The Lidl effect on the changing off-trade landscape - Interview, Lidl's UK head of beer, wine & spirits, part II

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In part two of this week's just-drinks interview, Ben Hulme, Lidl's head of beer, wines & spirits in the UK, discusses how the company has worked to change its reputation with both its customers and its suppliers, the role that brands have played - and could continue to play - and Minimum Unit Pricing.

Lidls head of beer, wines and spirits, Ben Hulme

Lidl's head of beer, wines and spirits, Ben Hulme

The reputation for Lidl among UK consumers has changed massively in the last ten years: The retailer's rapid growth at the expense of more-established supermarket chains speaks to that reputational shift. Encouraging that change hasn't been easy, though, to which Hulme attests. “As we've tried to change perceptions,” he says, “we've tried to highlight both the quality and the value, rather than just being cheap. That's the message people have associated with us in the past. We're at a situation now where our customers' opinion of us as a supermarket is vastly better than it was a few years ago. People understand who we are.”

Suppliers have also taken note. “In the past, suppliers have been wary of us and not necessarily wanted to deal with us,” notes Hulme. “That has changed - they've seen what we're doing and that we're not about gimmicks. In wine, for example, we're taking it seriously: If you're selling decent wines, you've got to take it seriously. We're going to add our full concept and our weight behind it.

“When we looked to bring in more regional beers, we went out into the market and some still had these hang-ups. But, anyone that has dealt with us knows that we're incredibly straightforward. We're very upfront with our dealings. If we do a deal with our supplier, we'll fix a contract, generally, for a year. We don't have any hidden merchandising or listing fees. We don't do any of that. We have very transparent relationships with our suppliers.”

I freely admit to be itching to broach the subject of brands with Hulme. The Lidl model – which Aldi also adheres to – is to operate as a private-label retailer. And yet, a well-known brand will occasionally make an appearance on-shelf. Does Lidl consider brands to be a marketing opportunity or a concept the retailer could work with more, going forward? “We've thought about this a lot,” says Hulme. “Primarily, the lifeblood of our stores is own-label - that's where we've made our name and it will always be the number one consideration.

“Spirits, for example, is a hugely brand-dominated category,” he continues. “If we (Lidl) were to list a load of well-known brands, I'm sure they'd go really well. But, it's more that our concept is offering quality every bit as good as a brand, while also offering value. You can do that far more with a private-label range than you can with a branded range. With us, we offer product at a different price and customers can make their decision. Our messaging gets diluted when we start populating our offering with all sorts of brands - it doesn't really feed into our concept.”

With this absence of well-known brands from Lidl's spirits section, then, does Hulme see a need for brands any more? “Market data would suggest there still is a need for brands,” he laughs. “There's a reason why these brands are so successful. With private label, sometimes you can draw cues from brands. With Bourbon, for example, it's widely-believed that it has to come in a square bottle. As a result, everyone does it. So, yes, there's a place for brands, but our model is different and our philosophy will continue to be less about brands and more about value and quality.”

A-ha: Hulme has stumbled into my trap. Lidl has been known to ape brands to the point of drawing legal attention from said brand-owners, hasn't it, Ben? “I think it's a fine line,” he says. “Obviously, what we never want to get accused of is just copying when it comes to packaging. It's something we absolutely don't want to do. At the same time, there is that recognition aspect - if you're going to buy a standard bottle of vodka, for example, the visual cue is a red label. With gin, it's a green bottle. For us, it is very important that we have those visual cues. We'd be stupid if we put a bottle of gin in a see-through purple bottle with a yellow label - it wouldn't be what the customer expects.

“You have to balance that with the fact that these cues have been built up through successful brands," he continues. "So, we have to have those cues that customers can recognise, but also that we're not basically copying a brand. That's something we don't want to do. As we become better known for what we do, we can start experimenting a little bit more.” Later this month, Hulme says, Lidl will launch a higher-price spirits range that “we gave some design agencies a blank slate to work on”.

To conclude the point, Hulme admits that “there are certainly times in the past where we've got it wrong”.

“But, the intention is never merely to copy. We'd be uncomfortable with that anyway.”

Next topic: Minimum unit pricing. The issue remains in the balance, after Europe's highest legislature earlier this year said “not no, but not yet yes”, to the Scottish Government's proposal to introduce the measure.  Where does Lidl sit on the matter? “It's a difficult one,” says Hulme. “I know what my suppliers think about it. There have been studies done that work for both sides. But, you can manipulate studies a certain way. In the UK, we sell our three-year-blended whisky for about GBP11; in Germany, it's sold for EUR6.99. And, they don't have the same level of alcohol-related social problems in Germany that the UK does.

“I like the motive behind it ,” he adds. “It's a noble aim to try to curtail alcohol-related social problems. But, I think it's far too simple to just whack up all the prices.”

Got any better ideas, then? “There are things you can do,” he says. “There are certain products that you can maybe not offer. About a year ago, for example, we took the decision to delist our 2-litre PET strong white cider in a blue bottle.”

Times are good for Lidl in the UK right now. The company is growing at a healthy clip, and has ambitious plans to grow its number of outlets in the country. Meanwhile, customers have long shaken off the stigma of making their grocery shopping decision based solely on price, and have been rewarded with improved quality products at prices that remain at the lower end. Time to relax for a bit and count the money, right? “If only,” laughs Hulme. “There are challenges that we've got that other retailers wouldn't have. There are times when we've had to work hard to get suppliers on board, because of their pre-conceived ideas about us. We've been called a discounter. That's a term I don't really like, because it's misleading. We don't do discounts off our prices, our concept is everyday low price. We don't discount anything. I guess 'discount retailer' has a better ring to it than 'everyday low-price retailer'.

“Another challenge is to make it work and stay competitive, while not having so much space and having tighter ranges. We've been forced to be a bit more creative about what we do. It's an operational challenge. We need to drive the category, while also keeping the culture of simplicity. For example, with our 'Beer Cellar' range, we didn't want to take the beers out of the cases to put them loose on the shelf. But, we realised the market dictates that's what we had to do.

“Whilst things are going well, we are still pretty small in the UK - we've got 4% UK grocery (and wine) - share in an intensely-competitive market. We're not the only people with exciting, good-quality ranges out there, we need to make sure customers are noticing us and that we remain relevant. As soon as you take your eye off the ball, people will pull you up on it. You have to make sure you're getting it right.”

The first part of this interview can be read here.

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