Publix's next big threat, European grocer Lidl, reveals U.S. expansion plans

Jan 26, 2016, 2:02pm EST

Ashley Gurbal KritzerReporterTampa Bay Business Journal

A European discount grocer is heading straight for some of Publix Super Markets Inc.'s most competitive markets.

Lidl, based in Germany, has revealed real estate requirements for its U.S. stores. It is looking to build stand-alone, 36,000-square-foot stores on sites that are at least 3.5 acres with 150 parking spaces. In June, Lidl announced U.S. headquarters in the D.C. metro area, and there was speculation that the grocer could have 100 stores in the U.S. by 2018.

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Lidl is gearing up for a major U.S. expansion that could cut into Publix's market share.

SIMON DAWSON | BLOOMBERG

For now, Lidl is seeking sites between New Jersey and Georgia. Florida isn't in its expansion plans yet, though it likely will be in the years ahead. As the nation's third most populous state, Florida is an alluring place for grocers. Several grocers have expanded successfully here in recent years — including Trader Joe's and sister company Aldi US, a German discount grocer that could make consumers more willing to shop at Lidl.

Even without a Florida presence, Lidl's expansion plans pose a threat to Lakeland-based Publix, an analyst said. Much like Aldi, Lidl sells a small selection of private-label goods.

What happens at Publix stores throughout its eight-state footprint have the potential for a ripple effect in the Tampa Bay region. Publix employs more than 35,000 people here, many at its corporate headquarters in Lakeland.

The Carolinas especially are already a grocery war zone, between Publix's expansion there and Kroger Co.'s (NYSE: KR) acquisition of Harris Teeter.Wegmans Food Markets Inc., based in New York, is targeting a site in Cary, North Carolina, for its first store in the Tar Heel state.

Lidl, with its private-label focus, poses a different threat than Wegmans and Kroger.

"Ninety of the top 100 consumer packaged goods brands lost share in 2015," saidJohn Karolefski, the Cleveland-based publisher of GroceryStories.com, while private-label products increased their market share. Sales of private-label products are projected to reach $98 billion by 2018.

Whole Foods Market Inc. (NASDAQ: WFM), which has been struggling to retain market share, is building a separate chain of discount stores, 365 by Whole Foods, which will focus on its own line of private goods.

"To compete effectively against discounters, Publix would have to make more space on the shelf for their private label goods and promote them more," Karolefski said. "That would create tension between them and branded manufacturers."

Both Publix and Kroger have put an emphasis on private-label products in recent years. A Publix spokesman said previously that the grocer is "always looking for other opportunities to expand our private-label offerings," which now include limited-edition wines.

Kroger, which competes with Publix in Georgia and North Carolina, has several successful private-label brands and in September 2015 launched another: Hemisfares, which is upscale, international foods.

With its private label focus, Lidl will be able to compete with potentially lower prices — an area that's a potential downfall for Publix. Kroger is already knownfor lower prices than Publix, an analyst said.

Higher prices are a potential roadblock to Publix's growth. The grocer has been focusing on more upscale touches in some of its stores — which has helped it snare market share from specialty grocers like Whole Foods.

However, Publix has seen some success with low-price campaigns. Its bundling price strategies — buy one, get one offers — have helped it compete with Walmart Stores Inc. (NYSE: WMT), which is its biggest competitor in Florida.