Netto outstrips the competition as more shoppers seek out its value proposition

Turnover increased from £627 million to £696 million for the year to December 31 and operating profit jumped by 195% to £9.3m as consumers increasingly looked to the price-focused operators as their saviours in the current economic downturn.

Richard Lancaster, managing director of Netto in the UK, said: “This is the year of the value retailer and all such retailers will do extremely well as the benefits from the economy come our way.”

What is interesting is that the company is attracting increasing numbers of shoppers, and from a broader demographic, with the number of households now shopping at the grocer having increased by 12.3% over the past year.

Although he acknowledges that this is partly down to the increasing store numbers (the expectation is that a total of 18 new outlets will have been added by the end of the year) there is plenty of evidence to suggest the growth is also down to its strong value proposition appealing to an increasingly broad swathe of shoppers.

“There is no doubt in our mind that we're breaking the ice with more people. They are visiting us and are being pleasantly surprised. What they see are more attractive stores, better ranges and improved product flows - whereas it was previously soap powder at the front of the stores it is now soft drinks,” he explained.

But the key driver is undoubtedly price and of among the major food retailers Lancaster says Netto is clearly the lowest priced operator. This claim is supported by Nielsen Homescan figures that showed it to be at least 18% lower-priced in March than each of its key rivals on an average-price-per-item basis.

However, Lancaster believed it would be a mistake to attribute all the current success of Netto to the economic troubles as he said other factors are also at play. Chief among these has been the more customer-centric focus that has been brought into the company. “We have followed what our customers want...we now satisfy our core and top-up shoppers with a widening range of services and products,” he said.

This certainly appears to be working as the growth rates at Netto are continuing into the current financial year with Lancaster revealing that the company was experiencing strong like-for-like sales growth in the first quarter of 2008. Further evidence of this came from AC Nielsen whose research showed Netto had recorded sales growth of 11% over the four-weeks to February 23, outstripping that of all its major rivals.