Adelaide to welcome Australia’s first Kaufland supermarket

Kaufland’s first Australian store is set to be in Adelaide.

Germany’s Kaufland has confounded industry expectations by snapping up a site in Adelaide as it looks to forge into Australia’s fiercely competitive grocery market.

The company has bought an iconic property on the Adelaide CBD’s fringe, paying $25 million to buy the sprawling Le Cornu site on Anzac Highway in Forestville.

The Schwarz Group, which in addition to Kaufland also owns discount chain Lidl, had been trying to gain a foothold in the $90 billion-plus local supermarket sector for the past year and the Adelaide operation, will be its inaugural and flagship store, The Advertiser reports.

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Kaufland favours large warehouse style stores of up to 20,000 sqm compared to the more traditional Coles and Woolworths stores, that are generally less than a fifth of that size, which made the site attractive to the grocer.

The Le Cornu site is about 36,000 sqm and had been for sale for about two years. The deal was handled by real estate agencies CBRE and JLL. Sales agent, CBRE’s Ben Heritage, who brokered the Anzac Highway deal, confirmed the deal.

CBRE research has identified Australia as a “retail hotspot” for international brands with one of the highest new brand entry rates in Asia Pacific on a per capita basis.

The company cites Australia’s favourable economic conditions of strong population growth, wealth, employment and tourism.

Kaufland German supermarket Australia Aldi

German supermarket chain Kaufland is coming to Australia.

While Sydney and Melbourne are the preferred choices for first time entrants, followed by Brisbane, the German grocer has chosen Adelaide for its first site.

Kaufland’s barn-style retail experience could see it deliver about 60,000 products and has drawn comparisons to US giant Costco, which is well established in Australia.

Kaufland has not commented but it has laid out its plans on its Australian website.

“Kaufland has an ambitious Australian investment and development program. Therefore we are always looking to purchase suitable and appropriate sites,” it says, highlighting it wants sites of 15,000 to 20,000 sqm.

The move could shake up the supermarket sector that has just emerged from its worst period of growth in more than 30 years.

A survey of suppliers by UBS presented at the Australian Food and Grocery Council’s annual conference in May found only 51% of suppliers believed at that time Germany’s Kaufland would actually enter Australia, with only one supplier in contact with the retailer.

“While industry feedback suggests Kaufland will have a physical presence by 2020, we believe that an untested business model and large-format site scarcity in Australia (in particular east coast), will limit Kaufland’s success,” the survey says.

However, Kaufland’s purchase, and its use of a specialist consultant to find sites, could see it overcome this hurdle and grow into a significant player.

This article originally appeared on www.theaustralian.com.au/property.