Lidl is challenging Aldi’s price leadership

Lidl is attacking larger competitors with direct price comparisons

Sebastian Rennack
international retail analyst
Aletos Retail

For decades, Aldi has set the price benchmark in Germany’s grocery market. However, within the past half-year, Lidl has increasingly taken the initiative, challenging Aldi’s long-standing dominance. While past price reductions from Lidl appeared sporadic and opportunistic, recent developments indicate a shift toward a structured pricing strategy. Lidl is no longer just responding to Aldi’s moves—it is now increasingly setting the price agenda across key product categories.

The most striking example of this shift is Lidl’s continued, aggressive pricing in butter. Butter remains a focus item in the German market, where prices for a 250-gram pack surged by almost 50% between its lowest point in August 2023 and its peak in January 2025. In February 2025, Lidl launched a widely communicated butter price cut, lowering the price of 250g private label butter from €2.39 to €2.25, prompting Aldi to react by undercutting it at €2.19. Three weeks later, Lidl escalated the price battle by dropping below the psychologically significant €2 threshold, reducing its price to €1.99. This forced Aldi, along with Edeka, Netto, Kaufland, Norma, and Penny, to follow suit.

Aldi’s response in both cases was defensive, marking a stark contrast to its historical role as a price leader. The timing and sequencing of these price cuts suggest Lidl is employing a deliberate pricing strategy rather than reacting to raw material cost reductions. Wholesale butter prices declined only slightly in February, yet Lidl continued its price cuts, signaling a willingness to sacrifice margin in pursuit of market positioning.

Price battles reshape the market

The price competition between Lidl and Aldi is putting increasing pressure on the entire German grocery market. Discounters are no longer limiting their price battles to butter but are strategically targeting grocery categories that have experienced the highest price inflation in recent years. According to consumer price indexes published by the German Federal Statistical Office in January 2025, key staples saw some of the most significant price increases over the past four years, with inflation rates of +82.4% for olive oil, +65.7% for butter, +46.6% for flour, and +35.5% for sugar. Both Lidl and Aldi have concentrated their price reductions in these categories, directly addressing consumer price sensitivity.

Aldi initiated a 10% price cut on 1kg private label wheat flour in September 2024, triggering a response across the market. Lidl, in parallel, launched a major price cut on sugar, reducing 1kg private label sugar by over 30%. Initially caught off guard, Aldi reacted aggressively, undercutting Lidl and forcing Edeka, Rewe, Netto, and Penny to adjust their pricing. The battle intensified in October when Aldi reinforced its image as a price leader by announcing a permanent 30% price reduction on olive oil. The move was explicitly tied to olive oil’s extreme inflation, underscoring the discounters’ focus on high-inflation categories to maximize consumer impact.

Lidl’s global strategy: A pattern of market disruption?

Lidl’s growing price aggression in Germany does not exist in isolation. In other European markets, Lidl has already escalated price battles against dominant players, often several times larger than itself. In France, Lidl has engaged in direct price comparisons against E.Leclerc, Intermarché, Coopérative U, and Carrefour, positioning itself as the cheapest retailer. In Poland, Lidl is targeting market leader Biedronka on a weekly basis, claiming that Biedronka’s prices are higher for a basket of 15 products. A similar strategy is playing out in the Czech Republic, where Lidl is challenging discounter Penny (Rewe Group), emphasizing its lower prices in direct shopping basket comparisons. Lidl is also adopting aggressive pricing tactics in the Baltic states, where it claims a 29:0 win ratio in monthly price duels against Maxima in Latvia. In Finland, Lidl is positioning itself as the low-cost alternative to Prisma, S-Market, K-Citymarket, and K-Supermarket, promoting price advantages of up to 23%.

The consistency of these price battles across multiple European countries suggests that Lidl’s pricing actions are part of a structured strategy rather than isolated, opportunistic moves. The company is reinforcing its price-leader perception against Aldi and other major grocery retailers, reshaping competitive dynamics across Europe.

Labor shortages force retailers to adapt

Lidl is not only competing on price but also on labor costs, adding further financial pressure on its rivals. In February 2024, Lidl in the UK for the first time outbid Aldi on hourly employee wages by 4 pence per hour, following Aldi’s claim of being the highest-paying supermarket in the country. Lidl has also started positioning itself as a top employer in other markets.

Meanwhile, German retailers face a structural challenge that reflects broader trends across Europe. With 120,000 retail jobs vacant nationwide, according to the German Trade Association (HDE), retailers are being forced to restructure labor-intensive operations. Between 2023 and 2025, minimum wage increases have outpaced and are expected to continue outpacing grocery retail price growth, increasing the cost burden on retailers. This trend has prompted Edeka, Germany’s largest supermarket operator, to test reduced opening hours at its serviced counters. Other staff-intensive formats are also adjusting. Auchan in Central Europe is trialing discount hypermarkets as well as unmanned store concepts and revived its low-frills Atak format. Danish retailer Fotex has remodeled most of its serviced counters to self-service counters, with butchery and kitchen staff operating as dark kitchens for in-store sales and e-grocery fulfillment. Tesco in Central Europe has also been progressively downsizing its in-store production departments and serviced counters.

Lidl’s financial strength secures its advantage

Unlike many of its competitors, Lidl has the financial strength to sustain aggressive pricing. With an EBT margin of 3.1% for the business year 2023/2024, Lidl ranks second only to Tesco, which recorded a 3.3% pre-tax profitability in the same period. Other major retailers trail behind, with Ahold Delhaize at 2.6%, Carrefour at 1.6%, and Rewe Group at 1.4%. However, due to its scale, Lidl generates the highest absolute pre-tax profit in the market—€2.8 billion—surpassing all other European retailers. This financial muscle allows Lidl to simultaneously lower prices and increase wages, creating a significant financial challenge for its competitors.

Lidl redefines price leadership in Germany – and beyond

Lidl’s pricing actions in Germany are no longer isolated moves but part of a deliberate, structured strategy that is reshaping competitive dynamics. Across multiple European markets, Lidl has proven its willingness to challenge dominant players, and its actions in Germany indicate a similar long-term ambition. Aldi’s historical price leadership is now under real pressure, and Lidl’s aggressive pricing, combined with its financial strength, suggests that the battle for discounter dominance is far from over. If Lidl continues to dictate price movements and expand its cost advantages, the traditional assumption that Aldi sets the market standard may no longer hold. The German grocery sector—and potentially the wider European retail landscape—is on the verge of a fundamental shift.