German giant buys supermarket site to enter Australia

Australia's fiercely competitive grocery sector is set for another shakeup after German giant Kaufland purchased a landmark South Australian site for its first major supermarket in this market.

Kaufland, part of the world's fourth-largest grocery conglomerate, has paid $25 million for the sprawling Le Cornu site in the Adelaide suburb of Forestville, where it will open its inaugural and flagship store.

The supermarket and general merchandise chain's arrival will send shivers down the spines of Australia's "cosy" Coles and Woolworths grocery duopoly, already under siege from Kaufland's arch rival Aldi, which also hails from Germany.

Since its arrival in Australia in 2001, Aldi has made a serious dent in the dominant supermarket chains' profits and amassed 483 stores - mostly on the eastern seaboard.

Kaufland will build a signature 20,000 square metre supermarket on the Anzac Highway site, about four times the size of an average Coles or Woolworths store.

German customers compare Kaufland to a cross between a supermarket and a Kmart, similar to the shopping experience offered by another large new entrant on Australia's grocery scene, US giant Costco, but without the membership fees.

Costco has so far expanded to open nine big-barn supermarket warehouses across the country.

Kaufland is considered a popular one-stop shop with discount prices on both supermarket staples and extras like bikes or car maintenance supplies.

The retailer, controlled by the giant Schwarz Group in Germany, had been looking at sites in Australia for more than a year before setting up headquarters for its Australian staff in a small Port Melbourne office in March.

Schwarz Group is led by German billionaire Dieter Schwarz and is one of the world's biggest retailers with $US94.5 billion in sales in the 2015/16 financial year.

Its sister company is discount supermarket chain Lidl, another Aldi rival.

Kaufland operates more than 1230 stores in Germany, the Czech Republic, Poland, Bulgaria, Croatia, Romania and Slovakia.

The 36,000 square metre site in Adelaide was owned by the Le Cornu family who used it for their furniture business which they sold to ASX-listed Fantastic Holdings in 2008.

The transaction was handled by CBRE and JLL. The site, a couple of kilometres from Adelaide's centre, has existing use rights for bulky goods retail.

Kaufland was contacted for comment. In a statement on its website, it says: "We are a growth-oriented corporation continually assessing our expansion possibilities in existing and potential markets. With this in mind, we are currently conducting a feasibility study by analysing the Australian market".

This story German giant buys supermarket site to enter Australia first appeared on The Sydney Morning Herald.