Tesco and Sainsbury benefit from slowdown in Aldi and Lidl space race

UBS research using geospatial data shows UK grocery space growth has slowed to about 1.0% versus a pre-Covid average of 2.6%, with Aldi and Lidl expanding at multi-year low rates of 1.7% and 2.6% in Q3 2025; Aldi plans 80 stores over two years and Lidl has funding for 17 new UK sites. High cannibalisation within discounters’ networks (87% for Aldi, 85% for Lidl) and below-average planned openings suggest limited near-term footprint expansion, creating a supportive environment for Tesco and Sainsbury, which are holding or improving key consumer metrics. UBS also notes Aldi price-match schemes (around 650 items at Tesco and 800 at Sainsbury) bolster customer satisfaction, while structural online retail tailwinds could further weigh on discounters’ market share.

Analysis

UBS research using geospatial data shows UK grocery space growth slowed to around 1.0% in Q3 2025 versus a pre‑Covid average of 2.6%, with discounters Lidl and Aldi expanding at multi‑year low rates of 1.7% and 2.6% respectively. UBS highlighted that Aldi plans to open 80 stores over two years and Lidl has funding for 17 new UK sites, both below historical average openings, which aligns with the measured slowdown in net new space.

Cannibalisation within discounter networks is high—87% for Aldi and 85% for Lidl—reducing the marginal benefit of further openings and creating a "supportive environment" for incumbents; UBS observes Tesco and Sainsbury are holding or improving key consumer metrics. Aldi price‑match schemes now cover roughly 650 items at Tesco and 800 at Sainsbury, a dynamic that supports customer satisfaction and competitive positioning for the big two.

UBS also flags structural tailwinds in online retail as a separate headwind for discounters that could further constrain their share over time. The net implication is a window of competitive relief for Tesco and Sainsbury, but investors should watch store opening execution, cannibalisation trends, price‑match intensity and e‑commerce adoption for potential inflection points.

Key Decisions for Investors

• Consider increasing or maintaining overweight exposure to Tesco (TSCO) and Sainsbury (SBRY) to capture near‑term competitive relief from below‑average discounter expansion and stable consumer metrics
• Monitor Aldi and Lidl execution versus guidance (Aldi 80 stores over two years; Lidl 17 funded sites) and cannibalisation rates (87% and 85%) as clear triggers to reassess exposure if expansion accelerates
• Track online retail penetration and e‑commerce sales indicators closely because UBS identifies structural online tailwinds that could erode discounters' share and change the competitive outlook
• Use price‑match program breadth (approximately 650 SKUs at Tesco, 800 at Sainsbury) and same‑store sales/customer satisfaction data as early signals of sustained customer retention or renewed pricing pressure