The Westmeath farmer’s son with a Lidl plan for growth

Interview: John Paul Scally has already achieved much at the international chain

John Paul Scally: “There is nothing you can’t buy in a Lidl store today, fresh food or off the shelf.” photograph: keith arkins

John Paul Scally: “There is nothing you can’t buy in a Lidl store today, fresh food or off the shelf.” photograph: keith arkins

 

A strange thing happens to some men once we hit our mid-30s. Whenever we meet a guy of our generation who is very senior in business or successful in life, we check his age. Is he younger than me? God damn it, he is. Gloom descends at the thought of falling behind.

John Paul Scally is managing director and chairman of the board of directors of the supermarket chain Lidl in Ireland. The Westmeath farmer’s son has full responsibility for its 146 stores in this State and 36 outlets in Northern Ireland.

He manages more than 4,000 staff, he runs a business with annual sales of well over €1 billion, and he has already served almost four years on the board of of Lidl’s huge operation in France. Yet Scally’s face is as fresh as the 39-cent fruit and vegetables in the Lidl store in Gorey, Wexford, where we meet.

“What age are you, JP, if you don’t mind me asking?” Damn him to hell, anyway: Scally only recently turned 34.

“Lidl gives you the confidence [to take senior roles when you are young], and coming from Ireland, you would be well regarded in the group,” he says.

Scally grew up on a dairy farm in Tyrrellspass. He studied industrial engineering in Galway before he was recruited into Lidl’s graduate programme in 2003, initially as a construction manager, followed by a stint in logistics.

After some training in Lidl’s home country of Germany, he ran distribution hubs and warehouses in Belfast, Charleville, Co Cork, and Mullingar. He was sent to France as operations director for the south of the country in 2012, aged 30. Running an area that included the sunny Côte d’Azur? That must have been a slog.

The supermarket group gave him a seat on the board in France even though Scally couldn’t speak French when he arrived.

“They put me through an intensive language course in Paris, then I took over operations for about 550 stores,” he says.

He was one of seven people on the board of Lidl in France, where the group has 1,600 stores overall. Last September, he moved to assume control of Lidl in Ireland, replacing Brendan Proctor, who has moved on to head up Lidl in the US.

Lidl, along with its compatriot and rival German discounter Aldi, arrived in Ireland about 16 years ago and has since helped to turn the grocery sector’s economics upside down.

Rip-off Republic wasn’t yet a thing when Lidl first established itself here. For the first eight years, the chain slowly carved out market share with its bargain-basement prices and funny brands, while on the receiving end of sniffy quips about bags of sugar smuggled in from the eastern bloc and inedible canned weiners.

Back then, middle-class Dublin mummies would have rather gone to lunch with the girls in Roly’s wearing a shiny tracksuit than be caught shopping in Lidl. You bought your fresh food in Superquinn; you might buy bleach in Lidl.

We even crassly mispronounced its name. Lidl, we would say, rhyming with piddle, though Scally confirms that the correct pronunciation rhymes with needle. The company was that media-shy, it never even broke cover to correct anyone.

And then – bang! – the recession arrived in 2008 and everybody realised that the bigger Irish and British supermarkets had been codding us on price all along. Shopping in a German discounter became a badge of pride, not a shameful secret.

Lidl today has a market share of 8.5 per cent and research agency Kantar Worldpanel says its sales are growing at a rate of 9.5 per cent. According to the agency, “Lidl is in the strong position of getting more consumers through its doors while also encouraging them to spend more on each visit and return more frequently.”

Scally says its revenues are “significantly more” than €1 billion in the Republic alone.

Lidl has worked hard in recent years to improve its range and add a few frills and luxuries, as Irish consumer confidence recovers and the proverbial fiscal boot is removed from shoppers’ throats. It has nudged its offering slightly more upscale. Most of its 1,650 product lines – a fraction of the amount carried by bigger rivals – are own-brand and made exclusively for Lidl, although Scally swears by their quality.

“Maybe eight or 10 years ago, it was difficult to do a full shop in Lidl because we didn’t have the range we have today,” he says. “But there is nothing you can’t buy in a Lidl store today, fresh food or off the shelf. You walked the floor with me; you saw it yourself.”

A half-hour previously, we had taken a stroll around its “new concept” store in Gorey: a bigger, slightly plusher and more soft-focus version of a typical Lidl. The old Gorey store was a new-build in 2004. The company levelled it last year and invested more than €5 million in an upmarket design.

The aisles are wider – more than 2.7m/9ft across, compared with the usual 2m/6.5ft – so shoppers in a hurry don’t get blocked in behind people pushing trollies. It has a high roof and fancy wooden beams in the ceiling.

It has a coffee machine inside the door selling €1 lattes, and a new convenience hot food section – Lidl Go – beside the bakery.

It is near the end of “Greek week” when I visit, and the mums of Gorey are filling their trollies with cut-price feta and taramasalata. The lighting is softer. The store feels spacious, a bit like one of its supposedly more upmarket competitors.

Lidl’s smaller stores appeal to those who grind their teeth at having to negotiate the cavernous vortices of its competitors for a food shop. So might shopping in its bigger outlets become just as much of a chore as in the other chains whose eyes Lidl have wiped in recent years? Scally emphatically believes not.

