Sainsbury’s bringing Netto discount stores back to UK to challenge Lidl and Aldi

 
Sainsbury's: Launching discount stores
Simon Neville20 June 2014

Sainsbury’s today mounted a direct attack on rivals Aldi and Lidl by launching its own discount stores.

The decision by the UK’s second biggest supermarket chain could dislodge its rivals’ dominance of a market which has seen millions of customers leave Tesco, Asda and Morrisons and head for the cheaper stores.

It also comes after inflation dropped to a four and a half year low of 1.5 per cent as a direct result of intense price cutting competition between supermarkets. Sainsbury’s will team up with Netto, the Danish supermarket which disappeared from British high streets in 2010 after it was bought by Asda, and open 15 stores with the potential to roll them out across the country.

Mike Coupe, new chief executive of Sainsbury’s, said: “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.” The traditional big four supermarkets — Tesco, Sainsbury’s, Asda and Morrisons — have all struggled to come to terms with the rise of Aldi and Lidl, which have won over more than 50 per cent of the population.

It has led to an all-out price war, with Morrisons cutting the cost of 1,200 products, Tesco spending £200 million to slash prices on dozens of everyday essentials and Asda planning to spend £1 billion over five years on its own price cuts. However, Sainsbury’s decision is the first time a supermarket has directly challenged Aldi and Lidl with its own near-identical stores. It had been in talks with its Danish counterparts for two years on today’s deal.

The Netto stores will sell just 2,000 products to keep prices lower, compared with 30,000 in Sainsbury’s.

It could mean households being able to order online from a discounter for the first time, because Sainsbury’s already has the infrastructure to offer home deliveries, unlike Aldi and Lidl.

Netto chief, 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 with the freshness and innovation that customers rightly associate with Denmark.”

The new stores will start out in the North, but sources said London is “very much on our radar”.

Bruno Monteyne, retail analyst at Bernstein Research, said: “It’s exciting because Sainsbury’s is very good at quality and Netto is dedicated to value. Too often traditional supermarkets are trying to have a single store where they try to be all things to all men.”