See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/242023367

International Expansion and Strategies of Discount Grocery Retailers: The

Winning Models. International Journal of Retail & Distribution Management
31: 55-66

Article  in  International Journal of Retail & Distribution Management · January 2003

DOI: 10.1108/09590550310457845

CITATIONS READS

75 3,667

1 author:

Enrico Colla
ESCP Business School
145 PUBLICATIONS   490 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Evolution des tendances du consommateur et développement durable View project

Stratégies des entreprises de la grande distribution View project

All content following this page was uploaded by Enrico Colla on 14 January 2014.

The user has requested enhancement of the downloaded file.

 Introduction
International expansion Discount food retailing has experienced
and strategies of considerable expansion over the last ten years
discount grocery and currently occupies an important position
in the European retail industry. However, a
retailers: the winning certain number of discount retailers have had
models to abandon the market over the same period,
while others have obtained good results both
Enrico Colla in their domestic markets and abroad.
The purpose of this article is to illustrate the
determining reasons behind the success or
failure of discount retailers on the
international scene through the identification
and analysis of the various strategic groups,
The author
competitive advantages, entry barriers to the
Enrico Colla is Professor and Research Dean at
sector and barriers to mobility between the
NEGOCIA, Paris, France.
groups.
These concepts, well documented in
Keywords general business strategy literature (Porter,
Internationalization, Strategy, Grocery, Retailing, 1980, 1985), have not been used very often in
Competitive advantage, Diversification the analysis of the retail distribution sector,
particularly at the international level (Burt,
Abstract 2002). This article takes into consideration
Illustrates the reasons that have determined the success this literature and, concerning the data used,
or failure of the discount retailers on the international this is essentially based on documentary
scene, through the identification and analysis of the research that took in the main trade
strategic groups, competitive advantages, entry barriers to magazines and professional journals, as well
the sector and barriers to mobility between the groups. as published surveys and studies of the sector
Three strategic groups of discount food retailers that have and analysis of individual companies. During
adopted different internationalisation strategies have the course of research, the author extended
been defined and a series of key success factors of the research to company documents, balance
different strategic groups has been identified. The winners sheets and activity reports, and also
in the race to international expansion are in particular the interviewed company executives whose
leaders of the first group of German hard discount contributions enabled a better identification
retailers. But important niches in several foreign markets
of the groups and individual company
can also enable growth of retailers in the second group,
strategies and the elaboration of the
the German soft discount retailers specialised abroad, and
hypotheses put forward in this article.
of the third group, the French soft discount retailers
diversified abroad.

Electronic access
Discount food retailing in Europe

The Emerald Research Register for this journal is Discount food retailing in 2000 was present in
available at all European countries with 29,747 stores
http://www.emeraldinsight.com/researchregister trading under 72 names and with a market
The current issue and full text archive of this journal is share of 14.9 per cent of food sales. Market
available at share ranges from 4.2 per cent in Greece to
http://www.emeraldinsight.com/0959-0552.htm 42.9 per cent in Norway (see Table I).
From 1995 to 2000, this retailing business
format experienced slow growth in Europe in
terms of market share; it has, however,
International Journal of Retail & Distribution Management increased in the majority of countries, with
Volume 31 . Number 1 . 2003 . pp. 55-66
# MCB UP Limited . ISSN 0959-0552 the sole exceptions of Italy, Switzerland and
DOI 10.1108/09590550310457845 the UK.
55
 International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

Table I Market share of discount food retailing in Europe Table III Discount retailers without outlets abroad (by number of outlets
Market Market in 2000)
share 1995 share 2000 No. of No. of No. of
(%) (%) stores Leader Group and country of outlets outlets
Name origin 1995 2000
Norway 38.3 42.9 1,380 Rimi
Germany 29.5 32.6 13,081 Aldi Kwik Save (9) Somerfield ± UK 976 500
Belgium 24.7 27.8 815 Aldi Denner (10) Denner ± Switzerland 393 497
Denmark 20.0 22.0 859 Netto Siwa (11) Tradeka ± Finland 434 421
Austria 16.5 21.8 777 Hofer Ed (12) Carrefour ± France 423 419
Sweden 11.0 15.2 328 Rimi Euro Spin (15) Italy 140 308
The Netherlands 12.2 14.1 797 Aldi Zielkpunt (17) LoÈwa ± Austria N/A 293
Finland 10.7 11.2 855 Siwa CDM (18) Intermarche ± France 214 243
Spain 6.5 9.5 2,865 Dia NP Market (19) Edeka ± Germany 180 239
Portugal 6.1 9.5 420 Minipreço Sosty (21) Interdis ± Italy 260 234
United Kingdom 11.3 8.2 1,290 Kwik Save Kiwi (22) Johansonn ± Norway 82 230
France 6.4 7.9 2,622 Lidl Le Mutant (23) Coop ± France 199 215
Switzerland 8.6 7.9 777 Denner In’s Discount (24) Pam ± Italy N/A 207
Italy 9.7 6.7 2,620 Lidl Mondo (25) BML ± Austria 154 191
Greece 1.6 4.2 225 Dia Note: The figures in brackets indicate the relative position of the brands
Total 13.6 14.9 29,747 Aldi in terms of number of outlets in 2000
Source: AC Nielsen in Reidiboym (2001) Source: AC Nielsen in Reidiboym (2001)

