20th Jun 2014 08:17
LONDON (Alliance News) - J Sainsbury's PLC Friday moved to counter the recent success of discounters Aldi and Lidl by creating a jointing venture with Danish international discount grocery retailer Netto in the UK.
Sainsbury's, the UK's third-largest supermarket chain by market share, said it is partnering with Netto to form a joint venture that will initially trial 15 stores by the end of 2015, starting this
Autumn, and then roll out across the UK if the trial is successful.
Netto had stores in the UK up until 2010, when it departed after achieving little success. However, that was prior to the recent surge in popularity of discounters like Aldi and Lidl, and Sainsbury said the new Netto stores will be completely different from the previous Netto format.
The UK's four largest supermarket chains are all suffering market share losses to Aldi and Lidl at the bottom end of the market, and to premium offerings from Waitrose and Marks & Spencer PLC's food offering at the top of the end of the market.
"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," said Chief Executive Designate Mike Coupe.
Both Sainsbury's and Netto will each initially invest GBP12.5 million into the joint venture. Given start-up costs, Sainsbury's said they will each incur a post-tax loss in the region of GBP5 million to GBP10 million up to March 31, 2015.
"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," Coupe added.
J Sainsbury shares were trading 0.6% lower at 319.50 pence Friday morning.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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