The billionaire behind Lidl’s fast-growing grocery empire

Germany’s Lidl seen overtaking big rivals Tesco, Carrefour and Aldi

The billionaire behind Lidl’s fast-growing grocery empire

Philip Oltermann in Berlin

The Guardian, Monday 23 June 2014 14.51 BST

A recent report by Planet Retail predicted Lidl owner the Schwarz Group would become Europe’s biggest grocery retailer by 2018. Photograph: Alamy

One of the features that unite all of Lidl’s 9,875 supermarkets in Europeis the “party aisle”, which usually comes after the fresh fruit and vegetables. Walking past the alcoholic beverages and salty snacks, one can’t help wondering if one of the products on its tightly packed shelves might reveal the recipe behind the success of the chain set to become Europe’s leading grocery retailer.

Could it be the in-house Perlenbacher pilsner, on offer for 21 cents (17p) a can, beating Aldi‘s Karlskrone beer by more than half and giving a taste of the merciless competition between Germany‘s two discount giants? Perhaps it is the box of eight Crownfield muesli bars, with barcodes on each side so check-out staff don’t have turn them over – hinting at the speed and efficiency with which goods flow in and out of Lidl’s stores.

Or it could be the two bottles of riesling for which a man in a smart black suit has just paid €3.98 (£3.18) to take to a dinner party with his film-maker friends. “Lidl doesn’t have glamour, but this wine is really good,” he says. “And you can enjoy it more because it is so cheap.” Exporting the mentality of such “smart shoppers” to other European countries such as Britain, some retail analysts claim, is key to the company’s international success.

And successful it is: a recent report by Planet Retail predicted the Schwarz Group, which owns Lidl as well as the German warehouse discounter Kaufland, will overtake French group Carrefour, Tesco and Aldi to become Europe’s biggest grocery retailer by 2018 at the latest, generating sales of €80bn (£65bn). Other analysts say it will reach that goal this year.

The man behind the discount empire is the least likely to provide an explanation. Dieter Schwarz, whose personal fortune was in 2013 estimated to be €19.6bn, is not just the 24th richest person on the planet, but also one of the most secretive. Only two photographs of the Swabian 74-year-old remain in circulation, one in black and white.

Legend has it that he once turned down a medal for entrepreneurial achievement from the state of Baden-Württemberg because he did not want to be photographed. Schwarz took over the Schwarz & Lidl discount store after his father Josef’s death in 1977 and bought the naming rights from co-owner Ludwig Lidl, a retired schoolteacher, soon after. Calling his chain Schwarz-Markt, meaning “black market”, was never a realistic option.

The Schwarz Group still operates almost entirely out of Neckarsulm, a town of 27,000 adjacent to his birthplace of Heilbronn, with a business community so tightly knit that, as Süddeutsche Zeitung once wrote, “you’d rather be seen hitting your wife and child than talk badly about your company”. The exact structure of the Schwarz Group is unusually opaque. Ulrich Dalibor of German services union Verdi likens the business structure to a sewing pattern, with “hundreds if not thousands of overlapping and interconnected companies”.

Shares are divided between two foundations, which makes it easier not to publish results for the complete organisation.

Union membership and works councils at the stores are said to be discouraged, and Dalibor says those outlets where workers organise themselves are often closed to set an example.

Lidl’s spokesperson Petra Trabert said that Verdi’s allegations related to an incident that occurred over 10 years ago. Trabert said several Lidl outlets had since formed their own works councils, but refused to state how many.

Public relations are kept to a minimum – the first press officer was hired in 2006 but let go 12 months later – which may be one of the reasons why Lidl’s reputation and finances were so badly hit by an investigation by Stern magazine in 2008, revealing that the company had hired detectives to spy on its own employees, supposedly to stop shoplifting . A year later the volatile discount sector was also struggling with rising commodity prices. The company’s turnaround since then, and particularly its current success in 26 markets abroad – 26 years after its first expansion, to France – has been remarkable.

Hermann Simon, a German business author and pricing expert, puts Lidl’s success down to its experience in “the toughest groceries retail market in the world. In Germany Lidl has got plenty of experience with difficult customers who count every penny.

“And they have had an extremely fierce rival in Aldi, forcing them to constantly compete on pricing and quality. These companies are not just successful because they are cheap, they have to provide consistent quality as well.”

Klaus Gehrig, who has been in charge of the Schwarz Group’s operative duties since 2004, is a former Aldi employee.

According to Simon, who in 1990 coined the term “hidden champions” to describe Germany’s Mittelstand companies, Aldi and Lidl managed to achieve precisely what American discounters did not manage in Germany: exporting their extremely efficient internal structures while still managing to adjust to the unique quirks of local retail cultures.

Wal-Mart, for example, began aggressively expanding into Germany in 1997 but eventually capitulated 10 years later. “Rolling out your national system abroad worked for US companies in new markets where there were no real competitors,” said Simon, who lists McDonalds and Starbucks as examples. “But in retail they just persisted with features that clashed with the local culture, such as the ‘greeter’ who welcomes you at the entrance.”

Lidl has over recent years pursued a different strategy, said Matthias Queck, a Frankfurt-based analyst for Planet Retail. “At first Lidl just copied and pasted their business model abroad, but since they’ve managed to establish a footing they have started to adjust more to local cultures”. In Britain, Lidl now actively advertises its use of local retailers with a “We love British” campaign. Whereas in Germany Lidl did not runTV ads until 2008, it has spent generously on a marketing campaign with a self-consciously British sense of humour.

“Traditionally, the groceries market in Britain has always been very class-based: whether you shop at Asda or Waitrose usually reveals something about your social status,” said Queck. “Lidl and Aldi somehow managed to break up those old hierarchies; their customers are not just those with a low income, but also people who think it’s smarter not to care too much about where you’re seen to do your shopping.”



About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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