Structure of the sector and international This data demonstrate that the biggest firms
presence are present in the largest number of foreign
countries, confirming the existence of a
The sector is relatively concentrated and a relationship between the size of the firm and
mere eight names account for 70 per cent of its international exposure.
the stores. If one considers only the 25 biggest Presence abroad seems also to depend on
names, all of which own at least 200 stores the specialisation or diversification of the
(with the sole exception of Leader Price), 12 group to which the discount retailer belongs.
of them have outlets abroad and the top eight If one compares the discounters in the light of
are also the European market leaders (see the extent of their international presence and
Table II), whereas the other 12 are only of the diversification of the group to which
present in their respective domestic markets they belong, one observes that the discounters
(see Table III). present in several countries belong to

Table II Discount food retailers with outlets abroad in 2000 (by number of outlets in 2000)
No. of No. of outlets No. of outlets
Trading name Group and country of origin countries 1995 2000
Aldi (1) Aldi ± Germany 8 4,171 5,246
Lidl (2) Lidl & Schwarz ± Germany 11 2,194 3,927
Plus (3) Tengelmann ± Germany 3 2,662 2,950
Dia (4) Carrefour ± France 4 1,906 2,816
Penny (5) Rewe ± Germany 3 2,225 2,537
Netto (6) Dansk Supermarket ± Denmark 3 880 1,397
Spar AG ± Germany
Norma (7) Norma ± Germany 2 1,046 1,270
Rimi (8) ICA AB-Svezia (Ahold) 3 472 666
Rema 1000 (13) Reitan ± Norway 3 286 370
Leader Price (14) Casino ± France 2 189 333
Prix (16) Coop ± Norway 3 230 299
Facta (20) Coop ± Denmark 2 262 234
Note: The figures in brackets indicate the relative position of the brands in terms of number of outlets in 2000
Source: AC Nielsen in Reidiboym (2001)

56
International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

specialised, or relatively undiversified groups, discount is more competitive than soft

whereas the purely national retailing store discount), the roles of the retailing brand
brands belong to highly diversified groups. names (in the hard discount the percentage of
Inter-format synergies seem to be more exclusive private labels exceeds 90 per cent,
significant in domestic markets than at the whereas in soft discount it only accounts for 50
international level. per cent). For a more elaborate definition of
Furthermore, no hard discount retailer is hard and soft discount (see Colla, 1997; Colla
limited to mere national presence (one and Dupuis, 1997).
exception was CDM – of the French
Intermarché group – which, facing huge
losses, recently changed store name adopting The three winning business models
Netto fascia) whereas many soft discounters
limit themselves to purely domestic Among the retailing brand names thus
expansion. International development is segmented, three strategic groups stand out
therefore a strategic option that appears to (see Table V): that of firms specialised in hard
impose itself on retailers in hard discount discount (Aldi, Norma, Lidl and Netto), soft
more than in soft discount. discount retailers belonging to diversified
national groups (Penny, belonging to Rewe,
and Plus, belonging to Tengelmann) but
Strategic groups in international specialised abroad, and finally the discounters
discount retailing belonging to large groups diversified not only
on the domestic market, but also abroad (Dia,
We can now proceed to segment the 13 belonging to Carrefour and Leader Price
discount retailing brand names present belonging to Casino).
abroad, (the 12 in Table II to which we have These three strategic groups have a varied
added Colruyt), using the concepts of strategic international presence and somewhat
groups and strategic dimension (Porter, 1980, different key success factors.
1985). The two dimensions retained are the Purchasing power and experience in own
format, hard and soft discount – also called label management are important factors of
discount supermarket (see Burt and Sparks, success for all discounters, the former being
1994) and the degree of diversification of the the most important for retailers from the first
parent company (see Table IV). Hard and soft group. While the retailers in the first and
discount are defined by the amplitude and second groups resort to use of numerous
breadth of choice of the products carried (less private brands, generally one per product line,
than 1,000 SKUs in hard discount and three those in the third group exclusively use their
times more in soft discount), the position in own brand.
terms of costs (much lower in hard discount), By contrast, expertise in fresh produce is
pricing levels and value for money (hard superior among retailers in the second and

Table IV Segmentation of discount retailers (DR) present on the international scene

