Sainsbury’s and Netto in UK Discount Store JV

23 Jun 2014 --- Danish international discount grocery retailer Netto has announced it is returning to Britain in the form of a joint venture (JV) with UK grocery retailer, Sainsbury’s.

The JV will combine Dansk Supermarked’s experience in systems, infrastructure and low-cost operations with Sainsbury’s UK grocery, product sourcing and property expertise.

The trial will consist of 15 Netto stores to be opened by the end of 2015, with the first opening their doors in the North of England later this year. If the trial proves successful, the next stage of the joint venture will see the new format rolled out across the country.

Each partner’s initial investment in the joint venture will be £12.5 million, and given start-up costs, each partner expects to incur a post-tax loss in the region of £5-10 million up to 31 March 2015.

Per Bank, CEO of Netto’s parent company Dansk Supermarked, said: "It’s great to be bringing a new twist to the rapidly-growing UK discount sector. We’ll 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."

The new Netto stores represent a complete departure from the format that left the UK market in 2010. They will offer outstanding value and ease of shopping to customers and will feature a great 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 outstanding prices.

Mike Coupe, CEO Designate of Sainsbury’s said: "We are 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.

"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 UK discount sector is reported to be currently worth an estimated £10 billion in annual sales and is forecast to double in value to approximately £20 billion in the next five years.

Netto will be led by Morten Möberg Nielsen, previously Managing Director of Netto International in Germany, whose successful track record spans 18 years in retail including 14 years with Dansk Supermarked.