In pictures: Netto unveils first store as it takes on Aldi and Lidl

Netto’s return – a joint venture with Sainsbury’s – comes as rival hard discounters Aldi and Lidl continue to grow at breakneck speed at the expense of the big four grocers.

The Danish discounter exited the UK four years ago but marked its return with a store on Moor Allerton Retail Park in Leeds. It will be followed by a further four this month.

Chief executive of Netto parent company Dansk Supermarked Per Bank said: “We are discount, but with a Scandinavian twist and we hope customers will see that.

“Discount retailing has come of age in the UK and the market can support so many more discount shops. Our competitors Aldi and Lidl have done a great job in helping discount become more mainstream but we will take the concept one step forward.”

Bank said Netto’s fresh and bakery offers, the “friendly and bright” store environment, and the “sense of humour” of the brand will set it apart.

Commercial director Nick Townend said next year’s expansion would be concentrated in the area between the M62 and M1 from a depot in Scunthorpe. Townend said if the model works, that depot could support up to 150 stores, and that eventually Netto could have five depots servicing up to 750 shops.

Product ranges

The 8,072 sq ft Moor Allerton store carries 2,300 SKUs, plus around 60 ‘spot deals’ each week, sold on a ‘when they’re gone, they’re gone’ basis. Fresh produce is delivered to the store each day, and there is a strong emphasis on British products.

Netto has also used the model of ‘good, better, best’ in some categories with its entry-level brand Easy and its top-end brand Premieur. Its ‘better’ range, which makes up the bulk of the ranges, is made up of different private label brands such as Chesterfords.

Townend said the range tiers are “as good in terms of quality as any of the big supermarkets”.

“We are discount, but with a Scandinavian twist. We hope customers will see that”

Per Bank, Netto

Grocery Insight director and food retail blogger Steve Dresser said: “Netto has second-mover advantage. It has taken learnings from how Aldi and Lidl have changed over the last few years and also provided a difference on top of that.

“It’s a great start, the number of SKUs gives it flexibility, and its bakery is a step ahead of what else is out there. The only concern is if Sainsbury’s starts to struggle, what will happen then?”

Bank noted that the joint venture is a trial – it aims for 15 stores by the end of next year – but said he believes the model will work. “Customers are looking for value but the beauty of discounters is that you can do a full weekly shop, come out with what you need and do not get tempted to buy anything else,” he said.

Bank said that the partnership with Sainsbury’s has helped Netto understand the UK market and how it has changed in the period the brand was absent. “Nobody knows customers as well as Sainsbury’s and we wouldn’t have been able to create this concept without them,” he said.

A joint team from Sainsbury’s and Dansk sourced and created the products, and Bank said Sainsbury’s property team has also helped Netto secure sites.

Exit from UK

Netto originally pulled out of the UK in 2010 and sold all its stores to Asda in a deal worth nearly £800m.

Bank said: “While Netto probably didn’t have the right model then, it left because of the fantastic offer, it just couldn’t refuse. Who would have known then that the discount market was to take off the way it did?”

Each partner’s initial investment in the joint venture will be £12.5m and, given start-up costs, each expects to incur a post-tax loss in the region of £5 to £10m up to March 31, 2015.

Netto’s opening comes ahead of partner Sainsbury’s unveiling its results and strategic review of the business next week. Like other big grocers, Sainsbury’s is also starting to lose share as it is squeezed by Waitrose and the discounters.