DR belonging to specialised DR belonging to groups with DR belonging to highly
groups low foreign diversification diversified groups abroad
Hard Aldi (10/2,750) Prix (3/299) Rimi/Ica AB (1/500)
discount Norma (2/137) Facta (2/234)
Netto ± Dansk and ITM a (3/348) Lidl (14/1,745)
Soft Rema 1000 ± Reitan (7/326) Treff/E-Delta ± Edeka/AVA (4/124) Leader P. ± Casino b (2/213)
discount Colruyt (1/10) Penny ± Rewe (6/665) Dia ± Carrefour c (5/3092)
Plus ± Tengelmann d (5/788)
Notes: In brackets: the number of foreign countries and the number of stores abroad in 2001
a
Dansk Supermarkets is the owner of Netto stores in Denmark, the UK and Poland, whereas Netto network in
Germany has been the property of ITM since the buyout of Spar Handels (1997). Therefore we still consider this
store-name as being of Danish origin; b Of which 150 Barateiro in Brazil, in partnership with PaÄo de AzuÂçar;
c
Of which 277 Minipreço in Portugal, in Partnership with Sonae; d In Austria the fascia of the discount stores of
Tengelmann is Zielpunkt
Source: Derived by Enrico Colla from data provided in Food Business News, October 2002

57
International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

Table V The three strategic groups of retailers in international discount

Soft discount groups specialised
Hard discount specialised firms abroad Soft discount diversified groups
Aldi, Lidla , Nettob , Norma Plus, Penny, Rema 1000 Dia, Leader Price
Very limited assortment Larger choice (particularly of fresh Larger choice (particularly of fresh
Dominant own labels produce) produce)
Mono-format Strong own labels Strong own brand
Global concept Part of a multi-format national group Belongs to a group with multiple
International purchasing power Concept partially adapted to foreign format abroad
No inter-format synergies markets Concept partially adapted to foreign
Strong international presence Purchasing power by country market
Leaders on domestic and foreign No inter-format synergies on foreign Purchasing power by country
markets markets High level of managerial synergies
Limited international presence abroad
Followers on domestic and foreign Strong international presence of the
markets group
Followers on domestic market and
pioneers on some foreign markets
Notes: aLidl & Schwartz also own a number of hypermarkets; bDansks Supermarket (Netto’s parent company) also
owns, but exclusively in Denmark, a substantial network of supermarkets

third groups, who carry a wider and more The importance of purchasing volume of
diverse range of this family of products. private label products in discount
Finally, retailers in the third strategic group retailing
benefit from sales and purchasing synergies
with the other retailing formats belonging to The importance of sales and purchasing
volumes in discount retailing has been
the same group which owns a multi-format
underlined by analysts of the format (see
network abroad.
Colla, 1997; Colla and Dupuis, 1997). The
The strategies adopted abroad demonstrate
major difference in prices compared to
a link with the characteristics of the formats
supermarkets and hypermarkets – from 15 per
and expertise of the discounters: the more
cent to 30 per cent – for products of
limited and restricted assortment enables
comparable quality, is the main competitive
more substantial globalisation of the range of
advantage and the principal criterion of
products offered by retailers in the first group
choice of this formula (see Colla, 1994). The
and enables them to secure bigger reductions
low prices are made possible by the
in international purchasing costs than those
purchasing of large volumes of exclusive
secured by other groups. However, the third
products without any manufacturers’
group benefits from inter-format synergies, proprietary brand name. The producers do
both in terms of purchasing and in the not pay for the communication and marketing
marketing of the brand (and store name). costs of these products and are also able to
Retailers of the first group are leaders in reduce their manufacturing costs and
discount food retailing in their domestic overheads. Thanks to large production
markets holding substantial market share. volumes and the intensive utilisation of
They are present abroad in most countries, production equipment, they operate on net
and with a larger proportion of market share, margins that are lower than those of the
and their rate of international expansion over leading brands but, due to the high turnover
the past years has been higher in terms of of investments, their profitability remains
number of stores than penetration into new perfectly satisfactory.
countries. This special relationship between industry
Discounters in the third group, followers in and retailing is similar to the ‘‘comakership’’
their domestic markets like those in the relationship between manufacturers and their
second group, benefit from managerial suppliers of raw materials or components
synergies abroad, which enable them to (Lugli, 1993). It also enables a lightening of
penetrate some new markets more easily. what are termed interface costs – in selling
58
International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

