German Supermarket Giant Arrives on Australian Shores

German retail giant Kaufland is set to shake up Australia's supermarket landscape after winning planning approval for its first three supermarkets and a new distribution centre in Victoria.

The $457 million outlay by Kaufland will create more than 1,500 jobs and inject almost half a billion dollars into Victoria’s economy.

Kaufland's first three stores, approved for Dandenong, Chirnside Park and Epping will be served by the country's latest and largest distribution centre comprising 115,000 square metres at Merrifield Business Park in Melbourne’s north.

A further three stores, at Oakleigh South, Coolaroo, and Mornington, are subject to an independent advisory committee planning approval process.

Related: Coles Spends $950m on Warehouse Revamp

Kaufland, which has more than 1,230 stores and 150,000 employees in Europe, will establish its Australian headquarters in Melbourne creating 1,600 jobs across.

“Securing the investment of one of the world’s largest grocery retailers in Victoria is a clear vote of confidence in our economy, our world-class infrastructure, retail talent and retail trade growth,” Victorian minister for economic development Tim Pallas said.

The German supermarket discounter is owned by parent company Schwarz Group, which is the fourth biggest retailer in the world.

The construction of the new distribution centre will be a vital link in its supply chain as Kaufland spreads its influence throughout the country in an attempt to capture a portion of Australia’s $90 billion grocery sector.

The company's distribution centre will be located in Mickleham, at the largest masterplanned business and employment precinct in Victoria, Merrifield Business Park, which spans 330 hectares.

“Our new state of the art distribution centre at Merrifield Business Park will be the company’s single biggest investment in Australia and enable Kaufland’s expansion,” a Kaufland spokesperson said.

The European supermarket giant, which builds large warehouse-format stores averaging 20,000sq m (five times the size of a standard Woolworths or Coles) will offer a wide range of products, including fresh food, packaged groceries, general merchandise, clothing, and homewares.

Related: Grocery-Anchored Supermarket Sweep Continues in Victoria

Upsetting the supermarket status quo

With its arrival in Victoria, Kaufland is set to ruffle the feathers of heavyweights in Australia’s $90 billion grocery sector.

Last year Kaufland paid $25 million for the Le Cornu site on Anzac Highway in Forestville, in Adelaide.

During Kaufland's planning process a number of groups and companies protested the company's accelerated approval, including Vicinity Centres, the ISPT fund and Queensland Investment Corporation.

Kaufland said it would engage Victorian suppliers, to source products locally where possible and provide opportunities for complementary independent retailers such as cafes within the specialty tenant spaces in stores.

Across all groceries departments, Woolworths retains its overall market lead, ahead of Coles, Aldi and IGA supermarkets.

According to the most recent supermarket & fresh food currency report, Woolworths holds 27.4 per cent of the fresh food market overall, ahead of Coles with 24.6 per cent and Aldi with 9.8 per cent.

In an attempt to secure a step-change in costs and catch up with rival Woolworths, Coles announced an investment of $950 million in two state-of-the-art warehouses.

Three years ago, Aldi unveiled a $500 million refurbishment plan that would see every Aldi store in the country upgraded across its 500-store portfolio.

US warehouse supermarket Costco has 10 outlets in Australia that combined are capturing almost $2 billion a year in sales, and has plans to open more warehouses across the country.