Kaufland stops market entry into Australia

Date : 22 January 2020

Amin Alkhatib

Senior Retail Analyst

Talk of Kaufland’s entry into Australia began in 2016, along with speculation around the potential entry of its sister company, Lidl. At the beginning of 2020, the Germany hypermarket operator looked to edge closer to entering the market, with its first store expected to open in 2021.

It has since been reported that Kaufland has invested over AU$430m (US$295m) in Australia over the past three years. This has included the opening of an advanced distribution center, recruiting staff and executives, purchasing land and obtaining planning permissions for new stores.

Now, however, Kaufland’s acting CEO, Frank Schumann, has said it will be exiting the market, before it has even opened its first store in the country.

A gradual withdrawal and sell off properties

Kaufland announced it will let go of its 200 staff members, who will be left with “generous packages including all entitlements will be offered, as part of a thorough support and consultation process for all”. Regarding the existing investments, which includes the land and properties it has purchased, this will be "discussed with the relevant parties in [the] coming days".

Relief for leading Australian retailers

Kaufland’s exit will be welcomed by leading Australian retailers, Coles and Woolworths. Both expected the German retailer’s arrival to instantly intensify price competition, like Aldi’s entrance to the market in 2001, which would eat into their margins.

Kaufland to focus on Europe

The retailer stated it will be “concentrating its business on its European core markets in the foreseeable future”. It sees a great deal of growth potential in the region, and to further consolidate its leading position in some of the markets where it already operates. This will be especially the case in Romania, where it is reporting dynamic growth, and which is becoming a substantial revenue source.

Subscribers wanting to find out more about retailer’s strategic priorities can look at Strategic outlook for Kaufland.