How much of a threat is discounters Poundland and B&M’s push into grocery?

Wilko may have collapsed into administration earlier this month, however, the rest of the discount sector is thriving and are looking to grocery as an area of growth.

The likes of Poundland, Home Bargains, B&M and Poundstretcher have all been making a concerted push in grocery in recent years, with some venturing into the chilled and frozen categories, as well as ambient.

How successful will the variety discounters grocery expansion be, and how much of a threat will this pose to traditional supermarkets?

Why expand into grocery?

Despite the UK grocery market being one of the most competitive in the world, it is no surprise that the general discount players are targeting it, according to Global Data lead retail analyst Nick Gladding.

He says that they are scaling up their grocery offer “to take advantage of food’s role as a footfall driver and to use price competitiveness on groceries to encourage spend across their wider product offer”.

Gladding explains that expanding into the fresh and food-to-go categories enables the discounters “to be relevant to more eating occasions and shopper missions.”

While Poundstretcher offers a range of food and drink from cereals and crisps to sauces, spices and sweets, Home Bargains, Poundland and B&M have been more ambitious and have rolled out products in the chilled, frozen and fresh grocery categories.

Poundland began its bigger push into grocery in February 2022 with the launch of new fresh products at its biggest store in Nottingham, with bakery, fresh fruit and vegetable shelves, now rolled out across more of its estate.

The discount chain took an even bigger leap into grocery when it introduced fresh meat and fish into stores for the first time in August last year.

In June of this year, it had added frozen and chilled food to more than 570 stores and even launched a price comparison campaign against Asda and Morrisons to solidify its name known in the space.

Poundland retail director Darren Kay says: “We’re quietly widening what we offer customers, day-by-day and store-by-store, because we know customers appreciate the convenience of shopping with Poundland for much more of what they need week-in, week-out.”

Home Bargains also offers a wide variety of food items, with dedicated in-store areas for chilled, frozen and fresh products, as well as goods such as its more traditional offering of confectionery and soft drinks.

Home Bargains also opened in-store bakeries in 64 stores in March, offering items such as baguettes, tiger rolls, pastries, muffins and doughnuts.

A spokesperson for the retailer says: “In recent years the market for fresh baked good in the UK has grown significantly and the bakeries we have introduced at stores nationwide have allowed customers to enjoy our competitively priced fresh bakery range.”

The spokesperson says the bakeries will be introduced to more stores.

IGD global insight leader Bryan Roberts tells Grocery Gazette that the cost-of-living crisis has “undoubtedly” led shoppers to turn to discounters for groceries.

“Shoppers have realised that variety discounters have become a credible destination for groceries and the fact that they offer low price points, impactful deals, accessible pack sizes and tertiary brands means that they are ideal for shoppers on a budget,” he explains.

Kantar associate director Sophie Carroll concurs and says the expansion into new product offering is designed to take advantage of the cost-of-living related growth they have experienced.

“Once shoppers are in the door, they can see the discounters’ extensive range of groceries, which many shoppers have been delighted by. This has helped to increase shopper frequency and build bigger baskets,” she says.

Will discounters’ grocery growth continue?

The cost-of-living crisis may have stimulated more food and drink sales for the variety discounters but will this growth continue when the economic environment eases?

IGD believes so. The grocery trade body estimates that the variety discounters will generate an extra £2.2bn between 2023 and 2028, this equates to a whopping 27% growth.

Roberts says there is room for grocery growth for such businesses as “they have already carved out sizeable share in key categories and there remains significant upside in core grocery categories to drive share further.”

He says the likes of Home Bargains and Poundland can learn from Aldi and Lidl “in terms of weekly special offers and driving awareness,” noting that the issue for discounters to overcome will be driving frequency.

How much of a threat are the discounters to supermarkets?

Unsurprisingly the big supermarkets are acutely aware of the discounters encroaching on their turf and are taking defensive action.

Last year, Asda launched its Home Bargains Price Match, mirroring the prices of more than 100 items sold at the discounter, including Sure deodorant, Surf washing powder and Huggies nappies.

Gladding says that “Asda customers are likely to also shop at Home Bargains so it makes sense for Asda to neutralise the threat with a price match.”

However, he warns that the price match may draw attention to the discounter and could dilute Asda’s quality credentials. Roberts adds that a more sensible approach would be “playing up competitive advantages such as range, service and loyalty rewards”.

However, Roberts says that supermarkets like Asda are right to be worried about variety discounters.

“They already have significant share and have established a great reputation in seasonal. If anything, they have caused the big supermarkets just as much of a headache as the food discounters but receive less fanfare due to their absence from the publicly available monthly market share narrative.”

Kantar’s Carroll believes the variety discounters’ push into grocery is more likely to have big impact on independent and convenience stores, where shoppers pop in for quick purchases.

“These smaller independent or convenience stores typically have higher prices and lower quality products, therefore the discounters may lure away some of these convenience store or top up trips.”

With the variety discounters march into food and drink showing no signs of stopping, grocers across the spectrum will be kept on their toes.



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