Shop | Lidl declared a price war – this is how competitors respond

Shopping chain On Thursday, Lidl published the inter-trade group report it made itself price comparison and at the same time declared a price war on other chains.

The comparison showed that it beats competitors by a clear price difference. Lidl said that it will continue to lower prices as much as it can.

How will S group and Kesko respond to Lidl’s declaration of a price war?

“We can’t comment on our plans,” says S Group’s grocery manager Sampo Pällysaho.

The reason for the reluctance is that the competition authorities have placed Kesko and S Group in a dominant market position and they are not allowed to comment on their price movements in advance.

The combined market share of S Group and Kesko in the Finnish grocery trade is 82.6 percent. Lidl has a 9.6 percent slice of the grocery store.

However, both Kesko and the S group have lowered their own prices several times this year and last year. The price war is obviously already underway.

The S group announced in January that it had lowered the prices of almost 400 products in its Xtra cheap series. Last year it counted them a couple of times.

Kesko, on the other hand, said in February that it had dropped the prices of all products of its own K-Menu low-cost brand. It did the same last year.

In addition, Kesko has reduced the prices of 300 Pirkka products and 4,000 other products.

“We have not made separate marketing campaigns for them, because we consider this to be a normal grocery store operation. The price competition is constant,” Kesko’s grocery manager Ari Akseli says.

Lidl, on the other hand, said in February that it had reduced the prices of around 800 products and in April of a thousand products.

How about what do the competitors think of Lidl’s price comparison?

According to Lidl itself, its own price comparison is fairer than, for example, the price comparisons made by different media, which it says it was disappointed with.

According to Lidli’s own comparison, the grocery basket at Lidl was on average 20 percent cheaper than the grocery baskets of K-Supermarkets and K-Citymarkets. S-market grocery basket Lidl said it beat 13 percent with a cheaper price and Prisma with seven percent.

S-group’s Päällysaho directly knocks out Lidl’s price comparison.

“The comparison made by Lidl is completely subjective and does not describe the entire market situation,” Päällysaho says.

He reminds that Lidl has made a price comparison entirely based on its own selection. Among the 40 products in the comparison, there are, for example, very few brand products and domestic brand products, which are central to the S group’s selection.

Lidl’s comparison was made in seven cities.

“In practice, Lidl has selected the products that are suitable for its comparison”, Päällysaho criticizes.

Päällysaho also criticizes the fact that the comparison was made in a short period of time, two days, and therefore does not describe the price level of the genuine selection.

Kesko’s Akseli also says that Lidl’s price comparison is a pure marketing measure and not an unbiased comparison.

He brings up the same problems as Pällysaho. According to Aksel, the starting point of the whole comparison is skewed and not professional.

Like Päällysaho, he points out the omission of branded products as a problem. They are central to both Kesko’s and S group’s stores, while at Lidl, the share of own brands in the products is exceptionally large, up to two thirds of the selection.

According to Aksel, the comparison should include hundreds of products and not just dozens. The omission of promotional products is also problematic for him.

Lidl has wanted to be profiled as cheap from the beginning. Price is its most important competitive advantage.

How important is price as a competitive advantage for Finnish grocery chains?

According to Aksel, the importance of price to customers has been growing all the time in recent years.

“We have increased the number of both general and targeted offers,” says Akseli.

According to him, the price alone is not the deciding factor, but the ease of grocery shopping is important to many, as is the domesticity and quality of the products.

According to Päällysaho, the S group’s goal is that, in addition to a wide selection, those who want affordable products can find them.

Competitors’ pricing is constantly monitored both in Kesko and in the S group. According to Päällysaho, the S group monitors competitors’ pricing on a weekly and monthly basis in dozens of different stores.

According to him, S Group’s own investigations show that Prisma’s prices are not more expensive than Lidl’s.

“If you compare the 4,000 products that make up Lidl’s selection to Prisma’s, then Prisma’s prices are the same or even cheaper than Lidl’s,” Päällysaho says.

At Prisma, the range of groceries includes around 20,000–25,000 products. About 80 percent of the food sold by the S Group is produced in Finland.

Lidl renewed its loyalty program last winter and boasted that it pays the highest bonus in Finland.

The competitors have not remained idle.

According to Aksel, instead of collecting plus points and plus money, Kesko has invested even more in loyalty discounts given directly at the cash register.

Akseli criticizes the marketing of competitors’ bonus programs. Few reach the advertised bonuses of benefit programs, despite the centralization of purchases, when households are even smaller.

Päällysaho, on the other hand, considers the strength of the S group’s bonuses to be that they are real money flowing into the bank account, unlike other trading groups. No reforms are planned for them.