The German discounter has its sights set on technology. Through its parent company, the Schwarz Group, Lidl wants to become a “national cloud champion” in Germany. Here are some insights from the experts at AURIS Finance, a consultancy specialising in mergers and acquisitions.
The German business daily Handelsblatt named him “Visionary of the Year”. In the world of mass retail, Dieter Schwarz, now in his eighties, stands out as much for his discretion as for his strategic foresight.
€2 billion allocated to artificial intelligence
Founded in 1930, Lidl has steadily expanded from Germany to become the world’s leading discounter and Europe’s largest retailer. In 2023, the Schwarz Group generated a turnover of €154 billion, of which €15 billion came from its French shops. This windfall enables the group to position itself in the strategic areas of digitalisation. The Schwarz Group is part of a consortium of companies that participated in Aleph Alpha’s financing round. The German start-up, which specialises in generative AI for industrial applications, managed to raise €500 million in November 2023, two months before its French competitor Mistral AI raised €385 million. Dieter Schwarz is not content with just getting involved in promising start-up companies. The supermarket magnate was behind the creation of a European centre for artificial intelligence in his hometown of Heilbronn in southern Germany, in which his foundation has invested €2 billion.
StackIT, a Cloud solution for German SMEs
The group started looking at technology solutions very early on. Initially out of necessity. To manage its retail data, Lidl set up an IT branch within the Schwarz Group. This unit has a total of 20,000 servers, which are used by the 13,700 Lidl and Kaufland shops in around thirty countries. From March 2022, the group’s cloud services will be marketed under the name “StackIT”, on the same model as giants such as Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure. StackIT offers businesses an on-demand cloud computing solution, with pricing based on usage. Other services include databases and compute instances. Schwarz IT’s two server centres are located in Austria and Germany. This enables the group to offer a cloud that is 100% made in Germany and complies with European cybersecurity and data protection standards.
Diversification and inorganic growth
Despite sales growth, the hard discounters are also having to cope with an inflationary context. The group is now facing a decline in its financial profitability. For 2022, the operating profit of Lidl International (activities outside Germany) has fallen by 6.6%. Against this backdrop, the parent company is stepping up its diversification strategy, investing almost €8 billion a year in “strategic projects for the future”. Technology companies are a particular focus for the supermarket giant, which recently acquired XM Cyber, an Israeli company specialising in cyber security.
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