The Motley Fool

This global supermarket giant is about to disrupt Woolworths, Coles and Aldi

Woolworths Group Ltd (ASX: WOW), Coles Group Limited (ASX: COL) and Aldi need to watch out, there’s about to be another international supermarket invader.

Kaufland is getting closer to opening its first megastores in Australia according to an article in the Australian Financial Review.

If you don’t already know about Kaufland, it’s part of the Schwarz Group which is one of the world’s biggest retailing businesses. Schwarz also operates Lidl, a discount supermarket similar to Aldi.

The idea of Kaufland is that it operates huge 4,000 square warehouse stores that sell almost everything a shopper could want from a retail space including groceries, meat, clothing, toys, home furnishings and other general products.

Kaufland is going to be facing off against Coles, Woolworths and Aldi in the food & drink segments and against Big W & Wesfarmers Ltd’s (ASX: WES) Kmart in the discount retail portion of the store.   

Being a one-stop destination could be quite attractive for shoppers who want to buy everything under one roof, without going through a whole Scentre Group (ASX: SCG) shopping centre.

Kaufland also has its own private label bring, like Costco’s Kirkland, which is known for being high-quality. But it’s also known for low prices, so Kaufland could be a fierce competitor.

There are over 1,200 Kaufland stores across Europe, so there’s a lot of economic weight behind the brand which will be able to offer low prices to compete here right from the first store openings.

Each store will take about year to construct and open, so it’s not like we’re going to see a huge surge of these megastores across Australia. But each new opening could see a bit of market share being stolen from the existing incumbents. The first stores will be in Prospect in nothern Adelaide and in Dandenong in outer Melbourne.  

Kaufland Australia boss Julia Kern is not exactly sure how many Kaufland stores the global giant is aiming for in Australia. But there are several in the works. Kaufland is building a $460 million distribution centre in Mickleham, Melbourne. It has five stores approved for Victoria with more in the planning stage.

Foolish takeaway

This probably isn’t going to be like what Amazon did to internet retailing in the US, but it could make a material dent in our local supermarkets’ earnings, particularly if they have to be more careful about the prices they charge.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.