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Lidl: Not Only for People Having Little Money

The discount chain mainly wins over customers from its competitors in Hungary

Budapest, 27th June 2005 – The most important event in Hungarian retail trade in 2004 was the entry of Lidl into the discount market. The new player mostly won over its customers from other chains that had been present on the market for a long time. These are some of the findings of the first report of a new series of multi-client studies prepared by GfK Hungária Market Research Institute.

Lidl, a discount chain already present in 18 countries, entered the Hungarian market in 2004, thus making the competition in the discount segment already popular with customers more dynamic. The chain of shops belonging to the so-called hard discount category – its main characteristics being shops with small selling area furnished in a functional way, offering a limited choice of products to its customers (especially in the non-food category), with a lot of private label and exclusive brands in its selection – has appeared especially in counties with below the average purchasing power in southern Hungary. It typically opened its shops in small settlements with purchasing power below the national average.

The competitive situation is well characterised by the fact that Lidl has mostly won over its clientele from other chains of shops, and only 9% of its profit comes from the increase in the buying intensity. It can be generally said about Hungarian FMCG customers that they are not really loyal to a shop, and they do their shopping almost everywhere. A Lidl customer household spends EUR 10.33 on average in the chain during a visit, and spends over 90% of its FMCG budget in other shops. According to the surveyed data, the customers of the chain have an above the average inclination to pay visits to the shops of the Tesco, Match, Penny Market and Spar chains as well.

Most of Lidl’s customers come from the Southern Hungarian – mostly the south-west – region, to which the clear explanation is the regional distribution of the shops. Its customers are mostly members of 3-4-person households with children from small and big towns where the housewife is under 40, and have medium or relatively high income.

The Hungarian result of Lidl is well characterised by the fact that during the first six months of its operation it reached nearly 29% of the households through its 29 shops. The proportions of its market shares vary by product category: as a result of its hard discount nature, the chain is stronger on the food and drink markets, while its market share is lower for chemical products. The chain has reached the highest market shares in the deep-frozen pizza, roast blended coffee, ice tea, cream cheese, salad dressing and breakfast cereal segments. The demand is mostly high in Lidl’s case for the private label products, and as a result, the "Lidl” brand became one of the strongest private label brands in the surveyed period.

The survey has been conducted by GfK Market Research Institute, Hungary’s leading market research institute

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