Lidl is planning to move into the London market as part of plans to ditch its budget image.
The budget supermarket chain has bought a new headquarters in southwest London and plans to open 300 new small-medium sized stores within the M25 circle. Lidl currently has 10 stores in the capital but the new stores gives it real competition for the likes of Sainsbury's, Waitrose and Tesco.
Lidl, along with sister store Aldi, has grown in popularity over the few years, creating huge competition in the supermarket industry and driving prices down. It has a 4% share of supermarket sales in the UK, generating a record turnover of more than £4 billion. Other supermarkets, however, are enduring a tough time. Waitrose, another of the winners over the past few years, this week reported its first fall in annual sales for seven years. And Morrisons reported a 47% fall in half-year profits.
Retail analysts believe Lidl's plans to go more upmarket have been in place for several years.
David Gray, retail analyst at Planet Retail, said: "This is part of an ongoing strategy, with Lidl putting in more premium ranges, more fresh bakery products, more brands, to make it more like a mainstream supermarket."
But because Lidl's current image is based on out-of-town stores with budget prices, Mr Gray stressed that the plans are a gamble.
"I can't see them moving into the heart of central London. They will end up with smaller shops - they'll end up with convenience stores, which are a high-cost business model where it's a lot harder to make money," he said.