Hailed as ‘Aldi on steroids’, German discount superstore Kaufland is coming to Australia, promising to “put continued pressure on grocery prices in the sector”.
The German ‘superhouse’ will open its first store in Adelaide next year and already has plans for a store in Dandenong, Victoria.
The store’s parent company Schwarz Group is the fourth largest supermarket conglomerate in the world.
Supermarkets in Australia have been put on guard, especially lower-priced product dealers Foodworks and IGA. Kaufland’s purchasing power should also ring alarm bells for Coles and Woolworths.
The Australian market has been warmed up to Kaufland’s discount model by its German competitor Aldi.
“Aldi’s growth over the last 17 years was initially a bit of a slow burn and consumers became educated to that European discount model,” said Dr Gary Mortimer from Queensland University of Technology Business School.
“It had brands that were unknown, needing to put a gold coin in a trolley and returning the trolley to get that back and bringing your own bags to the supermarket, but consumers have adjusted.”
He says Aldi’s twice-weekly specials have “educated Australian consumers to realise the products marketed or retailed by Aldi are really good quality”.
“Now [that] the Australian consumer has been educated, Kaufland and Lidl entering the marketplace will be expedited, [and] will move a lot quicker into the marketplace,” said Dr Mortimer.
“That’s one of the reasons why Wesfarmers have spun off their Coles business because the market is going to get highly competitive.
“I would draw some parallels to the UK food and grocery market which has five major supermarkets as well as two German discounters, Aldi and Lidl – that sector in the UK has been really competitive and we’re starting to see that play out in the Australian market.”
Kaufland is taking its expansion into the already competitive Australian market seriously. IGA and Foodworks stores will be watching their backs, as will department stores such as Big W and Kmart, as they will find it difficult to compete or expand.
“The discounter model will start to erode any opportunities IGA and Foodworks have to grow – they are the most exposed in the market as Kaufland enters and Coles and Woolworths move towards trialling smaller format stores.”
“Kaufland is a very large, big box retailer. They are essentially a supermarket attached to a discount department store,” says Dr Mortimer.
“They range anywhere upwards from 60,000 lines – that’s three times the standard lines of a supermarket,” says Dr Mortimer.
A Kaufland store would be double the size of a Coles and Woolworths supermarket, and finding available land may be the biggest challenge it will face in Australia – not direct competition.
Are you looking forward to Kaufland coming to Australia? Do you shop at Aldi? Would you welcome a competitor that could drive prices down even further?