UK Supermarket Wars: Can Sainsburys and Netto take on Discounters Aldi and Lidl?

- Leadership - Nov 07, 2014

Netto is back. In a joint venture with Sainsbury’s the discounter opened its first store in Leeds this week as the mainstream supermarkets take on the ever-popularising Aldi and Lidl.

On unveiling its first new outlet, Netto has said it will “set new standards for discount retailing in the UK”, bring the best of Danish to compete with its German counterparts.

The partnership with Sainsbury’s consists of a trial involving the gradual opening of 15 stores to the end of 2015, which will turn into a complete rollout if successful.

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

Netto originally pulled out of the UK in 2010 and sold all its stores to Asda in a deal worth nearly £800m, but the company is excited to be back.

Per Bank, CEO of Netto’s parent company Dansk Supermarked, commented: "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."

Bank acknowledged the “great job” Aldi and Lidl had done in making discount supermarkets compete with the likes of Tesco, Sainsbury’s, Asda and Morrisons, but claims that Netto will elevate this a step further.

READ MORE: Can Morrisons Fight Back Against Lidl and Aldi with Match & More Loyalty Card?

The big test will lie in the quality and reception of Netto’s Danish products versus the already-popular German brands sold by its nearest rivals. The first store in leads will carry around 2,300 different products (SKUs), and fresh produce will be delivered daily with British goods given strong emphasis. Products are categorised on a ‘good, better, best’ style system.

The new chain in the UK 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.

Whether his experience of the German market will prove influential in this next stage in the UK supermarket wars will be interesting to see. Worth £10 billion a year at present, the UK discount sector is set to double in value over the next five years as the battleground becomes ever more populated. 

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