“We are working on getting people through the tills even more quickly,” he says. “Although the store is slightly bigger, people can get around it just as fast.”

Detail

Lidl’s discount model is based on process design and efficiency, and, as an example of the level of detail that involves, Scally says huge effort is put into car park design.

Its new store in plush Terenure, in south Dublin, is effectively up on stilts, with a small surface car park at ground-floor level. Customers take a travelator to the first floor for their shopping. This wasn’t a quirk of planning. Scally says Lidl’s data tells them that stores with underground car parks are less favoured by consumers. Perhaps some shoppers don’t like driving into tight, dark spaces below ground.

So the new Terenure store hitched its skirt and stood taller. Several upcoming new stores, such as those in Cabra and Glenageary, will have similar designs.

Other new stores, such as those at Castlerea, in Roscommon, will be based on the “Gorey concept”. So, too, will a new Tallaght store, where Lidl last week also opened a new group headquarters.

Scally says Lidl wants to open another “40 or 50” stores in Ireland. Many of its refits will also ape the Gorey concept. How many of those? “Maybe eight this year, including conversions,” he says. “Then we’ll keep a similar pace after that. I don’t feel under any pressure to do it, but you can’t sit still in retail.”

Its competitors have pushed back against Lidl’s lower prices in recent times, printing vouchers or introducing cut-price basic ranges. Late last year, Lidl’s market share went backwards.

Scally dismisses the response from Lidl’s bigger competitors: “Their basic ranges don’t come near our own brands. It is an attempt to fool the consumer. Our own brands are equivalent in quality to the well-known brands.”

Lidl has focused on pushing its quality message in the recent past, but that is all about to change in coming weeks. It is going after its competitors on price once again with a new marketing campaign.

“The price differential is massive and a lot of people are still not conscious of how big it is,” he says. “We need to communicate that more.”

Scally has prepared a trolley with a reasonably basic weekly shop for a small family. It has everything you’d need: meat, eggs, bread, fruit, canned goods. Scally says it costs €48 in Lidl but would cost €114 at a rival store.

“Price and value made us great,” he says. “We never lost it. People have now accepted our quality in recent years. Now we will remind them about price again.”

Lidl is about to launch a full media campaign, fronted by an Irish mum with kids, pushing the message of a “full shop for half the price” of its bigger rivals. She will say she can now afford some luxuries in her life with the money saved shopping at Lidl’s low prices. A luxury pitch and a hard price marketing message all rolled into one.

Lidl’s low prices are helped by its operating model, based upon a neurotically efficient supply chain to help keep costs to a minimum.

All suppliers deliver to regional distribution hubs, such as Newbridge, Mullingar, Charleville and Belfast.

Stores put in daily orders to their hub, and deliveries arrive, often late at night. Delivery drivers have keys to access the shuttered stores, let themselves in and unload the goods alone. When the first staff arrive at about 6am, it is all there.

The fresh food is packed on to shelves and when the doors open at 8am, the store is ready to go for shoppers. The focus then shifts to the consumers.

Ambient goods, where possible, arrive on pallets wheeled into the store, or boxes that are placed on shelves. Lidl doesn’t reorder ambient goods as soon as shelf space appears. Its store managers wait until it hits a minimum level of stock on a shelf before reordering.

“A lot of retailers say ‘we’ve sold one, so we’ll order one’ and repack to keep the shelf looking full,” Scally says. “That’s totally unproductive. Most of our ambient product has just a week’s supply on the shelves, and we wait until there is a day’s supply left.This means the order for that product only arrives once a week, the shelf only has to be packed once a week, and it cuts down the work processes.”

The Gorey store, at 1,400sq m/15,000sq ft, only requires about eight staff on duty during a shift to cover all functions.

People culture

Scally repeatedly refers to Lidl’s strong people culture. All company bosses say this, and it often sounds forced. But the German discounters do walk the walk on human resource policies.

Scally insists its staff are the best paid in retail. The Irish operation has pioneered many personnel initiatives, such as its retail management degree in partnership with Dublin Business School, which have been rolled out in the group abroad.

Area managers always had competitive packages, including company cars, but Scally says it has recently also introduced cars for store managers.

“They have a choice between and Audi A3 or a Volkswagen Golf,” says Scally. German options, naturally.

Like all grocers these days, Lidl is keen to stress its credentials on buying Irish goods. Today, it releases a report by DKM economic consultants that puts Lidl’s purchases of Irish goods annually at more than €540 million, including €150 million for export.

Greek week is now over; next week it is Iberian week across the group internationally, when Lidl stores across Europe will push its Sol y Mar range. Scally says it will be Irish week in July, when several of Lidl’s local suppliers will provide extra goods for export.

With the interview finished, Scally hops into his car for the official opening of the new Tallaght offices. He has left himself almost exactly enough time to drive up the M11 to get there. Timing and precision – they say it is the Lidl way.

CV

Name: John Paul Scally

Position: Country manager, Lidl

Age: 34

Home: Dublin

Family: Single

Something we might expect: “I’m from rural Westmeath, so I’m a GAA man”

Something that might surprise: “I’m also a snowboarder”