and logistics – between producers and and Intermarché in France), the discount
retailers. retailer will have a competitive advantage of
Therefore, through the modification of the this order with a market share of 4 per cent in
vertical linkages, hard discount brings about a the food sector. To achieve a market share of
complete overhaul of the value chain from this magnitude in these two countries, one
producer to retailer (Porter, 1985). The needs at least 1,000 stores. Only Lidl is in this
co-ordinated management of certain activities position in France. The importance for
(logistics, sales) is optimised, others are retailers of this factor of competitiveness is
transferred – with a major reduction in costs – particularly marked at the national level in
from the supplier’s value chain to that of the each of the countries in which they are
retailer. The balance of power in the channel present, where pooled international purchases
of distribution has tilted in favour of the are of a lesser size. It is, however, more
retailer (see Coughlan et al., 2001), who significant in hard discount, because of the
decides on the characteristics of the products limited number of products and the
and chooses suppliers in terms of their concentration in groceries and beverages (less
performance in the pursuit of his objectives. fresh produce), making standardisation of the
The latter are generally dependent on the assortment more common at the international
former, but they reap sufficient rewards to level.
accept this kind of relationship.
Hard discounters therefore, carry a range of
products that are of slightly inferior quality to Competitive advantages of hard
the leading industrial brands, but at a discount and defensive strategies of
substantially lower price. The greater the their competitors on a national scale
percentage of such products (almost the
entire assortment for Aldi and Lidl), the more These considerations explain the partial
competitive the price. Furthermore, all failure or serious difficulties faced by soft
management costs and investment costs are discount retailers already present in countries
reduced to a minimum and the huge turnover where hard discount retailing has made
of capital secures good profitability, in spite of inroads (e.g. Kwik-Save in the UK).
low gross margins. Therefore, these firms But purchasing volume and the experience
have introduced innovations (Dupuis, 1998) acquired in supplier relationship management
not only at the point of sale (easier to imitate by retailers in the first group, being hard to
by their competitors), but also in the vertical imitate, also created entry barriers for other
relationships in the value chain (harder to formats (‘‘classic’’ supermarkets and
imitate). hypermarkets) and barriers to mobility
The competitive advantage over (Porter, 1980) for firms from other strategic
competitors, in terms of purchasing is linked groups willing to enter the hard discount food
to purchasing volumes by product line more retailing business.
than to the overall size of the company (Filser, The existence of these entry barriers has not
1998). always been perceived by the competitors,
In the French example (see Table VI), one who opened a certain number of stores and
observes that the low number of players in gained market share at the regional level in
hard discount enables those present, in a the short term, but subsequently had to quit
sector that in France accounts for around 9 the market or change their strategy,
per cent of market share, to benefit from abandoning the hard discount business.
purchasing volumes per product line that are Those options confronted numerous
three to four times higher than those of classic discount retailing brands that certain leading
supermarkets (which in France account for 36 national retailers (e.g. Intermarché in France,
per cent of the market). Coop in Italy and Asda in the UK) who saw
A hard discount retailer should have a fit to develop when the German hard discount
market share of at least a quarter of that of a retailers appeared on the scene in their
rival supermarket to maintain the advantage countries in the early 1990s (Colla, 1997).
in terms of cost and price cited in the These retailers often work on developing the
example. In a European country where the benefits of location and purchasing synergies,
leading supermarket chain has a market share aided by their access to vast networks of stores
in excess of 16 per cent (e.g. Tesco in the UK of other retailing formats, their knowledge of
59
International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

Table VI Comparison of hard discount (HD) and supermarket (SM) in France (2000)
Turnover/sku Turnover/sku
No. of skus in No. of skus in HD stores in SM stores
HD stores in SM stores (FRF) (FRF)
General consumer products + self-
service fresh produce 1,200 8,164 267 72
General consumer products department 885 6,529 225 60
Pharmacy sector 568 3,591 186 63
Beverages sector 126 790 462 126
Hygiene, health and beauty care sector 191 2,148 185 47
Self-service fresh produce department 315 1,635 385 120
Chilled foods sector 212 1,172 459 141
Frozen foods sector 103 464 234 66
Note: Sku = Stock keeping unit
Source: AC Nielsen in Le HeÂnaff (2001)

suppliers and their experience in private 1000 in Sweden). After a phase of growth that
brand management, acquired during the lasted until 1996-1997, when they went from
development of their own brands. These 78 (1991) to 115, the number of operators in
synergies were valuable in the short term and the discount retailing sector diminished over
at the regional level, but insufficient in the the following years to return to 104 in 2001.
long term and at the national level, when the Indeed, no new retailer has managed to break
volume/costs/price advantage of the German into this group on an international level with
hard discount retailers started to gain ground the sole exception of Netto, whose success
with their gains in market share. In France, was in any event somewhat mitigated
for example, the national discount retailers, (Bennison and Gardner, 1995).
after a period of strong growth from 1991 to Mobility barriers also appear to be high
1994, began to reduce the number of new towards the third strategic group. Mobility
stores opened and to lose market share into this group is available only to firms that
(INSEE, 2001). already have a substantial network abroad, or
Furthermore, the defensive strategy of the that have (and are ready to invest) very
national players hardly ever transformed itself substantial financial resources; needed to
into a strategy of international expansion, acquire (in the short term) or to develop (in
confirming the defensive nature of their the medium and long term) a multiple-format
approach and the competitive weakness of international network. Moreover, the multi-
their store concepts. No less than 32 discount format portfolio has to be food oriented,
retail chains in Europe had to cease trading, discount oriented and the firm has to have
in the last five years alone, of which 25 in soft some experience on small proximity format.
discount and only seven in hard discount Not so many groups have these characteristics
(Dial in Belgium, Larc, Eda, Dia in France, and, apart from Carrefour and Casino, there
Tip in Germany, Prijs-slag in The are no other successful examples, until now,
Netherlands and Billi in Switzerland). Among of that strategy. The international
the former, a significant number were diversification efforts of Rewe and
comprised of retailing brands created for Tengelmann have not yielded very positive
‘‘defensive’’ reasons, in the UK (Food Giant, results and Plus and Penny remain their only
Crazy Prices, Pioneer, Dales, Discount Giant, retail brands to have succeeded abroad.
Norman’s, Solo), in Austria (Top Diskont, On the contrary, international
Famila, Meinl-Jeee), in Finland (Säästari- diversification is not an objective for retailers
Valtti-Rabatti), in Portugal (Mini-Preço), in in the first group of hard discounters. It is
Spain (Superdescuento). Others tried to certainly not one of Aldi’s objectives, who
penetrate certain countries, but were consider that they have plenty of
unsuccessful when faced with local opportunities to exploit with their format. By
competition and the inability to reach the contrast, Lidl has a hypermarket concept that
breakeven point rapidly (Dia, ED, Tip and they have exported to the Czech Republic and
Plus in Italy, Penny Market in Spain, Rema to Slovakia. But theirs appears to be an
60
International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

