Sainsbury's brings back Netto in discount battle

Baskets pilled up in a Danish Netto store (Sainsburys )

Sainsbury’s has made a shock move in the battle against discounters Aldi and Lidl by bringing Netto shops back to the UK.

The supermarket is to open 15 UK Netto shops in the north of England by the end of next year in a joint venture with its Danish owner Dansk Supermarked.

Netto pulled out of the UK in 2010 when Asda bought the chain in a £778 million deal which enabled it to open smaller Asda stores.

Sainsbury’s has been challenged to find a response to the growth of Aldi and Lidl as it and rivals Tesco, Asda and Morrisons have also been squeezed by their growth.

Sainsbury’s and Netto’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 March 31 2015.

Sainsbury’s incoming boss Mike Coupe 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 store will offer short-term “when it’s gone it’s gone” deals to shoppers in a similar manner to Aldi and Lidl. The stores will sell Netto's products but use Sainsbury's supply chain.

Netto chief Per Bank, who joined the Danish supermarket from Tesco in 2012, 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.”