Swedish retailer Axfood has decided to merge its Hemköp and Spar chains to create a single chain of stores operating under the Hemköp banner.

The new chain will have approximately 200 stores and annual sales of approximately SEK10bn (US$1.3bn). Synergy gains are estimated to amount to SEK60m-80m over a three-year period, Axfood said.

The retailer said that competition for traditional grocery stores in Sweden had intensified considerably in recent years, with discounters and hypermarkets both capturing market shares. Axfood has a market share of around 22% in the "traditional grocery store" segment, although this share is divided among several brands.

"We are now combining three brands - Hemköp, Billhälls and Spar - under a single brand name. This will give us better opportunities for growth and development," said Mats Jansson, president and CEO of Axfood.

Conversion of Spar stores will commence in October 2004 and is expected to be completed by year-end 2005. The cost of the conversions is estimated at SEK30m.

The new chain will have a number of large stores. These will acquire their own format within the chain along with the new Hemköp name. The local Gothenburg chain, Billhälls, among others, will be included in the new bigger format.

Axfood said due to the merger of the head offices of Spar and Hemköp, 30 jobs would be eliminated. Spar's office in Gothenburg will be closed by 1 October of this year at the latest. Carl-Erik Möller, currently president of Hemköpskedjan, will serve as president of the new chain.