Bricks and mortar key to building brand
Lidl boss JP Scally isn't a fan of online shopping and sees greater opportunity in more traditional stores, writes Samantha McCaughren
Managing director of Lidl Ireland
Engineering, NUI Galway
Operations director Lidl France. A number of roles in Lidl Ireland
A keen runner up to marathon distance and a big GAA supporter. His favourite winter hobby is snowboarding.
On Friday, March 2 JP Scally was at home dealing with the logistical nightmare brought about by the blizzards of Storm Emma. The shutters were down on shops across the Lidl group and even though plans were in place to re-open them as soon as possible, getting goods in from suppliers and ensuring staff could travel safely were among the challenges being worked out by the managing director of Lidl Ireland.
The last thing Scally was expecting was a call to say that a store in Dublin had been demolished by vandals operating a JCB. He was tipped off a short time before he could see the story go viral on his social media feeds.
"It was impossible to get there that night, so I got out there the next day," he says. "The most important thing was that we met with all the staff of the store here on the Monday morning as soon as things were getting back to normal and then redistributed them to other stores locally and try to accommodate them as much as possible during the closure period," says Scally.
"We had to reassure them as well that we were going to reopen their store for them. We'd made that decision by the middle of the following week, after surveying everything."
It was a shocking event for Scally, but the company was generally judged to have handled the destruction of the shop in Fortunestown, Tallaght well, actually managing to turn it into a positive for the brand.
Lidl is working on further embedding itself in the Irish psyche. Walking around another Tallaght store - this one beside the German discounter's Irish head office - Scally points out just how Irish the business has become.
For example, the group now carries both Barry's and Lyon's Tea, as well as its much cheaper own brand.
It is part of a strategy to complement Lidl's signature pared-back product line with the key Irish brands that many Irish shoppers say they will not compromise on.
Scally believes that in order for Irish people to do their main weekly shop in Lidl, it must stock some well-known Irish products.
And convincing people to do their main shop at the chain is central to Scally's plans.
"It is critical for future growth of the business because the majority of people in Ireland are familiar with Lidl and would certainly shop with us from time to time and our focus is on converting those people to loyal, long-term customers.
"We're constantly listening to customer feedback in terms of what we're missing from the range, what they'd like to see us add to the assortment.
"And, you know, through the research you see very consistently the same requests coming for new products from all different parts of society and parts of the country. So we're just working then on getting those products listed as customers demand them."
The discounter may have started off here 18 years ago with sparse stores stacking strange-looking goods in boxes and crates, but it has evolved significantly since then.
The 'new concept' shop in Tallaght has fresh produce, an extensive bakery section and even background music, albeit its played quite faintly.
In addition to the new staple Irish products, Lidl has also added some artisan and niche products to its range. Recent additions include low-fat snack Broghies and PowCow frozen yogurt. It also has significant relationships with the likes of Slaney Meats.
Scally is perhaps well-placed to understand that Irish food chain.
From Tyrrellspass in Co Westmeath, he is from a farming family and a career in farming was an option for him growing up. However, he decided to study industrial engineering in NUI Galway.
He saw himself working in manufacturing, but another opportunity caught his eye.
"I was just finishing college in 2003, I was starting to look at what jobs were out there, and I came across an advert for a construction manager with Lidl.
"Although it wasn't exactly my type of engineering I would have touched on civil engineering as well as part of my degree. I'd heard a little bit about this new retailer that was entering the country so applied for it and got the job," he says.
Initially, the role was focused on construction specification for new stores.
"But I actually ended up only doing that for a matter of weeks. Because the company was so new at the time, everyone was responsible for lots of different things so I got quite quickly moved into logistics."
He moved up that ranks before going to work in Lidl France in 2012 as operations director, a board role.
"I suppose the business was going through quite a bit of change in France at the time, there was a lot of investment happening in the market over there and they were looking for a bit of international experience to strengthen their team."
In 2015 the opportunity came to take up the top job in Ireland at the age of 32.
"It's the dream job, I suppose, being managing director of the operation in your own country, your home country," he says.
Much is often made of his relative youth, but Scally says the group focuses on ability and potential over age.
Scally is overseeing continued expansion by the group. It will invest €200m here this year, its largest annual investment in Ireland to date. This includes a major new distribution centre in Newbridge, Co Kildare. The project involves building a new road and building on the centre itself should begin in December.
The group now has 155 stores and Scally believes that will level off at around 200 shops, although declines to say how soon that might be.
"It's very difficult to put a timeline on it, partially because of the planning process in Ireland. It's important for us to get the right sites," he says.
"It will take a number of years to get to that target."
Scally is also responsible for 38 stores in Northern Ireland, the first of which opened in 1999.
Kantar's research on the grocery market puts Lidl's share of the market in the Republic at 11.4pc. Is that enough for Scally?
"Market share is not a figure that we're obsessed with," he says. "I think if we continue to offer customers what they want, we will continue to grow the business."
Fellow German discounter Aldi remains in close competition, but Scally says he spends little time thinking about competitors.
Over the course of the recession and recovery, shopping habits have changed.
Scally says that the group's shoppers are spending more per visit.
"They're trading up into some of the higher value items but primarily it's because they're buying more with us," he says.
While some aspects of the Lidl experience might have changed, the fundamentals remain the same. The shop in Tallaght employs around 35 people. Another supermarket could have close to twice as many people in the same footprint.
Scally says efficiencies are what make Lidl work and that prices fall 2pc to 4pc annually. This is not at the expense of suppliers, he says.
"I think we'd have a reputation in the market as being very, very fair with suppliers.
"So we have fantastic suppliers that we've been working with now for almost 20 years in Ireland, many of which started as very small artisan suppliers with us and have grown over the years with us."
Lidl is not pursuing a digital strategy, despite the fact that this is a massive international trend.
"We have to also bear in mind that online is still less than 2pc of the Irish food market. So although people have switched to online very much, be it for holidays or for clothes shopping in particular, food is different and I think that won't change in the foreseeable future," he says.
"People want to see the quality of the fresh fruit and veg that they're buying, they want to pick up their piece of meat and see it before they put it in their trolley and that's something that online shopping doesn't offer, obviously.
"So I don't believe that we're going to switch to a larger promotion of online in the foreseeable future."
Lidl is experimenting with selling non-food items online in some countries.
"That potentially is an option for us into the future as well. But we see an option to grow our bricks and mortar business more significantly than online certainly for the years to come."
One trend that Scally is focusing on is the shift to convenience and healthy eating.
"We've always had some amount of convenience in the range, however, we have just expanded it more significantly over the last number of months, adding more and more lines.
"I suppose what we are noticing the trend in convenience is towards healthy convenience so it's particularly salads. Proteins and spiralised veg, for example, all of that kind of stuff is becoming more and more on trend, even protein bars etc. So that's where our focus is on."
So what does the future hold for Scally, who started life in Lidl straight after college? Surely he must be thinking that a change would do him the world of good? But Scally remains very much focused on the job at hand.
"I have a lot of ambition still left for Lidl in Ireland," he says. "So I have plenty of work ahead of me in making those things happen."
Sunday Indo Business