Deep Dive: Kaufland in Australia – Europe’s Biggest Retailer Heads Down Under

Executive Summary

The biggest retailer in Europe, Schwarz Group, is reportedly bringing its Kaufland discount hypermarket format to Australia. The company told us that it is still scoping the market.

• Kaufland could capitalize on the strong Australian consumer demand for value groceries, which would place pressure on the dominant grocery retailers, Coles and Woolworths.
• However, Kaufland’s ability to build share in a developed, consolidated retail market is untested. So far, Kaufland has launched outside Germany only in Eastern European countries.
• We think Kaufland would face greater challenges in nonfood categories. It would be entering a market that not only has a number of incumbent value general merchandise retailers, but also one that is set to see more and more nonfood sales migrate online.
• In short, there are opportunities for a discount grocery offering in Australia, but we think any major addition of nonfood space would be challenging in a sector that will see more sales switch out of brick-and-mortar stores