Netto couldn’t handle the UK’s big boys
So now we know. Netto abandoned the UK by selling out to Asda Wal-Mart because the might of the country’s big grocers ultimately caused it too much grief.
Speaking at the World Retail Congress in Berlin Claus Juel-Jensen, managing director of Netto International, admitted that the aggressive competition from the likes of Tesco, Asda, Morrisons and Sainsbury’s made its life too difficult in the UK.
Although he says the offer from Wal-Mart involved a sum of cash that was far too tempting for Netto to turn down, there is no doubt that had life not been quite so tough for the discount supermarket then it would probably still be operating in the UK today.
Unlike in the other markets in Europe where Netto also operates, Juel-Jensen says the UK’s big boys were on its case from day one. He suggested that with their big marketing budgets they have fought a very successful campaign to give shoppers the perception that the products in the food discounters are cheap because they are of an inferior quality – cheap and nasty.
Despite numerous taste tests that have suggested the contrary, the reality is that many UK consumers continue to believe that the products of Netto, Aldi and Lidl are of low quality. This has made life tough for all three of them, especially over the past year.
The aggressive moves from the likes of Tesco, which launched a range of own-brand goods squarely aimed at competing with the core products of the discounters, have had a big impact despite much media criticism of their moves at the time. It was all bad news for margins.
With the benefit of hindsight we can now see that the major grocers’ efforts at fighting off the discounters – following their ‘moment in the sun’ at the height of the recession – has been very successful.
It has not only seen the departure of the UK heads of Netto, Aldi and Lidl but has (we now know) resulted in Netto throwing in the towel. Job done it seems.