* Joint venture to open 15 Netto stores by end of 2015
* Successful trial would mean Netto UK roll-out
(Adds detail, Sainsbury, Dansk Supermarked, analyst comment,
By James Davey
LONDON, June 20 British grocer J Sainsbury
has teamed up with Denmark's Dansk Supermarked to bring
the Netto brand back to the UK and take on fast-growing German
discount chains Aldi and Lidl at their
Sainsbury's and Denmark's largest retailer said on Friday
they would spend an initial 25 million pounds ($43 million)
setting up a joint venture that will open 15 Netto stores in the
UK by the end of 2015.
The deal, which will see a first store open in northern
England later this year, marks the first major strategic move of
Sainsbury's chief executive designate Mike Coupe, who will
succeed Justin King after next month's annual shareholder
The Netto stores will have a focus on fresh produce and
meat, along with an in-house bakery offering fresh Danish breads
and pastries. Products will be predominantly own-label, though
there will be some brands.
If the trial is successful, Netto stores will be rolled out
across the UK.
Sainsbury's, in common with Britain's other "big four"
grocers - market leader Tesco, Wal-Mart's Asda
and Morrisons - has been losing market share to Aldi and
In response Tesco, Asda and Morrisons have said they are
cutting prices while Sainsbury's has vowed to remain
competitive, raising concerns among analysts of a possible price
war hitting earnings across the sector.
The UK discount sector is worth about 10 billion pounds in
annual sales, a figure forecast to double in the next five
years, according to data from industry body IGD.
"You can clearly see the growth of the discount sector and
we've been thinking about how we might combat that over a period
of time," said Coupe.
"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," he said, adding talks with
Dansk Supermarked started about a year ago.
Jon Copestake, retail analyst at the Economist Intelligence
Unit, said the trial was relatively low-risk for Sainsbury's
given the small amount of capital involved and allows the grocer
to compete in the discount segment without undermining its own
The Netto name left the UK market in 2010 after Asda
purchased its 193 stores for 778 million pounds and converted
them to the Asda brand.
"We are coming back with a much better Netto than we had
last time," said Per Bank, CEO of Dansk Supermarket. He said the
stores would have over 2,000 products versus 1,200 previously.
"We compete well against Aldi and Lidl in all the other
markets where we are present (Denmark, Poland, Sweden and
Germany)," he said.
Bank described the venture as "a perfect match", adding:
"The Brits and Danes - they do work well together".
Netto UK will be a separate company with a management team
led by Morten Moberg Nielsen, previously managing director of
Netto International in Germany.
Sainsbury's and Dansk Supermarked will each initially invest
12.5 million pounds in the venture.
Taking account of start-up costs, both expect to incur a
post-tax loss of about 5-10 million pounds up to March 31, 2015.
Shares in Sainsbury's were down 0.8 percent at 318.7 pence
at 1140 GMT, valuing the business at 6.1 billion pounds.
($1 = 0.5864 British Pounds)
(Editing by Tom Pfeiffer)