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20/11/2013

"Families who shop at Lidl save around 2,000 euros per year"

Verónica Martos. Journalist. @martosveronica

Wiki Spanish Food.- Lidl has become one of Spain's most profitable retail groups. How did you do it?

Miguel Paradela.- The key to our success is strict adherence to our business model, which is based on four main pillars:

1. The first is procurements that are centralized at group level, which allows for very favorable agreements with our suppliers, with the consequent effects on our final sales prices.

2. The second is optimized variety, eliminating repeat items and offering only products for which there is most demand. This increases business volume and reduces costs.

3. The third is ongoing simplification of our internal processes, with a view to constantly optimizing our value chain, from the producer to the customer.

4. And the fourth is elimination of costs which don't add value, for example, we leave the most popular products in their original boxes and on pallets, saving time as we don't need to organize them on store shelves.

W.S.F.- Lidl's advertising campaigns have focused on highlighting product quality. What's the objective of that strategy?

M.P.- Lidl is the leading supermarket chain in terms of price, and that's how consumers know us.

Our goal is to convey to consumers that they can pay competitive prices for our products without sacrificing top quality.

Our slogan, "Quality is not expensive", which we have used for several years, aims to convey that the products we sell under our own label and which are exclusively available in our stores have the same quality as other, better-known brands in the market, but at a lower price. In fact, in view of household budget estimates published by Spain's National Statistics Institute, families who buy Lidl brand products save around 2,000 euros per year.

W.S.F.- Lidl is an importation platform for promoting Spanish products in Germany. Why are Germans interested in Spanish products?

M.P.- Spain has a notable business fabric structured around the food chain, starting with the farmer and extending to the processing industry through to the retail segment. In addition to producing products with excellent quality, Spanish agri-food companies have worked tirelessly in recent years to control and adjust costs and enhance efficiency. This has enabled them to remain competitive at price level. As a result, today Spain's agri-food industry is robust and competitive, both here at home and in other countries.

This combination of excellence and competitiveness currently exhibited by Spain's agri-food sector aligns perfectly with Lidl's business model, based on offering the best value for money at all times. This is the main reason that Spain's market has become increasingly relevant and occupied a growing part of Lidl's international strategy.

As part of our policy of aggregate group-wide procurements that are decentralized by market, we buy Spanish food products and export them throughout Europe, distributing them throughout our network of over 10,000 stores in 26 countries on the continent.

Lidl's central procurement unit in Spain offers many Spanish suppliers the possibility of distributing their products throughout Europe. In 2012, we bought 2.5 billion euros of goods from Spain's agri-food sector, of which 1.2 billion were sold in other countries. One example is the 960,000 tons of fruits and vegetables bought last year in Spain. This generated revenues of 860 million euros, 80% of which was exported and sold through our international network of stores. This makes Lidl the Spanish fruit and vegetable sector's primary customer.

W.S.F.- How can Spanish products adapt to the needs of German customers?

M.P.- Lidl Spain, which is an export platform for Spanish suppliers, places at the disposal of its collaborators our expertise in the markets where we operate. We have first-hand information about the characteristics of consumers in each country, such as their tastes and preferences. In the collaboration process between Lidl and its suppliers, that information is used to develop specific products for each market. As a result, there are Spanish products which are available in stores in Germany and the rest of Europe, where they have considerable success; however, they are not available in Spain.

W.S.F.- Despite economic difficulties in the last few years, Lidl has continued to grow. How has the group maintained its good results?

M.P.- Because of the crisis, prices have once again become an extremely important factor in consumers' buying decisions. This has led to increased consumption of private label brands..

To respond to this change on behavior, many operators are working to position themselves as price competitive to maintain their competitiveness and market share.

In contrast, Lidl has always been positioned in the market as the leading supermarket chain in terms of prices. That position is part of our identity as a company and its the central pillar on which our business model is based.

Offering the lowest prices in the market while maintaining quality is how we increased our weekly consumer numbers by 20% in the last five years.

W.S.F.- Lidl operates in many countries around the world. How does it adapt to different consumption habits in each country?

M.P.- Lidl's policy of selling the highest-quality products at very competitive prices is enough to enable it to find its niche in the markets where it operates.

The price factor is decisive for attracting customers. Then you offer a selection of quality products adapted to local consumers' needs and tastes, which leads them to trust in Lidl and shop there regularly.

W.S.F.- Many companies have the objective of entering new markets. Does Lidl have plans to expand further in the coming months?

M.P.- While there's still scope for growth in the countries where we currently operate, Lidl is also conducting viability studies to enter the US and Lithuania.

W.S.F.- Now that we're in the fourth quarter, can you opine on balance sheet performance for the year? Do you expect to exceed the 2.4 billion euros in revenues obtained by the Spanish subsidiary in 2012?

M.P.- Our fiscal year ends on 28 February, so we don't want to venture a guess. We have the Holiday campaign coming up, which accounts for a considerable portion of annual results.

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