The encyclopedia · Strategy & Leadership · Strategic decision · 2017–2020
Kaufland quit Australia after spending $500 million without opening a store
German retailer Kaufland spent years and roughly $500 million preparing to enter Australia, then withdrew in 2020 before opening any stores.
Kaufland · Schwarz Group · 2020-01-22
What happened
Kaufland, the German hypermarket chain owned by the Schwarz Group, announced plans to enter Australia around 2017. Over the next three years it bought at least 23 sites, built distribution infrastructure, hired about 200 people and reportedly spent close to half a billion dollars preparing for launch.
On 22 January 2020, Kaufland announced it was withdrawing from Australia without opening a single store. The company said it wanted to focus on its European business. Most of the Australian employees, many of whom had been recruited from rival supermarkets, lost their jobs, and the sites were put up for sale.
The Australian grocery market was already dominated by Woolworths and Coles, with Aldi and Costco established as discount competitors. Analysts pointed to high property prices, long payback periods and the difficulty of breaking the duopoly as reasons the investment no longer made sense.
Why it happened
- The Australian grocery market is one of the most concentrated in the world, with Woolworths and Coles controlling most sales and Aldi already occupying the discount position Kaufland wanted.
- Real-estate and construction costs in Australia were higher than expected, stretching the payback period beyond what the parent company was willing to accept.
- Kaufland's European hypermarket format, built around large out-of-town sites, did not map cleanly onto Australian planning rules and shopping habits.
- After three years of spending without revenue, Schwarz Group preferred to take the loss and redirect capital to markets where it already had scale.
The lesson
Market entry is not a construction project. Kaufland had sites, staff and capital, but not a path to profit in a market that was already well defended.
Aftermath
Kaufland sold its Australian property portfolio and has not returned. The case is often cited alongside other failed retail entries in Australia as an example of how a strong domestic duopoly can absorb the costs of new competition until the entrant gives up.
Sources
- The Australian — 200 jobs to go as Kaufland retreats from Australia
- Inside FMCG — Where did it all go wrong for Kaufland?
- Supermarket News — What Does Kaufland's Australia Exit Mean for Lidl?
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