U.S. consumer is facing intense inflationary pressure, says Lidl U.S. CEO Joel Rampoldt

Guest is coming in with a bird’s eye view on spending and the changes they’re making to attract value minded shoppers. Joining us is Joel Rampold. He is the USCEO of Lidl. Joel, welcome. Hi, please, you know, explain to us what you think is going on here with so much mixed commentary about the consumer, What’s Lidl’s experience? Yes, well, every, every category of US retail is seeing inflationary pressure. Grocery is no exception to that. Lidl is no exception to that. We see some of it coming from energy prices, some of it coming from transportation prices, well known facts around fuel and driver shortages. All of that combined is putting upward pressure on prices. What we’re focused on is controlling what we can control. We focused on being operationally excellent, finding cost, driving it out wherever we can, finding wastage, driving it out wherever we can. So we can counter that by putting downward pressure on prices by operating as efficiently as we can. What’s the mix of price and traffic in your numbers these days? So what we are seeing is growth in customers. Our customer accounts are actually very, very healthy. Where the pressure comes is in basket size and we are, we are always focused on keeping our prices as low as we possibly can. Everywhere we can take cost out, we try to turn that into putting pressure back on back on prices, particularly as a private brand LED company, we’re very well positioned for that. Customers are really looking at the private brand versus national brand equation much harder than they have in recent years. And so that’s very favourable for us. We’re able to offer the same quality or in many cases better quality at a much better price. For a legal shopper that can be about 40% savings and that’s very favorable for us. In terms of the price equation, customer traffic equation continues to be very strong. Sure. So in other words, people’s average transaction price, for lack of a better word is, is it down, is it flat? Is it just up slightly? It’s under pressure, right. And we’re having to do a lot of work to keep that, to keep that number where it needs to be. And it’s logical because when you look at industry data, we’ve seen recently that the American family in a month has gone from visiting about 17 supermarkets a month a few years ago to almost 21 grocery stores a month now. So they’re not doing that because they enjoy gassing up their car. They’re doing that because they think they may be able to get a better deal by going to multiple different outlets. And the way we respond to that is we want to make it very easy for our customers. We’re not heavily promotional. We’re everyday low price every single day. They should be able to get our very best price on the items that they’re looking for, the items that they’re counting on us for. We heard from Planet Fitness, they said they think there was a shift in Consumer Focus in the new year to savings dime. Brand says the lower income consumer is more aggressively managing their check. That sounds like what you’re talking about, Energizer said. Higher income consumers are spending more freely than middle to lower income consumers are. Would you say that that’s the same phenomenon you’re experiencing? Are you benefiting from any trade down? So we’re benefiting from that in, in a number of ways. the US according to federal data, the US families are spending more of their disposable income on food than at any time since the 80s. So obviously in that situation they’re going to be much more focused on what they buy and and how much they spent. We benefit from customers looking at us and saying you know particularly on the things that are most important, the things that disproportionately drive their decision about where to shop, which is fresh product, we offer exceptional value. And when you walk into a Lidl, that’s what you see, fresh fruit, fresh produce, fresh bakery just beyond that fresh protein, those are areas where we really excel and those are areas where customers are taking a really, really hard look, right. And I would say that perhaps the, I don’t know if I’d call it deflation, but the price hikes have slowed and that part of the grocery store and some of the more some of the other supermarkets as well. I don’t know if that’s keeping people from maybe seeking out the value in Lidl or if they still are. No, we we we see very strong customer traffic. Customers are still under pressure in a lot of cat in a lot of categories and again the the private brand equation for them is exceptionally strong. The things that we do every day to drive cost down and and we’re you know we’re relentless about putting downward pressure on prices. Inflation pushes up against us, we push down sometimes we have to yield, we have to go up. But over time in inflationary times and in less inflationary times, Lidl will have the best prices and our promise is you get the best quality, you have the best price, you don’t have to compromise. We do that by being relentless about operational efficiency and by being a private brand company. I would say hearing what you’re talking about, it put you more in the campus experiencing some kind of softness amongst the lower income consumer then. Am I right about that when you when we talked about the number about spending the most of disposable income since the 80s, when you look at that cut by income quintile, obviously it’s very, very different in the lower income quintiles. Those numbers are obviously much, much higher. So those are customers, those are the customers where this idea of being really focused on what did I pay last year, what am I going to pay next week, How do I really squeeze this hard? That’s where that behavior is most concentrated and where it’s sharpest, but we see it across the board. I was out touring stores yesterday in very different socio economic situations, very different average household incomes around those stores and we see a very similar situation across all of them that they’re all still feeling the inflationary pressure. Joel, thanks for joining us today. We appreciate your time.