comparing potential and new products with existing ones and rivals, external agencies and laboratories also carry out other sensory, taste, microbiological and taste tests.

The company has ensured that its DNA testing in particular has become even more robust as a result of what the industry learned after last year's horsemeat scandal, in which some rivals here and overseas became embroiled.

It shined a light on one unsavoury depth of the notoriously competitive grocery business, but perhaps helped Lidl and others reach out to new customers and re-emphasise their quality standards and value. Super Valu here also now seems to be fighting on these grounds, and may soon be the nation's biggest grocer if it and the Germans eat into more of market leader Tesco's 25.2pc share.

While Lidl has 8.3pc of the market, and grew its share by 12.3pc over the last year, all grocers largely seem to be trying to lure the same shoppers through their doors. Super Valu teamed up with Bord Bia and Local enterprise offices last September to launch a Food Academy for small food producers and will promote them in the run-up to Christmas, while aiming to make the meat sections of some stores feel more like an artisan butchers.

They are also gaining ground with their own-brand range - on which retailers bank more profit than branded groceries - and promoting items such as French wines in a bid to stay connected with middle class and former Superquinn shoppers, after their merger last year.

"It's a saturated market to a certain extent and the battle will be won on how our brand is perceived: the trust, the product offering, the quality and pricing," adds McDonnell, a UCD graduate, as we take a brief walk around its massive, busy warehouse - the size of more than four football pitches Head of logistics here is Dubliner Peter Hynes, who, like his colleague has had (as you might expect from a German company) an apprenticeship-style induction into the business, involving stints in various parts of the company in its home nation.

As tightly-packed pallet bays five high tower all around us with microwaves, bottled water and other drinks, Tayto and Hunky Dory crisps, it's evident that we're here during a quiet period - it tends to get busier at peak times of the morning and late afternoon and evenings.

Nearer Christmas there will be a melee of pickers and packers zooming around on electronic buggies.

We pass someone cleaning up some spilled beer, while nearby the pallet bays are full of Christmas crackers, chocolate Santas and tins of Cadbury's Roses. At any one time, there could be enough stock here - worth millions of euro - to replenish the shelves in the 46 stores this warehouse serves for two or three weeks.

"Some of our rivals compete very well and the customer is winning in Ireland - whereas perhaps before, they weren't so much. We feel we've helped to shake up the market to their advantage," McDonnell continues.

"Our customers know they won't necessarily be drawn into impulsive purchases based on different brands' promotional cycles.

"They can distract and bamboozle you in a larger retailer. How we put our offering to the customer is a lot more simplistic - and when they've paid at the till, they'll see the saving, which might help you pay a utility bill, for example, but they won't be losing out on the quality of their groceries, because it'll be the same, if not better."

Shoppers can look forward to continued expansion, if perhaps at a slower pace, and there is reason to be positive about the recent upturn in the economy, he maintains.

"We plan to invest further in the Irish market, with new stores and modernising or extending existing ones. We're now well represented nationwide, so at a more strategic stage of expansion.

"As we've grown our market share, the demand for this offering is still there: people are trusting us more and shopping with us more. But it might be early next year, before we can perhaps talk about a three-year or five-year plan to include our new HQ, as well as new stores or warehouses.

"We're seeing growth again now and if there's a bit of grace on income tax, the pressure on us will be released a little. We have a lot of healthy, creative businesses here, particularly in the food industry and with that plus the economy moving in the right direction, I'm positive about the near future," he concludes.

Sunday Indo Business

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