chain Sainsbury's has entered into a deal with Danish discount grocery chain Netto, in what appears to be a bid to take on their discount rivals such as Lidl and Aldi.Both Netto and Sainsbury's will invest £12.5m in the venture. They aim to have 15 stores across the UK by the end of 2015, with the first store opening in the north of England later this year.
Netto previously operated in the UK for 14 years until 2010 when their 193 stores were bought by Asda for £778m. Asda were required to sell 47 of the stores to allay competition concerns. The remaining stores were then rebranded as Asda Supermarket, which are smaller than the regular Asda stores.
Although Sainsbury's has traditionally been known for its upmarket image, this move highlights the risk posed by Aldi and Lidl to the big supermarket chains. The discount retailers have consistently been the fastest growing supermarkets in the UK.
Netto's parent company Dansk Supermarked want to grow Netto internationally and according to a report in the English trade press the group said "the partnership with Sainsbury's is an important milestone in our ambition to grow Netto International, which is a core pillar of our overall strategy."
Netto intends to sell a combination of own brand products together with some bigger international brands, as well as fresh food and an in-house bakery. They expect to incur a post-tax loss of around £5m-£10m in the year to 31 March 2015.
Netto currently operates stores across the EU including in Denmark, Poland and Sweden and employs around 42,500 people.
