Danish retailer Netto — which pulled out of the UK in 2010 — is plotting its return in a joint supermarket venture with Sainsbury’s and a head-to-head discount clash with rivals Lidl and Aldi.
The first new stores, branded as Netto, will begin opening this autumn in what are traditionally seen as the less affluent areas of the north of England. By the end of 2015 there will be 15 stores in the North West, Yorkshire and the North-East and if the venture is considered a success the chain will be rolled out nationally.
Netto disappeared from Britain four years ago when it sold all its 193 stores to Asda. Both Dansk Supermarked, Netto’s parent company, and Sainsbury’s are investing an initial £12.5m in the joint venture and each expects to incur a post-tax loss in the region of £5-10m up to 31 March 2015.
“It’s great to be bringing a new twist to the rapidly-growing UK discount sector,” said an enthusiastic Per Bank, chief executive officer at Dansk Supermarked. “We will offer market-leading value to customers with the freshness and innovation that customers rightly associate with Denmark.
“The discounter experience, operating model and systems of the Dansk Supermarked group, combined with Sainsbury’s UK market insight, property expertise and logistics excellence will help deliver a discounter format we think UK customers will love.”
Many retail analysts, while admitting there is still room within the discount sector, are not convinced the partnership’s intentions are that far removed from what Aldi and Lidl are already offering. In a statement, the Scandinavian company explained: “There will be a fresh food offer as well as an in-house bakery offering fresh Danish breads and delicious Danish pastries. There will also be weekly and seasonal ‘when it’s gone it’s gone’ offers in both food and non-food ranges, bringing customers a ‘new world every week’ at low prices.”
The chief executive designate of Sainsbury’s, Mike Coupe, said he was very excited about helping to bring the new Netto to British shoppers. “This joint venture provides a great opportunity for us to gain exposure to the high growth discount market for the first time in partnership with Dansk Supermarked, whose expertise and values are a strong complement to our own,” he added.
“If successful, this trial has the potential to open up a new long-term growth opportunity for us complementing our fast expanding convenience, online and non-food businesses, as well as our existing supermarket estate.”
The new Netto venture will be led by Morten Möberg Nielsen, previously managing director of Netto International in Germany.
Sainsbury’s — which has just reported its second consecutive quarter of falling sales — is one of Britain’s “big four” supermarkets along with Asda, Tesco and Morrison’s. All have been fighting to maintain market share in the face of increased competition from both discount grocers and upmarket brands, such as Waitrose. Last week Morrison’s announced it was shedding 2,600 jobs as part of a wider cost cutting strategy.
