In the past year the number of discount shoppers has surged. It seems the £4.99 Canadian lobsters at Lidl and the £7.99 bottles of Chateauneuf-du-Pape at Aldi are hard to resist; and when fashion magazines this month found that Aldi’s own-brand anti-wrinkle cream - £1.49 a jar - was the most effective on the market, the shelves soon emptied. More affluent customers are flocking to buy their products.

Even Tesco, the unrivalled champion of the UK grocery market, is beginning to worry. It is so worried, in fact, that just yards from its headquarters in Cheshunt, Hertfordshire, Tesco has built a mock-up of an Aldi store where its executives, product buyers and marketeers can study the tactics being used by the enemy.

Aldi’s model is simple. Stores are run with as few as four staff at any time and managers, earning a minimum of £40,000 a year, regularly roll up their sleeves to stack shelves. Aldi wants to open 50 stores a year, taking it above 400 by the end of 2008, and has plans for 1,500. Lidl has more than 450 and rising. Tony Baines, Aldi’s UK managing director for buying, said: ‘We could have a store in every town in the next 15 to 20 years.’

About 5% of all grocery shopping is at discount chains. Baines believes that could rise dramatically. ‘I think the discount grocery market in the UK could grow to 20% —us with 10% and Lidl with the same,’ he said. He is candid about where the growth will come from and sees Tesco as the most vulnerable to its strategy.

‘If you’ve got someone with 30% of the market, you could assume most of our growth is going to come from that,’ he said. As reports of food price inflation continue to dominate the news, Aldi is taking steps to further lower its already discounted prices on more than 100 of some of the most commonly purchased items in some areas.

“We’re proud to offer customers the best possible prices on the quality products they purchase the most,” said Paul Piorkowski, division vice president. “Aldi already has prices that are up to 50 percent lower than the competition. This is an emphatic statement that we will continue to take the lead in value.”

Among Tesco’s problem in America is a confusion of focus. Many things it emphasizes — green, organic, and sustainable — are features of expensive things and upscale venues in the US. So these features clash with the discount-price image Tesco wants for Fresh & Easy.

Tesco would have done better to emulate the Albrecht family.

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Jim Prevor is widely recognized as a leader in understanding and assessing the state of the food industry. The founder and editor-in-chief of both Produce Business and Deli Business magazines as well as the Perishable Pundit website.

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