Kaufland abandons Australia: A timeline of Schwarz Group’s $500 million blunder

You may have seen the news: Kaufland, the German-owned grocery giant which has for three years been making big promises about its Australian expansion, has decided to abandon its plans, despite having invested $523 million in paid capital Down Under.

The shock announcement, which was made on Wednesday afternoon, leaves 200 staff and more than 20 prospective construction sites across the country in the lurch.

In a statement circulated yesterday, Kaufland’s acting chief executive Frank Schumann said the chain was bidding adieu to focus on its core European business.

After investing about half-a-billion dollars, Schumann said the decision was ‘not easy’ and did not reflect on the efforts of local employees or management.

“In Europe, we see a great deal of growth potential. We will actively shape the consolidation of the European retail sector, thus further reinforcing our leading position,” he said.

Owned by German-headquartered Schwarz Group, the fourth largest retail conglomerate in the world, Kaufland at one time wanted to open dozens of stores in Australia.

It was only last week that Schwarz tipped in an additional $100 million into Kaufland Australia, bringing the total paid capital to $523 million, ASIC filings seen by SmartCompany reveal.

Kaufland had spent years laying the ground for its expansion Down Under, clogging up local and state government planning processes with proposals for its mega 4000–7000 square-metre hypermarkets.

Amid promises of job creation and lower prices for supermarket consumers, politicians in South Australia, Victoria and Queensland welcomed the multinational with open arms.

$500m spent, 23 sites locked in, 200 staff employed, then #Kaufland pulls the pin on the Australian market. @QUT @QUT_AMPR @QUTmedia#retail #supermarkets https://t.co/k08nKkRZOh

— Professor Gary Mortimer ???????????? (@ProfRetail) January 22, 2020

But independent supermarket advocates had been calling foul, saying Kaufland was receiving special treatment, particularly by the Victorian state government, expressing concern another multinational supermarket could wreck their businesses.

In short, it’s been a wild journey.

Below SmartCompany has compiled a timeline of how it all unfolded, from 2016 to today.

2016-17: Brace yourselves, Kaufland is coming

November 2016

Schwarz Group applies for Kaufland trademarks in Australia, confirming it was conducting a “feasibility study” Down Under.

Cue months, and months, of speculation.

December 2016

MPTG Property (the company that would later become Kaufland Australia) was incorporated.

March 2017

Kaufland had set up its dedicated Australian website, which was scant on detail but revealed ads for several management positions.

Feasible, then?

September 2017

The business changed its corporate name from the inconspicuous MPTG Property to Kaufland Australia.

October 2017

Questions arise about site availability for Kaufland’s massive hypermarkets in Australia, until October, when the German giant quelled critics by quietly purchasing its first location in South Australia, paying about $25 million.

Later that month, Schwarz Group filings with the corporate regulator revealed the multinational had injected $43 million into the local Kaufland business to turbocharge its expansion.

November 2017

Here’s where things started speeding up.

Kaufland inked a deal for its second site — this time a former Bunnings location in Dandenong, Melbourne — paying about $16 million.

That’s two in the bag, or so everyone thought.

2018: Fat stacks and high-profile executives

February 2018

Reports emerged Kaufland was searching for local executives to oversee the next stage of its Aussie expansion.

Former Woolworths and Metcash executive Mark Hewlett was brought on board — one of Kaufland’s first big hires in Australia.

Kaufland booked a $4.8 million pre-tax loss for the year ended February 28, 2018, on $84 million in assets, according to ASIC filings.

During that same year, Schwarz tipped in $88 million to keep the business going.

March 2018

Kaufland Australia received a $30 million capital injection from its parent entity, Kaufland Australien Beteiligungs GMBH, which is ultimately owned by Schwarz.

April 2018

Morgan Stanley analyst Thomas Kierath publishes a lengthy report detailing Kaufland’s prospects Down Under, predicting its revenue could balloon to $3.3 billion by 2026.

May 2018

Aussies caught their first look at what Kaufland could look like in Australia when Schwarz submitted building applications for its first Adelaide site.

August 2018

Skipping forward to August and Kaufland was making headlines again, this time over planning controversies in Victoria, with planning minister Richard Wynne angering local councillors and the Master Grocers Association (MGA) by deferring decisions about prospective Kaufland sites to a special committee.

