Aldi still thriving in UK, despite rivals' claims, says CEO

Aldi is widening a price gap with rivals in Britain and is still delivering underlying sales growth there, the head of its UK business told Reuters, denying the discount supermarket was suffering the effects of a fightback by bigger chains.

Britain's four major supermarkets - market leader Tesco , Sainsbury's , Asda and Morrisons - have all raised their game to counter the rapid rise of Aldi and fellow German-owned discounter Lidl [LIDUK.UL], sacrificing profits to fund price cuts and improved service. All have said they have narrowed the price gap with the discounters.

Not so, says Matthew Barnes, Aldi's [ALDIEI.UL] chief executive for the UK and Ireland.

"When you look at any price comparisons or our own internal data it shows us that if anything the price differential between Aldi and the big four is growing at the moment," he said in an interview at Aldi's headquarters at Atherstone, central England.

"It hasn't dropped below 20 percent on your average basket of groceries; it's as high as 35 percent against some of the more expensive of the big four. That will continue," he pledged.

Industry data published on Tuesday showed Aldi has overtaken the Co-operative <42TE.L> to become Britain's fifth largest supermarket with a market share of 6.2 percent, having attracted 826,000 more shoppers year-on-year in the past quarter and grown total sales by 12.4 percent, helped by an extensive program of store openings.

"Customers are voting with their feet," said Barnes. "This year has started with a bang, we are growing fantastically. February started extremely strongly," he said.

The CEO was critical of analyst reports and rivals' rhetoric which suggest Aldi's sales at stores open over a year, or like-for-like sales, have flatlined or even turned negative.

"Our like-for-like sales are still positive, very positive. I'm very happy with our like-for-like sales and they will remain positive for this year," he said, while adding like-for-like sales were not regarded internally as a key performance indicator for the business.

Barnes did not provide any figures. Privately-owned Aldi does not publish regular sales, or like-for-like sales, updates.

"MISINFORMATION"

Aldi was deliberately opening stores to take away, or "cannibalize", sales from existing ones that were too busy, often with all tills open and the car park full, Barnes said.

"There is such a thing as good cannibalization," he said, arguing Aldi was increasingly a victim of "misinformation".

"Like (saying) our like-for-like sales are negative ��� wrong. Like the price gap is closing ��� wrong. Like Tesco���s Farm Brands are matching us on price ��� wrong," he said.

"This insistent talk of things slowing down. Where's the evidence of that?" he asked. "It's peddled by people with a very strongly vested interest in the big four ... I don���t lose a millisecond of sleep on what they say."

Barnes said that while Aldi remained committed to being the lowest priced in the market, it was not immune to the sector's inflationary pressures, given the slump in the pound following Britain's vote last year to leave the European Union which has raised import costs.

"I'm very clear there will be price inflation this year and that will happen throughout the market," he said, noting a big move in meat prices last week.

But he said Aldi was better placed to cope than rivals because 77 percent of its sales come from British sourced products and it could rely on the "unwavering" financial support of its huge German owner Aldi Sud.

Price inflation could also bring opportunities for Aldi.

"History will show you that in times of inflation shoppers do begin to consider more the value end of the market. They broaden their horizons, that's a huge opportunity for us," said Barnes.

Aldi, which currently trades from nearly 700 UK stores, is targeting 1,000 by 2022, by which time it may have Morrisons, the No. 4 player, in its sights.

"I've heard from many people internally since overtaking the Co-op - number four's next," said Barnes.

(Editing by Mark Potter)