Germany's Kaufland will find it harder to do an Aldi in Australia

Simon Evans
Oct 9 2017
AFR
German supermarket retailer Kaufland will need to be careful with its site selection in other capital cities as it prepares to expand in Australia, as small fruit and vegetable retailers bear the brunt of Aldi’s aggressive pricing in fresh food, says a large independent rival.
Roger Drake, the owner of 60 supermarkets in South Australia and Queensland which generate annual turnover of $1.2 billion under the Foodland and Drake banners, said on Monday he was “staggered” Kaufland was making Adelaide its opening foray in Australian expansion plans which it had been plotting for months.
He had been anticipating the first Kaufland stores to be operating in Melbourne or Sydney where population growth and faster economic momentum made the economics more appealing.
Kaufland, which operates 1230 stores in Europe, runs large hypermarket style stores which are between five to six times the size of an average Coles or Woolworths store. They include a large supermarket offering under the same roof as a big general merchandise component similar to a Kmart or Big W.
Kaufland, which is part of the Schwarz Group, the world’s fourth largest retail company, last week acquired a 3.6-hectare site for $25 million in the inner Adelaide suburb of Forestville in its first property purchase as part of a proposed store roll-out in Australia.
Mr Drake, a retail industry veteran who opened his first supermarket in 1974, said conditions in supermarket retailing were more competitive than at any other stage in the past 40 years.
But he said good sites were becoming harder to come by, and the large footprints required by Kaufland were difficult to pick up.
“Location is so important. Location is number one. There has to be good parking, it has to be on the right side of the road,” Mr Drake said.
Aggressive pricing
Mr Drake said shoppers didn’t tend to travel too far from their local areas for supermarket shopping, even when there were large promotions on general merchandise from competitors like Aldi trying to drag in customers from further afield.
He said his 37 Foodland supermarkets in South Australia hadn’t been hit as hard by the entrance of Aldi into the state 18 months ago as he was initially anticipating.
“It’s not as much as we thought,” he said. Mr Drake said Aldi had been very aggressive with its general merchandise offering and special buys in the local market.
He said single-store fruit and vegetable operators appeared to be being hit the hardest by Aldi’s aggressive pricing on its fresh food offering, particularly among berries and mangoes.
“They [Aldi] are disrupting the fruit and vegetable market. I feel very sorry for some of the fruit and vegetable shops,” Mr Drake said.
Aldi first entered the Australian market in 2001 on the eastern seaboard and have built up a network of almost 500 stores, with expansion in Western Australia and South Australia the main focus in their growth plans over the past 18 months, along with a revamp of their fresh food offering.
Kaufland didn’t elaborate on its plans for Australia beyond generic statements on its Australian website that it “has an ambitious Australian investment and development program” and is looking for sites of a minimum of 10,000 square metres.
The $25 million sale to Kaufland of the 3.6 hectare site by the Le Cornu family was confirmed by CBRE agent Ben Heritage on October 6
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