This was the first sign of what would become a consistent bugbear for Kaufland Australia, heightening scrutiny over its launch timeline and store development decisions.

September 2018

Kaufland advertised for 30 additional roles in a hiring binge focused on in-store managers and administrative staff, saying it wanted to employ 600 store team members in Australia.

October 2018

A month later, the Australian Financial Review raised eyebrows with an interesting report into some new Schwarz ASIC filings, which revealed an additional $60 million in capital had been poured into the expansion.

With more than $100 million injected in about a year, it was clear by this point that Kaufland was burning through funds in a bid to get its business set up Down Under.

November 2018

Another high-profile executive joined Kaufland’s ranks soon after, with former Myer boss Richard Umbers brought in to bolster the German giant’s ranks, jetting off to its German offices for training.

The appointment came as Coles chief executive Steven Cain revealed in an interview with the Sydney Morning Herald he had sent a reconnaissance team to Germany to scope out how Kaufland operates.

The Master Grocers Association was further ramping up its anti-Kaufland ‘Save Our Shops’ campaign, kicking up a fuss about what it deemed an unfair planning approval process that superseded local governments.

The Victorian government’s special Kaufland planning panel was initially tasked with considering six development proposals from the business in the southern state.

Over the next twelve months, that number would more than double.

2019: Is this thing actually happening?

Hint: No.

January 2019

Anyways, 2019 started with expectations Kaufland would open the doors at its first Australian store within 12 months — which would have been consistent with its initial timeline.

But before long, it became pretty clear it would be a while before anyone would actually buy anything from Kaufland in Australia.

January 2019

In the wake of reports Schwarz was pouring even more money into the local expansion, the first cracks began to show when council documents revealed a change in plan for its $25 million Adelaide site.

Kaufland would now clear some of its Forestville land for separate development, the Adelaide Advertiser reported.

May 2019

This didn’t stop local competitors from talking about Kaufland though, with Aldi chief executive Tom Daunt telling the Sydney Morning Herald he expected and welcomed increased competition from Schwarz in Australia.

June 2019

Kaufland was putting its slow start to 2019 behind it with the commencement of construction on a $459 million distribution centre in Mickleham, Victoria.

The warehouse was spruiked as the keystone in Kaufland’s plans — a hub that would enable the business to make its stack-it-high, watch-it-fly hypermarket model work in Australia.

However, contradictory reports were beginning to emerge about exactly how many stores were in Kaufland’s Australian pipeline, with estimates ranging from a dozen to 14 or even as high as 20.

Kaufland representatives never confirmed the exact nature of its rollout plan at any point during its Aussie expansion.

August 2019

Kaufland was turning its attention to Queensland, filing an application for a store in Toowoomba, and revealing it had purchased sites in Morayfield and Burleigh Heads.

Two additional stores were also earmarked for Victoria, further to the nine already being considered by the state’s special planning advisory committee.

These included prospective locations in South Morang, Coburg North, Lyndhurst, Pakenham, Narre Warren, Highton, Braybrook, Bendigo and Highton.

September 2019

Kaufland Australia managing director Julia Kern snapped a photo with South Australian Premier Steven Marshall in Prospect as the business broke ground on its $24 million store.

Kern said the Prospect store would create 250 jobs, but that obviously never happened.

The construction story was soon overshadowed by a report in The Australian, revealing ASIC filings which detailed an additional $100 million in capital poured into the Kaufland Australia business by Schwarz.

There was more than $400 million in capital on Kaufland Australia’s books — far from a small investment, even for the fourth-largest retailer in the world.

9 News revealed Kaufland had obtained planning approval for a store in Newcastle, NSW — bringing its total pipeline to 30 across the country.

October 2019

A month later, Sutherland Shire mayor Carmelo Pesce revealed the German giant also wanted to set up a supermarket in his own jurisdiction.

November 2019

But not every local council was welcoming Kaufland with open arms. Geelong’s local government scrutinised a development application by the business, noting its proposed 6,892 square-metre store would not integrate with the surrounding landscape.

2020: See-ya, losers!

January 2020

That brings us to yesterday when Kaufland made the shock announcement it was abandoning plans to expand into Australia, after more than two years of promises, capital investments and dozens of planning applications.