Netto: Increasing Competition the Discount Grocery Sector

Netto is about to face increased competition in the discount supermarket sector. Safeway, the UK grocery chain is planning to open a chain of discount stores to operate along its existing business. Carlos Criado-Perez, Safeway's chief executive who has repositioned the store as a specialist in fresh food and takeaway meals, believes there is a gap in the market for a new-look discount retail chain. He claims that the new stores will be based on a low-cost shopping concept that will be different from discount operators such as Netto, Aldi and Lidl. Most of the new stores will be purpose-built with some existing supermarkets rebranded, either as a Safeway sub-brand or under a new name.

Safeway, which is the UK's fourth largest food chain has been rejuvenated since Criado-Perez became its head. He abandoned the "everyday low prices" policy still employed by Tesco and Asda in favour of heavily advertised, deep discounts on a smaller range of products designed to pull in shoppers.

A second strategic move was to restructure the chain into four formats: convenience stores emphasizing fresh foods and ready-to-eat meals, supermarkets, superstores and hypermarkets. The first hypermarket opened in December 2001. The move into the discount sector will become a fifth format.

Based on: Finch, J. (2001) Safeway Plans Discount Chain, The Guardian, November 23, 27