Cheaper grocery bills expected as Kaufland scores second Australian site

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An employee places vegetables at Crimean Farmstead, Russia's first specialized grocery which sells products from Crimea, in the Moscow suburb of Khimki January 25, 2015.
An employee places vegetables at Crimean Farmstead, Russia's first specialized grocery which sells products from Crimea, in the Moscow suburb of Khimki January 25, 2015. Reuters/Maxim Zmeyev

German supermarket giant Kaufland has scored another site in Australia as it gears to break into the grocery market. The chain’s expansion is expected to lead to further supermarket price wars in the coming years.

The Schwarz Group, the owner of Kaufland, has reportedly spent $16.4 million for a site in Dandenong, Melbourne, The Daily Telegraph reports. The company previously spent another $25 million for its first Australian site in Adelaide.

The Schwarz Group is the fourth-biggest retailer globally. It is known for its sprawling stores and a wide variety of goods. Up to 60,000 products are being sold in each store. In Europe, the chain already has over 1,230 stores.

Cheaper grocery bills and wider selections

Queensland University of Technology’s Gary Mortimer said he expected Kaufland’s expansion here to lead to further price wars in the future. That means an average Australian consumer could look forward to a wider range of products and cheaper grocery bills.

Mortimer also noted that Kaufland bought a site some months ago in South Australia, and it was recently announced that Dandenong would be its next. He said that what he saw from Seek some months back was that they were recruiting for business development managers for Sydney, Melbourne and Brisbane, suggesting that those will be the next three markets they will enter.

Lidl is the other brand they own, so the Schwarz Group has over the years slowly trademarked the Lidl and Kaufland brands in Down Under. Mortimer added that Aldi had paved the way for Kaufland to bring the German supermarket model here.

“Since Aldi has legitimised private label products here in Australia, the Australian shopper now understands what German food retailers look like and it will certainly enable Kaufland to expand a lot easier into the market,” The Daily Telegraph reports Mortimer as saying. He also thinks they will launch the Lidl model once the Australian site has been established in the next years.

Kaufland Australia’s website says it has “an ambitious Australian investment and development program.” Its hypermarkets in overseas can be as large as 20,000 sqm. That is close to four times the size of Coles and Woolworths Australian supermarkets. Mortimer said it is not unreasonable to think that Australia can sustain two or three major supermarkets as well as two discounters, as well as the hypermarkets such as Kaufland and Costco.

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