opportunist strategy of acquisition of retailers to achieve high sales volumes in each

locations, rather than one of genuine, long- country to reduce their costs.
term strategy of diversification. On the other hand, leading retailers in the
second strategic group are those that
developed a competing store concept to
Presence abroad, international growth retaliate against Aldi (and Lidl) in Germany.
and globalisation of the business model Over a long period of competition, they
achieved high sales volumes enabling them to
The stronger competitive advantages of the benefit from a price differential sufficient to
firms of the first group mainly explains the differentiate them from traditional
higher levels of performance in international supermarkets (Colla, 1997). But their
growth of the leading store names in this international expansion has been modest and
group. cautious (see Treadgold, 1997), due to the
Retailers in the first group (specialised hard inferior differentiation of the business model
discount) are present in a larger number of by comparison with classic supermarkets,
foreign countries and have occupied more their greater need to adapt to different
important positions for longer (see Table II). markets and their difficulty to achieve high
This successful aggressive internationalisation purchasing volumes on certain lines of
(Treadgold, 1997) appears to confirm the products. Furthermore, the limited
international presence of the group they
increasingly global aspect of their business
belong to does not enable them to benefit
model (Salmon and Tordjman, 1989). Their
from synergies with other retail formats
recent international growth is henceforth
abroad.
greater in terms of market penetration rather
than market development in new countries
(see Table VII). Edeka/AVA, Norma and Lidl
increased their presence abroad in two new The importance of synergies in
countries in 1998-2001, whereas Rimi, international growth of multi-format
Leader Price and Dia only in one. The other groups
discounters did not increase at all their Retailers in the third strategic group, such as
presence abroad (in terms of countries) and Dia and Leader Price, preceded the
Plus (Tengelmann) even reduced the number penetration of hard discount in their countries
of foreign countries during the same period of of origin (Spain for Dia and France for
time (withdrawing from Italy). The retailers Leader Price) where they had already
of the first group, being already present in a developed specific competitive advantages
relatively high number of countries, have had that were somewhat different from those of
a larger number of growth opportunities to hard discount.
exploit in these countries and are less likely to But they have always engaged in
need to look for others. At the same time, this international expansion thanks to the fact they
yet again underlines the importance for belong to major multiple format discount

Table VII International presence (2002) and growth among leaders in discount retailing (1998-2001)
Low growth abroad in no. of Strong growth abroad in no. of
stores (< 100) stores (> 100)
Weak presence abroad in Rimi/Ica AB (1/±14) Leader Price (Casino) (2/142)
terms of countries (< 10) Colruyt (1/8) Plus ± Tengelmann (5/458)
Norma (2/47) Dia ± Carrefour (5/551)
Netto (ITM et Danks) (3/42) Rema 1000-Reitan (7/153)
Treff/E-Delta ± Edeka/AVA (4/61)
Penny ± Rewe (6/93)
Strong presence abroad in Aldi (10/546)
terms of countries (¶ 10) Lidl (14/1745)
Note: In brackets: the number of foreign countries of presence in 2002 and the number of stores opened between
1998 and 2002
Source: Derived by Enrico Colla from data provided in Food Business News (1999, 2000, 2001, 2002)

