Tesco launches discount stores to counter Aldi and Lidl

British supermarket giant Tesco on Wednesday announced plans for discount food stores across the UK, as it comes under increasing pressure from German-owned Aldi and Lidl. Tesco, which is Britain's biggest retailer, said the first two Jack's stores open Thursday followed by up to another 13 over the next six months.
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, cautioned that Jack's would not "make an immediate dent in the competition's market share - not at the rate of openings announced". He added: "For context, there are already over 1,300 Aldi and Lidl stores across the country and the two have a combined market share of 13.1 percent, so Jack's is clearly playing a longer-term game." The new discount brand is named after Jack Cohen, who founded Tesco in 1919, and the launch coincides with the company's centenary celebrations.
Tesco chief executive Dave Lewis said Jack's would sell "great-tasting food at the lowest possible prices with eight out of ten products grown, reared or made in Britain". Data group Euromonitor International noted in a recent report that the German "discounters continue to shape the direction" of the UK grocery market.
"Consumer demand for low prices, driven by food price inflation in the wake of the Brexit referendum, as well as real wage stagnation, are part of the reason for this," it said. The market research provider added that consumers were "not simply trading down" for lower prices.
"The UK's discounter operators have invested heavily in making their outlets a credible alternative to the traditional chains, improving fresh food and wine as part of strategy to build a middle-class consumer base," Euromonitor's report said. Faced with increased competition, Tesco's biggest UK rivals Sainsbury's and Walmart-owned Asda are looking to merge. But the mega deal faces uncertainty, with Britain's competition watchdog on Wednesday launching an in-depth probe into the proposed tie-up. Shares in Tesco were up 0.5 percent at 236.3 pence in late trading on London's benchmark FTSE 100 index, which was half-a-percent higher overall.