Sainsbury's pulls plug on Netto joint venture

Sainsbury's, Britain's second-biggest supermarket group, is to end a joint venture with budget grocer Netto, closing 16 stores and putting 400 jobs at risk.

Sainsbury's is pulling the plug on its Netto joint venture. Picture: Sean Gallup/Getty Images

The tie-up with Netto’s Danish owner Dansk was created in 2014 as a trial as Sainsbury’s looked to halt the UK market share incursions of fast-growing German discounter food retailers, Aldi and Lidl.

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But following a strategic review Sainsbury chief executive Mike Coupe today cited “changing dynamics” for winding down the business, which has 16 outlets across the north of England. He said these factors included sales data, customer feedback and the costs of expanding the joint venture.

Coupe said: “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.

“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.”

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

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