Kaufland is coming to Australia. Does that name mean much to you? You'll get to know more about it over the coming years.
It's part of Schwarz Gruppe, the world's fourth largest supermarket giant, which also operates Lidl (a large Aldi-like supermarket chain in Europe) and Handelshof.
I think that Coles Group Limited (ASX: COL), Woolworths Group Ltd (ASX: WOW) and Aldi will be taking notice because Kaufland is coming with a bang.
According to Fairfax reporting, Kaufland is investing $459 million to build a 110,000 square metre warehouse in Melbourne's northern industrial suburbs at Merrifield Business Park. This distribution centre will have a temperature-controlled storage area, an automated warehouse section and a 40 metre tall bay storage area, as well as 3,600 square metres of office space.
This will be the HQ for a number of hypermarket stores along the eastern Australia states. There will be three Victorian stores built at Chirnside Park, Dandenong and Epping. There are potential sites at Oakleigh South, Coolaroo and Mornington that are under review by a planning panel. Kauflands are huge, like Costcos or Walmarts.
Kaufland's managing director Julia Kern was quoted by The Age as saying "Kaufland will be a one-stop destination supermarket. Our aim is to provide all Australians with more service and choice, highlighted by our principles of simplicity, quality, variety and price."
Apparently most of the stores that Kaufland plans to open was done through a deal with BWP Trust (ASX: BWP).
Foolish takeaway
Should Woolworths and Coles shareholders worry? Definitely, in my opinion. We have seen what an effect Aldi has had on the Australian supermarket industry. More competition in the sector will likely lead to lower profit margins. This doesn't even take into account what Amazon might do in the future.
