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UK grocer Sainsbury's in Netto deal

London, June 21, 2014

British grocer J Sainsbury's has teamed up with Denmark's Dansk Supermarket to bring the Netto brand back to the UK and take on fast-growing German discount chains Aldi and Lidl at their own game.

Sainsbury's and Netto said yesterday they would spend an initial £25 million ($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 shareholder meeting.

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.

Sainsbury's, in common with Britain's other big four grocers - market leader Tesco, Walmart's Asda and Morrisons - has been losing market share to Aldi and Lidl.

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 in annual sales, a figure forecast to double in the next five years, according to data from industry body IGD.

The Netto name left the UK market in 2010 after Asda purchased its 193 stores for £778m and converted them to the Asda brand.-Reuters
 




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