Sainsbury's teams with Netto for UK discount chain

Aims to tackle Aldi and Lidl on their own ground


Artist's impression of new Netto store

If you can't beat 'em, join 'em: hit hard by competition from stores such as Aldi and Lidl, Sainsbury's is getting into the discount store business itself.

The company is teaming up with Danish chain Netto (the name means 'price' in Danish) to open 15 discount stores across Britain by the end of 2015. The first will open in the north of England by the end of this year.

"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," says Per Bank, CEO of Netto's parent company Dansk Supermarked.

"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."

Shoppers may remember that Netto has been here before, operating in the UK for nearly thirty years. However, in a move to focus more tightly on its northern European business, it abandoned the UK market in 2010, selling its 193 stores to Asda.

The new chain, which Sainsbury's says will be very different, will focus on own-brand goods - with an in-store bakery offering fresh Danish pastries, naturally. There will be weekly and seasonal "when it's gone it's gone" offers in both food and non-food ranges.

Sainsbury's like-for-like sales have fallen for both the last quarters, while Aldi and Lidl have posted sales growth of 35.9 per cent and 22.7 per cent respectively. The new joint benefit will allow Sansbury's to take advantage of the discount trend, without diluting its main brand. The UK discount sector is currently worth around £10 billion in annual sales, and is forecast by the Institute of Grocery Distribution (IGD) to double in value in the next five years.

"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," says Mike Coupe, CEO designate of Sainsbury's.

"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."