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In what context did Lidl arrive in Spain?

Lidl has been present in Spain since 1994, when, as part of its international expansion, the company opened its first store in the city of Lleida. Upon arrival, Lidl was positioned in the discount supermarket segment, offering the cheapest shopping basket in the market.

Spain was, and remains, an attractive country with a potential market of 45 million people where discount was still a nascent segment with great potential for development within the large-scale distribution sector. We understood that our value proposition, based on offering quality products at very competitive prices, was likely to succeed here and time has proved us right.

At first we expanded throughout the country very quickly with the aim of reaching as many potential customers as soon as possible. To that end, in the period between 1994 and 1998, Lidl allocated a total investment of more than 220 million euros which served, among other things, to open 150 stores.

 

How has the Spanish subsidiary developed?
To sum it up in one sentence, in these 20 years in Spain we have managed to adapt our original hard discount business model to the consumers’ profile and we are now positioned halfway between the discount and traditional supermarket models. An adaptation in which we have responded to the needs and demands raised by our customers without renouncing the key discount elements that give us our competitive advantage –productivity, efficiency and cost control.

An example of this is the evolution of our range. One thing that contributes to the efficiency and productivity of the discount model is to offer an optimal product range, limited to the most in-demand and best-selling references. This type of range simplifies management and lowers costs.

So, while Lidl’s early product range basically consisted of over 700 references of mostly packaged products, currently this figure has more than doubled, incorporating the several fresh produce sections and offering our customers the option buying everything they need in our stores.

Our stores have also evolved, not only to accommodate this expanded range, but also to improve our image and offer customers a better shopping experience. In short, the key is to find the balance between efficiency and productivity required by the discount concept and the flexibility and adaptability required by our customers.

 

Can you translate Lidl’s current presence in Spain into figures?
In Spain we currently have 535 stores and nine logistics platforms that supply and support the retail network. All this has meant a cumulative investment of over 2,2 billion euros during our 20 years in the country. But what really enables our network of shops and stores to provide product to our over three million customers in Spain each week is our team, which comprises more than 10,000 people in our country.

You have recently announced a powerful investment plan
This year we plan to invest 200 million euros in Spain; this is the largest planned annual investment since Lidl's arrival in Spain. This investment will be used to build 40 new stores, modernize existing ones and build the tenth Lidl logistics platform in Spain, located in Alcalá de Henares. This logistics platform, scheduled for commissioning next summer, will be the company’s largest, and the most sustainable and advanced center in Europe. All these actions are expected to generate 400 new jobs in Spain this year.

 

How do you differ from your competitors?
We are a dynamic, growing company and every day we work towards offering our customers the highest quality at the best price. This is what drives us: quality at the best price, a combination that seems difficult to achieve but which is fully guaranteed by our business model.

Earlier, you mentioned the need for an optimized range. This is one of the 4 pillars of our business model. The other 3 are: we continuously simplify internal processes, we eliminate costs that do not add value to the customer and, perhaps most importantly, we aggregate our group purchasing. This aggregated group purchasing strategy differentiates us from our competitors and gives us a key competitive advantage.

Lidl aggregates the demand for a particular product for the whole group and purchases it in the most competitive market. Because the Spanish food sector now offers high quality products at very competitive prices, the presence of Spanish products in Lidl stores is growing, and not only in the company’s 535 stores in our country, but in the 10,000 that the group has in the 26 European countries in which it operates. Thus, currently more than 70% of the Lidl range in Spain is made up of products supplied by our 500 domestic suppliers, compared with 38% in 2008. Thanks to this model of aggregate purchases, each year Lidl buys food products in Spain valued at over 3,000 million euros, of which 1,500 are destined for export. If we compare the export figure to our imports of 400 million euros in 2013, we see that Lidl generates a positive trade balance of 1,100 million euros for the Spanish food industry.

 

How would you evaluate the distribution sector in Spain?
In Spain, food distribution is a highly competitive sector with many players and commercial formats that serve more than 45 million consumers.

In the difficult economic context caused by the economic crisis, in which price has become one of the key factors for consumers when making a purchase, it is essential that the sector companies keep their costs under control, adjust their margins and remain competitive.

Lidl’s business model, based on the fundamental principles of the discount philosophy, gives us an essential competitive advantage and enables us to maintain our leadership in price without customers having to renounce the best quality when filling their basket. The sustained customer growth we have experienced in recent years indicates that our model is a convincing one and we want to continue on this path.