Smart Company | Monday 5 November 2018
German-owned "hypermarket" Kaufland is launching in Australia.
A group of independent retailers are stepping up pressure on international supermarket Kaufland over its plans to set up shop in their local areas, complaining the giant is getting special treatment from the Victorian government.
Three weeks out from the Victorian state election, a decision by Minister for Planning Richard Wynne to appoint a committee to oversee the planning approval process for Kaufland is coming under scrutiny.
The ‘Save our Shops’ campaign, which brings together a group of independent supermarkets and the Master Grocers Association (MGA), believes the German giant will “destroy small business” and is skirting proper process by appealing to the state government for approvals, rather than local councils.
Tony Ingpen, owner of Mount Evelyn IGA and an MGA committee member, tells SmartCompany Kaufland is using its size to garner special treatment by the government.
“The process they’re going through at the moment is so underhanded,” he says.
“We don’t really know what size supermarket they’re proposing … is it a Woolworths-size venture, or a Costco type?”
Kaufland, owned by the world’s fourth-largest retailer Schwarz Group, is bullish on expansion into Australia and set to open locations in Victoria and South Australia over the next few years.
Job ads placed last month revealed the retailer, which has 1,200 locations in Europe, wants to employ about 600 store staff in Victoria initially.
Morgan Stanley research has predicted Kaufland could create a $480 million business in Australia by 2020, with large format 20,000sqm sites.
The state government has appointed a special committee to oversee half a dozen development proposals for Kaufland in Victoria, including in Mornington and Mt Evelyn, which has taken the decision away from local councils.
Two of the proposals involve applications to rezone industrial land, while two are for commercial one zones (retail zoning) and two others are for commercial two zones (typically used for bulky goods retailing).
The committee is currently taking public submissions and will make recommendations to Minister Wynne, with a decision expected in early-2019.
A similar committee was established to consider applications made by German-entrant Aldi when it initially expanded in Victoria.
Organisers of the Save our Shops campaign say they have made a submission to the committee, but Ingpen believes the process has been “taken behind closed doors” and the committee is a way for Minister Wynne to pass the buck.
A petition circulated by the campaign currently has 380 signatures.
Asked whether it is engaging with local communities on its store roll-out, a Kaufland spokesperson said it is engaging with local councils.
“We look forward to engaging further with community organisations and business groups as we continue on our path towards store openings,” the spokesperson said.
The spokesperson noted Victoria’s advisory committee is a legitimate process and is accountable to the public under the Planning and Environment Act.
“Kaufland is making significant investment and employment decisions for which it requires a degree of certainty that a traditional planning pathway through six individual Councils could not provide,” the spokesperson said.
Is Kaufland going to “destroy” small business?
The Nepean Highway site where Kaufland wants to set up shop in Mornington is surrounded by a raft of other supermarkets, including two Coles supermarkets, a Woolworths, Aldi, Foodworks and several other smaller boutique grocers.
Businesses in the area SmartCompany spoke to on Monday offered a mixed view, with some saying Kaufland wasn’t a direct competitor and others echoing the concern of the local government.
Mornington Peninsula Mayor Bryan Payne has sent out an awareness dossier which raises concerns about the impact Kaufland’s establishment will have on the local community, including worries some local retailers will be forced out of business.
Others, including veteran entrepreneur Dick Smith, have raised broader concern about the effect Kaufland will have on smaller retailers.
Smith told SmartCompany last month the entrant will “make a fortune” Down Under and send millions overseas.
“If it’s one cent cheaper, everyone will run to it,” he said.
MGA’s chief executive Jos De Bruin, who is also lobbying state government over the planning concerns, says Kaufland is a shopping centre in its own right and will disrupt the very notion of local supermarket shopping.
“We already have activity centres in local communities that are robust, if you suddenly have another shopping centre-sized development, that will have an impact on the community,” he tells SmartCompany.
“The loser here will be the people with the least-deep pockets.”
Australian Retailers Association executive director Russell Zimmerman says it’s not unprecedented for a retailer looking to open such large sites to be subject to special planning processes.
“What you’re looking at is a different type of business,” he tells SmartCompany.
“It will be a bigger concern for Coles and Woolworths … competition is worldwide these businesses have opportunities to develop these businesses here if they believe they’ll be successful.”
Retail expert and Queensland University of Technology associate professor Gary Mortimer has outlined a similar view.
He told SmartCompany in September local businesses aren’t in Kaufland’s crosshairs.
“Kaufland will represent a destination retailer, a large-format store shoppers will visit to do the bulk of their shopping, not necessarily a drop-in and top-up shop, so independent fresh food retailers, like fruiteries, bakeries and butcheries should not be impacted significantly,” Mortimer said.
“We can co-exist with smaller retailers”
The Kaufland spokesperson disputed suggestions that Kaufland is a “mega-mall”, saying store retail area is 4,000sqm and includes space for “up to four smaller local businesses”.
“Our history shows we can co-exist with smaller retailers,” the spokesperson said.
“Our growth has always come organically, not at the cost of competition.”