AUSTRALIA: Aldi, Wal-Mart say no to Dairy Farm’s Franklins supermarkets

The loss making Franklins supermarket chain, owned by Hong Kong-based Dairy Farm International, look unlikely to find a buyer in either the Aldi Group, the German discount retailer, or US-based Wal-Mart Stores Inc.

Aldi, which opens its first two stores in Sydney today, said in a statement its strategy was to grow “organically,’” not by acquisition.

Wal-Mart spokesman Jose Gomez was also quoted as saying: “We are not interested in Franklins” and the company had no medium-term plan to enter the Australian market, reports The Australian newspaper. 

Speculation has been mounting all week since the Sydney Morning Herald said on Monday that Dairy Farm agreed to sell 143 stores to either Wal-Mart or Aldi and 63 Franklins stores to Coles Myer Ltd., Australia’s No. 2 retailer.

Further reports said Franklins would probably only sell a handful of its 143 stores in New South Wales state and Coles Myer would operate the Victorian-state Franklins stores under the brand of UK-based Tesco Plc to avoid antitrust concerns.

Woolworths Ltd may also be interested in purchasing the stores. The Australian Financial Review speculated yesterday that Woolworths would buy the Franklins stores, then on-sell them to independent operators. That would increase the number of customers at Woolworths’ grocery supplying business, Australian Independent Wholesalers, the newspaper said. The company is believed to be watching the situation with interest but has not made any formal comment.   

Meanwhile, Aldi plans to open four more Sydney stores in February to complement the opening of its first two stores in Sydney’s western suburbs today. The company is believed to have already secured a further 20 sites around Sydney, with plans to open 100 in NSW.

Lower prices for consumers may be the inevitable result as Woolworths, Coles-Myer, Franklins and IGA have pledged to compete with their new rival.

“There’ll have to be some reassessment of pricing in the light of those stores competing in those areas that Aldi has opened up stores,” National Association of Retail Grocers of Australia national spokesman Alan McKenzie said.

Franklins spokesman Russell Deeble said the local retailer had a policy that it would be competitive.

“The implication of that of course is that we’ll match or better prices.” Mr Deeble would not comment on whether that meant Franklins would reduce prices at its stores near Aldi over the next few days.