61
International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

retailing groups that use these retailing brand then, only when their sales, and the
names in their international expansion reputation of the brand, reach a certain level,
strategy. Carrefour is the leader in several the group opens discount outlets under the
European countries outside France (Spain, Leader Price brand name. When 1,000
Portugal, Belgium and Greece); it is number Leader Price product items are sold in about
two in Italy, the leader in Latin America ten or so hypermarkets in that country, the
(Argentina and Brazil) and in Asia. Its success threshold is reached at which it becomes
in international markets is especially based on possible to open stores under the brand name
the hypermarket but also, through a series of (Moyroud, 2000). Over and above the cost
acquisitions, the group has recently migrated savings, the enhancement in the brand image
towards a multiple format strategy (see Colla resulting from this strategy enables them to
and Dupuis, 2002). Following the merger overcome this major difficulty of international
with Promodès, Carrefour acquired Dia, the growth faced by retailers offering a large
market leader in limited range discount number of private label products, such as
retailing in Spain, which has gambled on Marks & Spencer (McGoldrick and Blair,
proximity creating a huge network of small 1995). Unlike retailers in the third strategic
discount stores and developed considerable group, those in the first and second prefer to
expertise in the creation and management of fall back on private label brands, generally by
low-price private label products. line of product. Not being in a position to
Carrefour, the leader in several markets, is benefit from similar synergies, their policy
now in a position to favour the development tends also to minimise the risks associated
of the brand name in the countries where with the potential failure of certain products.
there are growth opportunities for discount
retailing. The synergies that Dia can benefit
from within the group are entrepreneurial, The strategies of choice of country
financial and managerial (Penrose, 1959; adopted by the companies
Colla, 2001). In the various countries where it
is already present, Carrefour has created a A significant difference is apparent between
web of relations with its environment (Dupuis the three strategic groups in terms of their
and Prime, 1996) that facilitate the choice of host country and the criteria that
introduction and success of a new retailing underlie these choices. On the basis of the
brand. survey and analysis (see Tables VIII and IX)
Two examples of synergies are purchasing of countries where the retailing brand names
and sales. Since pooling of purchases of are present, one observes that hard discount
products present in the range offered by retailers have especially penetrated those
several of the retailing formats enables an countries with high purchasing power, where
increase in purchasing volumes by line of retailing is modern and supermarkets or
product and by product item, one obtains hypermarkets are the key formats, where
advantageous terms on the cost of purchases brands are strong and retailers’ strategies are
for all the retailing brands within the group highly customer service oriented. The
that buy the same products, including the competitive advantage acquired in domestic
discount retailing brand. If the company uses markets via purchasing volume and
the same brand for the products sold in its experience in the management of
different outlets, the advantages are not relationships with suppliers by the retailing
limited to purchasing costs, but also enhance brands, have been replicated in these
the reputation of the brand. international markets, where enough
Leader Price, part of the Casino group, has analogies existed in macro-environment, task
indeed created and developed a complete environment and organisational environment
range of private label products, currently (Burt, 2002). The impact of the format has
benefiting from a far superior image in France depended on the nature of the local
to all other discount retailing formats, in spite competition and the pace of the development
of having three times less stores and spending in the market (see Colla, 1994; Burt and
six times less on advertising than the market Sparks, 1994, 1995; Colla and Dupuis, 1997;
leader Lidl (see Parigi, 2002). In foreign Colla, 2001). Aldi and Lidl are now present in
markets, Leader Price products are the majority of these countries and their
principally sold in the group’s hypermarkets objectives over the coming years will be to
62
 International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

Table VIII Discount retailers in western Europe (number of stores abroad per foreign country in 2001)
The
Countries/retailers Germany Austria France Italy Belgium Denmark Spain Portugal UK Greece Ireland Luxembourg Netherlands
Aldi 207 484 339 195 263 10 7 393
Lidl 40 740 209 90 250 110 200 20 1 58
Plus 293 165
Penny 191 82 146
Dia 2,480 277 202
Rema 1000 80
Netto 178 125
Norma 107
Edeka/AVA 36a 9b
Itm (Netto) 630
Leader Price
Colruyt 10
a b
Notes: Treff-Marche ; Coma
Source: Derived by Enrico Colla from data provided in Food Business News (October, 2002)

Table IX Discount retailers in central Europe, USA and Australia (number of stores per foreign country in 2001)
Countries/ Czech
retailers Norway Latvia Lithuania Poland Republic Hungary Romania Slovenia Finland Turkey Argentina Brazil Australia USA
Aldi 17 590
Lidl 117 14 3 10
Plus 100 84 108 15
Penny 115 130 1
Dia 86 249 24
Rema 1000 16 56 16 20
Netto 43
Norma 30
Edeka 38a 38b
Itm (Netto) 45
Leader Price 60 3 150
Colruyt
Rimi 500 20
a b
Notes: E-Discount; E-Delta
Source: Derived by Enrico Colla from data provided in Food Business News (October, 2002)

