Embattled supermarkets Coles and Woolworths could soon have a new competitor to contend with amid reports that yet another German chain, Kaufland, could be heading to Australia.
Rumours of Kaufland’s expansion have been around for some time, but they have crystallised somewhat with news the Aldi rival is conducting a feasibility study ahead of an assault on the Australian market.
“Only once that is complete will we be in a position to make a decision about entering the Australian market,” the company said in a statement to The New Daily, noting that it was a “growth-oriented company”.
Earlier this week, Fairfax reported Kaufland owner Schwarz Group, also known as Aldi’s arch enemy, had applied to trademark the Kaufland name in Australia.
Germany’s Heilbronner Stimme newspaper reported that Kaufland told its workers in a company meeting that it wanted to open its first supermarkets in Australia by 2020.
An Australian invasion became more likely after Kaufland firmed plans to enter the US market in 2017/2018.
What is Kaufland?
Kaufland is owned by the Schwarz Group, which also owns the Lidl chain. It operates only in Europe with 1240 branches, half of which are in Germany and the rest spread across Poland, the Czech Republic, Slovakia, Croatia, Romania and Bulgaria.
The Schwarz Group is a privately-owned company and the second-largest retailer in Europe, behind WalMart, for revenue.
In 2015/16, Schwarz had a turnover of $121 billion and operated more than 10,000 branches in 26 countries, however the lion’s share of those are Lidl supermarkets.
By comparison, Aldi had a 2015 turnover of $95 billion in 16 countries, including the US and Australia.
Kaufland stores are a mix between regular supermarket and massive-scale “hypermarkets” which can stock up to 60,000 products, some of which are its own K-Classic brand and name brands.
One source describes the hypermarkets as a hybrid of a cash-and-carry operation similar to Costco, and a regular discount supermarket, such as Aldi.
It is also known for its aggressive dealing, reportedly rejecting any price increases from suppliers and often demanding “advertising cost premiums” to cover costs of going into its flyers or for particular placement on its shelves.
What does it mean for Coles and Woolies?
A second discount retailer joining Aldi in the form of Kaufland or Lidl would increase pressure on the Australian supermarket duopoly of Coles and Woolworths.
It’s exactly the situation veteran Australian retailer and entrepreneur Dick Smith recently warned of in a harshly-worded statement addressing our current retail grocery market.
“They are here to eventually take hundreds of millions of dollars out of our country and repatriate this money to Germany,” said Mr Smith of discount chain Aldi.
He warned that unless Australian retailers followed Aldi’s lead in cutting staff and product choice, unemployment would rise.
“There will virtually be no jobs, as the Aldi formula is designed for very low staffing levels,” he said.