Netto's Sainsbury Deal Takes On Aldi And Lidl

Sainsbury (Berlin: SUY1.BE - news) 's is to take on cut-price retailers Aldi and Lidl in a tie-up with Denmark's Netto chain.

Netto is making a return to the UK market in a trial format that appears to mirror the discount store concept used by the German rivals.

A computer generated image suggests the new Netto concept will use similar mid-size outlets, rather than larger properties.

The trial will consist of 15 Netto stores that will be opened by the end of 2015, with the first outlets opened in the north of England later this year.

If successful, a country-wide rollout will take place.

The Danish brand exited the UK market in 2010, however since then the ultra-competitive supermarket sector has seen a dramatic rise in budget-end profitability.

According to IGD (Stuttgart: IF8.SG - news) , the UK discount sector is worth £10bn and expected to rise to £20bn within five years.

Netto is owned by Dansk Supermarked. Sainsbury's and Dansk are to plough a split-share of £25m into the project.

Each expects to incur a loss of around £7.5m up to March 2015 on the investment.

Dansk CEO Per Bank 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."

Sainsbury's CEO designate Mike Coupe added: "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."