Could a ‘land blocking’ rule change spell danger for Aldi and Lidl?
German discounters Aldi and Lidl have rapidly taken control of the UK’s budget grocery market in recent years. But could new curbs on ‘land blocking’ slow their insurgency?
Only a few decades ago, Lidl and Aldi were oddities. By 2008, the German discount supermarkets had been in the UK for more than 10 years but had failed to make much of an impression. Their sparse stores, wooden pallet shelving and unbranded, rarely fresh produce puzzled British shoppers.
Fast forward to 2026, and the two grocers are firm favourites in the UK. They each operate at more than 1,000 stores across the nation and have forced Britain’s native supermarkets, once known as the ‘big four,’ against the wall.
In May, Lidl forced Morrisons out of the top five by market share and Aldi is threatening to leapfrog Asda into third place. The green-liveried discount grocer has been haemorrhaging market share in recent years and slumped to a near-£1bn loss in June. Aldi, meanwhile, recently opened its 1,080th store in the UK and was just 0.6 per cent behind Asda last month, according to Worldpanel by Numerator.
The German discounters overcame the initial scepticism of British shoppers in the early 2010s, winning over the so-called ‘Maidstone mums’ to become the go-to for middle-class households looking for bargain champagne or freshly-baked goods – not just those feeling the pinch.
Though Sainsbury’s and Tesco – the two crown jewels of the UK’s grocery sector – appear safe from the insurgent discounters, their aggressive advertising campaigns in recent years make it clear that the two German supermarkets are on their minds. Both FTSE 100 grocers are piling new products onto their Aldi price match ranges, showing that the pair are wary not to rest on their laurels.
But the ‘big four’ have been handed what they hope will be a life raft in their bid to stem the tide of competition from Aldi and Lidl. Last week, the competition watchdog said it has provisionally decided to close a land-use loophole which had afforded the German discounters a huge advantage.
Currently, the two supermarkets are not covered by a set of rules, known as the Controlled Land Order, which was introduced in 2010 to stop grocers from buying up land to prevent rivals from opening new sites near their existing stores.
Rule change to ‘level playing field’
This crackdown on so-called ‘land banking’ applies to Asda, Co-op, Marks & Spencer, Morrisons, Sainsbury’s, Tesco and Waitrose – but not Aldi and Lidl, because they are classed as ‘limited assortment discounters’, not ‘large grocery retailers’.
Rivals of the German discounters had long campaigned for this loophole to be closed, and the Competition and Market Authority (CMA) said last week that it is on course to expand these rules to the two grocers. Because they now offer a wide range of products and purchase groceries directly from suppliers, these companies now operate more like ‘large grocery retailers’ than discounters, the watchdog has found.
Aldi had attempted to resist the rule change, telling the CMA that it offers as little as seven per cent of the products stocked by their larger rivals, and typically discount their groceries by as much as 21 per cent compared to other supermarkets.
But Aldi and its compatriot Lidl look set to lose this battle. “This is about allowing shoppers to choose where they spend their money and levelling the playing field for all major supermarkets,” said Juliette Enser, the CMA’s executive director of competition enforcement.
“This feels like a positive step towards a fairer, more competitive grocery market that works better for customers,” welcomed Lord Richard Walker, the executive chairman of Iceland.
The decision, once made final, could allow struggling supermarket giants like Morissons and Asda to open new stores closer to Aldi and Lidl, taking the fight directly to their German competitors.
“Bringing everyone under the same rules should, over time, make it easier for Tesco, Sainsbury’s, Morrisons and others to challenge the discounters in areas where access to sites has previously been constrained,” Retail Economics’ Nicholas Found told CityAM.
‘It’s not like the Premier League’
Though Aldi and Lidl had initially been placed in a class of their own, their rapid expansion in recent decades and success in conquering the weekly shops of households across the country had meant the CMA found this disparity increasingly hard to justify. “The writing had been on the wall for some time,” Found said.
But analysts have been quick to point out that this decision is unlikely to topple Aldi and Lidl, whose market share gains may slow marginally but are unlikely to reverse.
Richard Hyman, an independent retail analyst, told CityAM that the ruling – while a minor leg-up – will not materially change the fortunes of Asda and Morrisons. “It’s not like in the Premier League where every weekend your luck might turn and you may hit a bit of a purple patch and start gaining points against your competitors.
“They are disadvantaged by having brands that aren’t as strong, leadership teams that aren’t as strong, reputations that aren’t as strong, stores that are less good to shop in,” he said.
Though the watchdog’s decision could mean that more Asda and Morrisons stores gradually spring up beside the likes of Aldi and Lidl, British shoppers’ taste for the German discounters is unlikely to turn sour.