Surprise exit for Kaufland from Australia
Written on the 22 January 2020 by Matt Ogg
Kaufland's first foray outside Europe has fizzled today after the German retail giant announced it would abandon plans for Australian market development.
The group was previously planning to shake up Australia's retail market with 11 stores in Victoria to be supported by a 110,000sqm purpose-built distribution centre, along with openings in Adelaide, Sydney and Brisbane.
At every turn the hypermarket was met by state government fanfare for its potential economic contribution coupled with complaints from independent retailers over its proposed use of industrial land for retail purposes.
Today the Schwarz Gruppe-owned retailer told 200 Australian employees about the decision to undertake an orderly withdrawal from the Australian market to concentrate on its European core markets for the foreseeable future.
It said the decision was made after careful and thorough consideration, and "generous packages including all entitlements" would be offered to staff.
"This was not an easy decision for us. We always felt welcome in Australia. We would like to thank our employees and we apologise for the disruption this decision will cause," says Kaufland International acting CEO Frank Schumann.
"We would also like to thank our business partners, who offered us great support over the last few years. We would also like to thank the government for being very open-minded to our projects.
"In Europe, we see a great deal of growth potential. We will actively shape the consolidation of the European retail sector, thus further reinforcing our leading position."
The retailer says the future of Kaufland's existing Australian investments, including properties purchased for retail outlets and distribution infrastructure, will be discussed with the relevant parties in coming days.
Shares in Australia's two leading supermarket retailers Woolworths (ASX: WOW) and Coles (ASX: COL) hit record highs of $41.58 and $16.69 respectively after the news.
The German press has also reacted with surprise, with newspaper Handelsblatt describing Kaufland's decision to end its Australian adventure as a "severe setback" for 30-year-old Kaufland Australia managing director Julia Kern (pictured), who assumed the role in May 2018.
Kern had made a good impression in previous positions within the group including executive director for Kaufland's northern region, sales area manager for Lidl Italia and sales operation manager at Lidl in Germany.
The publication reports she was given a budget of around 300 million euros to lead Kaufland's market entry in Australia, but by no means should this retreat be the end of a promising career for Kern with the company.
When she was appointed in 2018, Kaufland's then CEO Patrick Kaudewitz said she was qualified for the job because of her past performance and potential.
"We do not make such decisions lightly. But we are a long way from a youth delusion attested to us," Kaudewitz said at the time.
"The average age of our board members and executive board members is 43 years."
Less than a year after Kaufland got the ball rolling for its Australian venture, Kaudewitz resigned as CEO, followed by the departure of Lidl CEO Jesper Højer.
News magazine Focus also reported the announcement came as a surprise, given less than half a year ago Kaufland was very enthusiastic about its early success in Australia.
Focus also reported the price wars between Kaufland sister company Lidl and Aldi have heated up in Germany.
But in Australia, Aldi's store network that has grown to 500-plus since its market entry in 2001 will now be without the threat from more of its German peers.
In other retail news coming from Europe, yesterday major UK supermarket chain Sainsbury's announced its CEO Mike Coupe will retire in May and will be replaced by retail and operations director Simon Roberts.
One of Roberts' likely tasks at the helm will be to take on competitors like Aldi and Lidl as they expand their presence in the UK market.
Related stories: Construction underway for Kaufland's first Adelaide storesubscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Author: Matt Ogg