increase their market share, to the detriment retail stores, small supermarkets and other
of supermarkets in particular. self-service stores.
By contrast, soft discount retailers tend to Expansion strategies seem to confirm the
prefer developing markets, geographically and existence of differing development
culturally close to their domestic markets, and opportunities according to the groups and
where traditional retailing still occupies an their retailing brands.
important position. Growth in soft discount Aldi is predominantly oriented towards the
will be at the expense of the latter, as well as USA, Australia and New Zealand and is
small supermarkets and other self-service looking for acquisitions in Spain. Lidl seems
stores. to want to increase its presence in southern
Retailers in the third group, who target the European countries in the process of
synergies, seek to penetrate developing modernisation, and is beginning to envisage
markets and those where the group is already growth in central Europe, beginning with
present with hypermarkets or supermarkets. Czech Republic. It is central Europe in
There too, the retailing business models most particular that is favoured by Penny and
directly hurt will be small non-specialised Rewe, while Dia and Leader Price are
63
International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

counting on expansion in Italy, South for soft discount retailing, had reached a total
America and Asia, where Carrefour and market share of 8.4 per cent in 2000, as
Casino already have a network of against 6.5 per cent for soft discount retailing.
hypermarkets and supermarkets (Table X). For hard discount retailing, this performance
stems from the growth of the leading discount
retailers in Germany, and especially in
Competition and prospects for growth international markets. By contrast, for soft
within the different strategic groups discount retailing, it stems more from the
reaction of national retailers to the
What developments in competition and
penetration of German hard discount
prospects for international growth can the
retailing brands (as stated above) than
discounters from the three groups expect?
The competitive rivalry of firms from the genuine international growth of the
three different strategic groups has intensified companies.
over the last few years for several reasons. It is in Spain and in central Europe that this
First, the number of countries, in which the confrontation between the discounters of the
discounters of the different groups are present different strategic groups is soon to become
simultaneously, has increased and more direct. In Spain, the rise in power of
consequently so has their interdependence. In Lidl and the forthcoming entrance of Aldi will
addition, hard and soft discount constitutes pose new threats for the market leader Dia. In
increasingly powerful strategic groups in Poland and in the Czech Republic, Lidl (and
many countries, further increasing the perhaps also Aldi), will challenge Penny and
intensity of competition. Plus, already in a strong position in this part
As long as their international presence is of Europe. Given what is happening in other
differentiated and that there is no direct countries and the analysis of relative
competition with other discount retailing competitive advantages, hard discount
brands, the retailers in the second and third
retailers should be able to impose themselves
groups can impose their presence. This is the
in terms of market share compared to the
case in Asia and Latin America, where hard
other retail formats. This does not mean that
discount has not yet arrived and where
the latter will not retain good positions, as
discount retailers from the third strategic
they did in Germany.
group enjoy good growth opportunities. But
By contrast, in countries that are culturally
when competition in the same market
becomes more direct, hard discount retailers different and geographically distant from
often take the upper hand over the other Germany and where the risks for a new player
discounters. are higher – such as South America and the
This is the case for the majority of Asian countries – it is the discount retailers in
European markets, where hard discount the third group, benefiting from the
retailing, which in 1991 held a total market experience of an already established strong
share of 4.6 per cent as against 4.8 per cent international group, who remain favoured.

Table X Criteria of choice of country and foreign growth opportunities of leading discount retailers
Hard discount specialised Soft discount specialised abroad Soft discount diversified groups
Aldi, Norma, Lidl, Netto Penny, Plus, Rema 1000 Dia, Leader Price
Criteria of choice of country: Criteria of choice of country: Criteria of choice of country:
Mature markets Developing markets Developing markets
Dominance of supermarkets Strongly-placed traditional retailers Group already present with
Strong brands Cultural and geographic proximity hypermarkets and supermarkets
Strong service orientation Growth opportunities: Growth opportunities:
Growth opportunities: Plus: central Europe Dia: Italy, France, Portugal, Greece,
Aldi: USA, Australia and New Penny: Romania, Czech Republic, Turkey, Brazil, Argentina
Zealand Croatia, Ukraine Leader Price: Argentina, Uruguay,
Lidl: southern Europe, Czech Rema 1000: Scandinavia and Venezuela, Taiwan, Thailand
Republic Baltic states
Netto: France

