Netto to shut down in UK as Sainsbury's ends joint trial

'‹Budget supermarket chain Netto is to close down in the UK, putting 400 jobs at risk although Sainsbury's said it will try to deploy as many of the 100 workers it put into the joint venture as it can.

Sainsbury’s said it will end its joint venture with ​Netto’s Danish owner Dansk after a two year trial and it aims to close the 16 stores in August.

Staff ​at the Wakefield-based supermarket chain ​will go through a consultation over the next two months.

Hide Ad
Hide Ad

A spokeswoman for Sainsbury’s denied the closure was anything to do with the shock Brexit vote and said the stores have been under review for some time.

“​Around 300 are Dansk colleagues and will return to their parent company. The rest, approximately 100, are Sainsbury’s colleagues and we will, of course, redeploy people wherever possible. The consultation will take up to 10 weeks,” she said.

“The stores have been performing well. We wanted to scale up quickly, but getting the right sites has been the biggest challenge.

“Sainsbury’s has been getting closer to the discounters in price for a while so there is less of a need (for Netto) than before.

“We will look to redeploy as many as we can.”

Hide Ad
Hide Ad

The Yorkshire Post contacted Dansk to find out what will happen to its 300 employees, but there was no response.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, s​aid​:​ ​“British consumers are eager and willing to shop with discount retailers but even with Sainsbury’s help, Netto couldn’t match the competition it faced from the likes of Aldi and Lidl.

​“​Operating in its ‘trial’ format prohibited Netto from achieving the economies of scale that have generated such success for its rivals.

“Aldi and Lidl have each had a rapid programme of new store openings matched with huge advertising and marketing spend to keep themselves front and centre in consumers’ minds. Despite a 20-year history pre-dating this joint venture, Netto lacks this brand awareness and credibility in its latest incarnation, and any retailer looking to learn from this experiment should note that this isn’t something which can be achieved without significant investment.”

Hide Ad
Hide Ad

​He added that​ 15.7 million British shoppers have visited a discount grocery retailer in the past 12 weeks, which is up 48 per cent on five years ago.

The ​Netto UK ​joint venture was created in 2014 on a trial basis as Sainsbury’s looked to take on discount rivals Aldi and Lidl.

​Following a strategic review, Sainsbury’s chief executive Mike Coupe said that changing dynamics that took into account trading data, customer feedback and expansion costs were the reasons for the store closures.

Mr Coupe said: “​​Netto is an excellent retailer with talented leaders and colleagues and we have learnt a great deal about the discount grocery retail market from this trial venture. ​Since we first envisaged the trial, almost three years ago, the grocery sector has evolved significantly and we launched our strategy 18 months ago to address these changing dynamics.

Hide Ad
Hide Ad

​​“To be successful over the long-term, Netto would need to grow at pace and scale, requiring significant investment and the rapid expansion of the store estate in a challenging property market. Consequently, we have made the difficult decision not to pursue the opportunity further.”

Mr Coupe also flagged a greater focus on Sainsbury’s core business and the integration of Argos, which the grocer is in the midst of acquiring.

​“Our learnings from the trial will undoubtedly benefit the rest of our business as we move forward,” he added.

Per Bank, CEO of Dansk Supermarked Group, said “Whilst we are pleased with the performance of the stores to date, it has become clear to both partners that the business requires greater scale over a short period of time to achieve long-term success.”

​​The value of the £20​m joint venture will be written down to zero and Sainsbury’s is also expected to incur cash costs of around £10​m to wind​ down ​the business.​