British supermarket chain Sainsbury's is teaming up with Denmark's Netto to compete in Britain with "hard discount" retailers currently gaining market share, the companies said on Friday.
Each partner would invest 117 million kroner (£12.5 million, 15.6 million euros, $21.3 million) in the joint venture that will open 15 Netto stores in northern England by the end of next year.
Low prices will combined with "the freshness and innovation that customers rightly associate with Denmark," Per Bank, the chief executive of Netto's parent company Dansk Supermarked, said in a statement.
Netto operates 1,200 stores, out of which 430 are in Denmark and the rest in Germany, Poland and Sweden.
The chain pulled out of Britain in 2010 after operating there for 20 years when it sold its 193 stores to Wal-Mart division Asda.
"The new Netto stores represent a complete departure from the format that left the British market in 2010," Sainsbury's said in a statement. "They will … feature a great fresh food offer as well as an in-house bakery."
If the trial is successful, the new budget chain will be rolled out across the country.
They said the start-up costs for the initial trial would result in a 47-94 million kroner (£5-10 million) post-tax loss for each partner by the end of March.
Britain's biggest retailer, Tesco, earlier this month suffered its largest quarterly sales drop in four decades. The world's third biggest supermarket group is facing fierce competition from German-owned discounters Lidl and Aldi, as well as from traditional supermarket rivals.
Sainsbury's, which posted a 19 percent rise in profit after tax in the year ending March, said the British discount sector is worth £10 billion in annual sales and that the figure is forecast to double in five years.