Netto to use Sainsbury’s logistics expertise in UK venture

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Netto, the Danish discount retailer, is to return to the UK in the autumn, in a joint venture with Sainsbury’s designed to combine Netto’s operating model with Sainsbury’s logistics expertise and market insight.

The aim is to challenge Aldi and Lidl, and the first stores will be in the north of England.

Per Bank, CEO of Netto parent Dansk Supermarked, said: “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.”

It is now looking for sites of 10,000 to 15,000 sq ft with parking for 60 cars within a 70 mile radius of Wakefield.

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.

In 2010, Netto sold its UK operation to Asda for £778 million. Netto operated 193 stores in the UK, which Asda used to develop its smaller stores business. Netto had two distribution centres. Asda converted South Elmsall to a cross-dock within its own network. Netto’s Daventry site was closed.

Netto said the new stores represented a complete departure from the format that left the UK market in 2010.

The Institute of Grocery Distribution calculates that the UK discount sector is currently worth some £10 billion in annual sales and is forecast to double in value to approximately £20 billion in the next five years.

“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,: said Per Bank.

And Mike Coupe, CEO designate of Sainsbury’s said: “”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.”

Netto will be led by Morten Möberg Nielsen, previously managing director of Netto International in Germany.

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