Finance Finance News The first peek inside German supermarket Kaufland’s Australian stores Updated:

The first peek inside German supermarket Kaufland’s Australian stores

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German supermarket giant Kaufland has 18 supermarkets in the pipeline, after the Victorian government approved another two stores on Thursday.

The approval of a further two stores in Melbourne – in Coolaroo, in the city’s north and Oakleigh South, south-east of the city – brings to five the number of stores approved in Victoria, as well as a 117,000-square-metre distribution centre at Mickleham, near Melbourne’s Tullamarine Airport.

Kaufland also has two stores approved in South Australia, and is awaiting approvals on one store each in Toowoomba (Queensland), and Adelaide.

kaufland gets two stores approved in Victoria
Kaufland has almost 12,000 stores around the world. Photo: Kaufland

In a statement, the company said its planned total investment in Victoria was more than $500 million, “with a potential of up to 2400 new jobs”.

While construction began on its two test stores last week, completion of its distribution centre is still 18 to 24 months away.

“With five approved stores, as well as the additional nine sites under review, we are committed to our long-term, sustainable growth across Victoria,” managing director Julia Kern said.

“We look forward to creating thousands of jobs and creating opportunities for local businesses.”

The aggressive retailer’s moves have been closely watched since it announced in early 2017 it would make an assault on the Australian market and take on the Coles-Woolworths-Aldi triopoly.

A company spokesperson told The New Daily the stores would be Kaufland’s standard footprint of about 4000 square metres, with the sites expected to follow the model of its German one-stop-shop operations, selling everything from groceries to electrical appliances.

Kaufland was recently rated as the cheapest for branded products and performed well for in-house brands too. Photo: Kaufland

The spokesperson was unable to say how many lines the stores would carry, but earlier reports speculated that its Australian stores would carry about 30,000 stock-keeping units (SKUs).

That compares with a typical stock-holding of Coles and Woolworths of about 22,000 SKUs, and Aldi at about 1350. German media report that Kaufland hypermarkets there typically carry up to 60,000 SKUs.

The interior of a typical Kaufland supermarket in Germany. Photo: Kaufland

The mega-retailer’s sheer size will present a formidable challenge for Australia’s exisiting supermarkets.

With sister supermarket Lidl, it is part of the Schwarz Gruppe, which employs 400,000 people in 11,700 sites in 30 countries and which in 2017-18 turned over €96.8 billion ($159 billion). It has publicly acknowledged its aim to hit the €100 billion mark ($164 billion) by 2018-2019.

Given its 7.4 per cent growth in 2017-18, that goal looks within its reach. (Australia’s entire supermarket sector had revenue of about $103 billion in 2018).

Woolworths prepares itself with profit lift

Meanwhile, Woolworths has boosted its full-year profit by 7.2 per cent to $1.75 billion, after a solid performance in the second half of 2018-19, with revenue climbing 3.4 per cent to $59.98 billion. That was despite the drag of its underperforming Big W department store chain.

The first eight weeks of the new financial year have provided even better news for the retailer, as its Lion King Ooshies collectables promotion helped drive 7.5 per cent comparable sales growth in the company’s 1000-plus supermarkets.

Chief executive Brad Banducci said its supermarkets had recovered well from a first-half hit from the removal of single-use plastic bags, volatile weather and the success of rival Coles’ Little Shop collectables.

Online sales also increased by nearly a third to $2.5 billion, driven by strong growth from WooliesX, CountdownX (in New Zealand) and Big W.

But Big W overall lost $85 million – an improvement on its $110 million loss in the 2017-18 year.

Woolworths earlier this year announced plans to close around 30 unprofitable stores, with the first two to go in Sydney, as well as distribution centres in regional Queensland and South Australia. The closures are expected to lead to about 1000 job losses.

“We were pleased with the material improvement in sales growth in Big W over the course of FY19, with customers noticing the improvements we have been making to price, range and in-store experience,” Mr Banducci said.

Woolworths shares rose by 0.55 per cent to $36.38.