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Kaufland will be stopping its online grocery service in Germany.

Concerns over profitability

Having launched its grocery online site in Germany in 2016, Kaufland has announced it will be withdrawing the service, following concerns around costs and the lack of potential for future profitability. The service is currently offered in Berlin and there were plans to extend it to Hamburg. However, in November the retailer announced it wouldn't be expanded to Hamburg and has now confirmed the service will be stopped entirely.

Online channel challenging in Germany

The move reflects the difficulty that discount retailers are having in making online grocery financially viable in Germany, with Lidl announcing last month they would also be withdrawing from the online grocery market for the time being. On the other hand, Edeka has recently announced that its online offer, through partner Bringmeister, will be adding additional services such as one hour delivery slots in Munich, made possible by the opening of a new logistics centre near to the city. So whilst the channel remains challenging, some retailers are continuing to develop their offers and increase the services offered.

Expansion to Netherlands blocked

Local sources reported that Kaufland had been planning to open its first store in the Netherlands, in the area of Deventer. However, permission by the council has been denied, due to concerns of the impact to other local businesses. This is not the only international entry Kaufland has considered. It recently purchased a second site in Melbourne in Australia, ahead of its planned entry into the country.

We bring you the latest developments from Kaufland around the globe.

Second store confirmed in Australia

Having invested in its first site in Adelaide, Kaufland has purchased a second site in Melbourne as it prepares for entry into Australia. Kaufland will be a unique offer in the Australian market, with stores around five times bigger than leading retailers Woolworths and Coles. This is the first English speaking country that Kaufland is opening in and unlike discounter Aldi, who also operates in the market, Kaufland stocks thousands of household brands along with private label ranges.

Expansion in Romania

For the first time, Kaufland has opened an outlet integrated into a real estate complex in the city of Cluj-Napoca, in North West Romania. This latest opening brings the total number of Kaufland stores in the market to 116. The new store is 2,403 sq m and has a modern design. Over 50% of the SKU's stocked are produced in Romania, helping to guarantee freshness and keep prices low. Romania is a key focus market for the retailer and it continues to develop its offer there.

Increasing the focus on local sourcing

Kaufland Romania has launched a private label range for products exclusively made in Romania. The new range is called K-Vreau din Romania (I want from Romania) and has over 80 products, including flour, sausages, desserts, bakery items and dairy products. The products are exclusively made by local producers and suppliers and it builds on the substantial local offer that the retailer already has, with over 50% of its products already coming from Romania.

Kaufland also launched a new initiative in Romania, in cooperation with the Commission for Agriculture and Forestry and the Ministry of Agriculture and Rural development. A 'Romanian shelf' has been developed, offering only domestic pork products and showcasing them in one location. It involves more than 100 small and medium sized farmers in the country and demonstrates Kaufland's commitment to supporting the local community and economy. It is part of a wider strategy aimed at attracting new customers and improving its image. Despite being an international retailer, Kaufland is keen to show its ability to operate locally and tailor its offer to suit individual markets.

 

 

The Competition Council in Romania will add an additional criterion when assessing retailer mergers or acquisitions. We look at what impact this change in regulation could have on Romania’s grocery retail market.

Competition council reduces geographic area of assessment

Romania’s competition council will consider the number of stores within each unit’s catchment area whenever retailers look to merge with or acquire another retailer. Previously, the council looked at number of stores within a 10 to 30-minute drive radius. Now the council will assess geographic areas within a 10-minute drive radius for stores above 400 sq. m., and a 10-minute walk radius for ones below 400 sq. m.

Lower area of assessment is boost for convenience stores

The regulatory change will mean a much smaller geographic area of assessment for small format stores. Retailers with aspirations to expand their supermarket portfolio will be limited from acquiring units that are geographically near. The regulations are aimed at supporting independent chains, mom and pop stores and markets by limiting the growth of chains in specific geographical areas.

Less market consolidation and more growth

Retailers looking to increase their store density in Bucharest will find it difficult to acquire market share in the capital due to the high saturation of stores. The change in regulation will give a boost to retailers such as Lidl and Kaufland that typically have an organic growth strategy.

 

Retailers also looking to expand to other Romanian cities will have their opportunities limited by this regulation. This is a boost for Profi that has more of a nationwide presence than the other top retailers in Romania. As a result, the market is encouraged to grow organically rather than focus on consolidating market share.

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Amin Alkhatib, Retail Analyst CEE, IGD International: based in London, UK, Amin is responsible for shaping IGD's research in Central and Eastern Europe; as well as contributing to IGD's broader European research programme. Follow me on Twitter @Amin_IGD for further insight on the region’s retail landscape.

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