June 20, 2014 / 9:42 AM / in 4 years

Sainsbury's, Dansk Supermarked to bring Netto stores back to UK

LONDON, June 20 (Reuters) - British grocer J Sainsbury and Denmark’s Dansk Supermarked plan to spend an initial 25 million pounds ($42.64 million) to bring the Netto brand back to the UK, seeking a slice of the country’s fast-growing discount sector.

The two companies said on Friday they have formed a joint venture that will see 15 Netto stores opened in the UK by the end of 2015, with the first opening in northern England later this year.

If the trial is successful, the next stage of the joint venture will see the new stores rolled out across the country, in a bid by Sainsbury’s to win a slice of the UK discount sector currently valued at about 10 billion pounds ($17 billion) in annual sales. The sector is forecast to double in value in the next five years, according to data from industry body IGD.

The return of Netto is also an attempt by Sainsbury’s to stop market share losses to the fast growing German discounters Aldi and Lidl.

The discounters have been winning business from Britain’s “big four” grocers - Sainsbury‘s, market leader Tesco, Wal-Mart’s Asda and Morrisons.

The Netto name left the UK market in 2010 after Asda purchased its UK store estate. Asda bought Netto’s 193 stores and converted them to an Asda fascia.

Under the deal, Sainsbury’s and Dansk Supermarked will each initially invest 12.5 million pounds in the joint venture. Taking account of start-up costs, each partner expects to incur a post-tax loss of about of 5-10 million pounds up to March 31 2015.

$1 = 0.5864 British Pounds Reporting by James Davey; Editing by James Macharia

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