Sainsbury’s has announced an end to its joint venture with Danish chain Netto, and will be closing all 16 UK stores in August.
The partnership has come to an end after just two years after Sainsbury’s bought half shares in Netto, owned by the Dansk Supermarked Group (DSG), for £25m in order to compete with leading German discounters Aldi and Lidl.
All 16 Netto stores are based in the North of England and employ up to 400 members of staff. Sainsbury’s exit from the venture comes as it prepares to complete a £1.4bn takeover of the Home Retail Group.
Mike Coupe, chief executive of Sainsbury’s, 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.
“Against this backdrop, as planned, we carried out a detailed review with DSG on the future of Netto. 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 and instead focus on our core business and on the opportunities we will have following our proposed acquisition of Home Retail Group. Our learnings from the trial will undoubtedly benefit the rest of our business as we move forward.”
Per Bank, CEO of Dansk Supermarked Group, said: “We, together with Sainsbury’s, set out to trial Netto in the UK to provide us with the basis to review the business at the end of the trial period. 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. Reaching scale has been challenging due to appropriate site availability and therefore we decided together to end the joint venture and focus on other opportunities within our respective businesses.”
The businesses are working together to minimise the impact of the decision on Netto employees and will be consulting with and supporting employees through this period of change.