Lidl overtakes Waitrose in Britain's supermarket wars

* Lidl now No. 7 UK grocer with 5.2 pct market share

* Aldi's market share grows to 7.0 pct

* Tesco (Frankfurt: 852647 - news) best performer of big four, shares rise 3.9 pct

(Adds detail, background, Aldi CEO comment, shares)

By James Davey

LONDON, Aug 22 (Reuters) - Discounter Lidl has

leapfrogged upmarket Waitrose in Britain's competitive

food retail market, industry data showed on Tuesday, a sign that

cash-strapped shoppers are still having to count their pennies.

Lidl and rival German discounter Aldi have

steadily cut into the market shares of Britain's big four

supermarket chains - leader Tesco, Sainsbury (Amsterdam: SJ6.AS - news) 's

, Asda and Morrisons - with aggressive

store openings fuelling their sales growth.

The two discounters started opening stores in Britain in

1994 and 1990 respectively, but their big breakthrough came when

the economic crisis hit in 2008 and more British shoppers were

prepared to give them a go.

In February, Aldi overtook the Co-operative to

become Britain's fifth largest supermarket and on Tuesday Lidl

recorded a market share of 5.2 percent becoming the No. 7,

market researcher Kantar Worldpanel said, usurping

Waitrose.

Waitrose has a loyal middle class clientele but even it has

felt the effect of Aldi and Lidl, who have pushed prices down

across the sector.

Kantar Worldpanel said Lidl's sales rose 18.9 percent

year-on-year in the 12 weeks to Aug. 13, while Aldi's sales rose

17.2 percent, giving it a market share of 7 percent.

"Ten million households visited (Lidl's) expanding network

of stores during the past 12 weeks, with alcohol and fresh

produce performing particularly well," said Kantar Worldpanel's

Fraser McKevitt.

He said that Aldi attracted 1.1 million more shoppers

through its doors than this time last year.

“Rising food price inflation continues to stretch household

budgets and as a result consumers are increasingly focusing on

the price that they pay at the till," Matthew Barnes, CEO Aldi

UK and Ireland (Other OTC: IRLD - news) , said.

LOSING MARKET SHARE

Though all of the big four increased sales for the fifth

consecutive period - a run of success not seen since 2013 - it

partly reflected grocery price inflation and they still all lost

market share to the discounters.

The big four now account for 69.3 percent of the UK grocery

market, down from 76.3 percent five years ago.

"That looks set to fall further in the coming months," said

McKevitt.

Tesco was the strongest performer among the big four, with a

sales increase of 3 percent, sending its shares as much as 3.9

percent higher.

Overall UK supermarket sales rose 4 percent year-on-year.

Like-for-like grocery inflation increased slightly to 3.3

percent after holding steady at 3.2 percent for the past two

months. The inflation has been fuelled by the fall in sterling

since last year's Brexit vote.

At the current rate, price increases could add a further 138

pounds ($177.3) to the average UK household’s annual grocery

bill, with the price of butter and fish most affected, Kantar

Worldpanel said.

Overall, British retail sales growth slowed in July, adding

to worries about a fall in consumer demand, official data showed

last week.

Market share and sales (percent)

12 wks to 12 wks to pct change

Aug 13 2017 Aug 14 2016 in sales

Tesco 27.8 28.1 3.0

Sainsbury's 15.8 16.1 2.0

Asda 15.3 15.7 1.4

Morrisons 10.4 10.6 2.6

Aldi 7.0 6.2 17.2

Co-Operative 6.3 6.6 -0.4

Lidl 5.2 4.5 18.9

Waitrose 5.1 5.1 2.8

Iceland 2.1 2.1 5.2

Ocado 1.4 1.3 12.6

Source: Kantar Worldpanel

($1 = 0.7783 pounds)

(Reporting by James Davey; Editing by Susan Fenton and Jane

Merriman)