64
International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

Conclusion first group, but important niches in several

foreign markets can enable growth, at least in
The article has defined three strategic groups the short term, of retailers in the second and
of limited range, discount food retailers that third groups.
have adopted different internationalisation
strategies, and it has identified a series of key
success factors and competitive advantages,
References
barriers to entry and barriers to mobility, with
varying importance to the different strategic Bennison, D. and Gardner, H. (1995), ``Internationalisation
groups. of limited line discount grocery operations’’, in
The importance of volume by product line McGoldrick, P.J. and Davies, G. (Eds), International
and product item, and the experience Retailing, Trends and Strategies, Pitman Publishing.
acquired in the area of private brand Burt (2002), ``International retailing", in McGoldrick, P.
(Ed.), Retail Marketing, McGraw-Hill, New York, NY,
management, leading to the restructuring of
pp. 543-84.
the value chain and to a channel leadership, Burt, S. and Sparks, L. (1994), ``Structural change in
favours more specifically the competitiveness grocery retailing: a discount reorientation?’’,
of the specialised German hard discount International Review of Retail Distribution &
retailers. Consumer Research, Vol. 4 No. 2, pp. 195-217.
These retailers are leaders in discount food Burt, S. and Sparks, L. (1995), ``Understanding the arrival
of limited line discount stores in Britain’’, European
retailing in their domestic markets holding
Management Journal, Vol. 13 No. 1, pp. 110-19.
substantial market share. But they are also Colla, E. (1994), ``Discount development in France: the
aggressive internationalists, present abroad in introduction of the format and the competitive
most countries, and with a larger proportion response’’, Journal of Marketing Management,
of market share, and their rate of international Vol. 10, pp. 645-54.
expansion over the past years has been higher Colla, E. (1997), ``Le deÂveloppement du hard discount en
in terms of number of stores than penetration Europe: une analyse compe titive’’, Revue Française
du Marketing, No. 161.
into new countries. They have especially
Colla, E. (2001), La grande distribution EuropeÂenne,
penetrated those countries with high Vuibert, Paris.
purchasing power, where retailing is modern Colla, E. and Dupuis M. (1997), Le deÂfi mondial du bas
and supermarkets or hypermarkets are the key prix, Publiunion, Paris.
formats, where brands are strong and Colla, E. and Dupuis, M. (2002), ``Research and
retailers’ strategies are highly customer service managerial issues on global retail competition:
Carrefour/Wal-Mart’’, International Journal of Retail
oriented.
& Distribution Management, Vol. 30, Nos 2 and 3,
The German soft discount retailers,
pp. 103-11.
belonging to large diversified groups Coughlan, A.T., Anderson, E., Stern, L.W. and El-Ansary,
operating mainly on their domestic markets, A. (2001), Marketing Channels, Prentice-Hall,
benefit from advantages – linked to their Englewood Cliffs, NJ.
purchasing volumes and price differentials Dupuis, M. (1998), ``L’innovation dans la distribution, ses
with supermarkets – lower than those of hard implications dans les relations industrie-commerce’’,
DeÂcisions Marketing, Vol. 15 No. 3, pp. 29-41.
discount and benefit less from synergies
Dupuis, M. and Prime, N. (1996), ``Internationalisation du
abroad than discount retailers in the third produit magasins: Le prisme culturel’’, Revue
group. They use cautious internationalisation Française du Marketing, pp. 157-8.
strategies, in countries that are geographically Filser (1998), ``Taille critique et strate gie du distributeur’’,
close and culturally similar. DeÂcisions Marketing, No. 15, pp. 7-16.
By contrast, the synergies available within Food Business News (1999-2002), ``Internationalisation of
food retailing: a database of cross-border moves’’,
multiple format groups favours the
free supplement to CIES Food Business News,
international expansion of soft discount
October 1999, 2000, 2001, 2002.
retailing names like Dia and Leader Price in INSEE (2001), Les Comptes du Commerce, INSEE, Paris.
the countries where the groups to which these Le HeÂnaff, S. (2001), ``Le hard discount s’essoufle un peu’’,
brand names belong (Carrefour, Casino) are Point de Vente, No. 846, p. 22-4.
present in force. Moreover, the group may Lugli, G. (1993), ``Hard discount: minacce e opportunità
reduce the risk of entry for the discount per la distribuzione Italiana’’, Trade Marketing,
Vol. 7, pp. 3-31.
format into new developing countries, thanks McGoldrick, P. and Blair, D. (1995), ``International market
to the synergies with other formats. appraisal and positioning’’, in McGoldrick, P.J. and
The winners in the race to international Davies, G. (Eds), International Retailing, Trends and
expansion are in particular the leaders in the Strategies, Pitman Publishing, London.
65
 International expansion and strategies of discount grocery retailers International Journal of Retail & Distribution Management
Enrico Colla Volume 31 . Number 1 . 2003 . 55-66

Moyroud (2000), ``La mondialisation, une vraie reÂflexion Porter, M.E. (1985), Competitive Advantage, The Free
sur le positionnement des MDD’’, Mondialisation Press, New York, NY.
des MDD, Les rencontres de LSA, Paris. Reidiboym, M. (2001), ``Hard et soft discount: les
Parigi, J. (2002), ``Les Français jugent leur enseignes nouvelles frontières’’, LSA, No. 1732, pp. 48-55.
Salmon, W.J. and Tordjman, A. (1989), ``The
alimentaires’’, LSA, No. 1748, pp. 26-9.
internationalization of retailing’’, International
Penrose, E. (1959), The Theory of the Growth of the Firm,
Journal of Retailing, Vol. 4 No. 2, pp. 3-16.
Oxford University Press, Oxford. Treadgold (1997), ``Retailing without frontiers’’,
Porter, M.E. (1980), Competitive Strategy, The Free Press, International Journal of Retail & Distribution
New York, NY. Management, Vol. 16 No. 6, pp. 8-12.

66

View publication stats