Sainsbury's and Netto are teaming up to take on discount supermarkets across the UK.
Denmark's Netto has not featured in the UK grocery market since it exited in 2010 bringing an end to its 14-year stay which made it a household name. It will return in 2015 with 15 stores already planned with the first to open in the north of England in late 2014. The move is designed to allow Sainsbury's to compete with the likes of Aldi and Lidl within the discount grocery market.
The joint venture is valued at £25 million with both companies investing the same amount. Officials did concede however that they are expected to incur a post-tax loss in the region of between £5 million and £10 million up to March 31st 2015. Netto also reassured investors that there would be "minimal risk" that the supermarket could take business away from Sainsbury's.
Alongside the majority of goods sourced from Netto's parent company Dansk and its own brand, the supermarket will be offering a limited range of branded products. Household names such as Heinz and Coca-Cola will also be included.
Per Bank, chief executive of Dansk Supermarket, said: "We'll offer market-leading value to customers, with the freshness and innovation that customers rightly associate with Denmark.
"The discounter experience, operating model and systems of the Dansk Supermarket group, combined with Sainsbury's UK market insight, property expertise and logistics excellence, will help deliver a discounter format we think UK customers will love."
Sainsbury's decision to enter into the joint venture with Netto comes after the company reported its second consecutive quarter of falling sales. This was despite a boost since the start of the World Cup.
Figures from analyst Information Resources for the week ending June 14th (the opening of the football tournament) showed that Sainsbury's expected to sell two million more burgers and ten million more sausages than it normally would.