Retailers ICA and Norgesgruppen have entered a cooperation agreement that will see the two groups join forces in the areas of sourcing and distribution.

The agreement coordinates distribution and logistics between ICA Norway and Norgesgruppen's wholesale company, Asko.

ICA said the deal represents an "important step" as it looks to turnaround its struggling Nordic operations.

"The changes that have recently been made at ICA Norway have been necessary, but not sufficient, steps to ensure the company's future development. Major strategic and structural measures, mainly in sourcing and logistics, have been necessary to ICA Norway's turnaround. The cooperation with Norgesgruppen is an important, forward-looking endeavor to eventually ensure a good customer offering and achieve profitability in ICA Norway," says Per Strömberg, CEO of ICA.

ICA said it will retain 40% of its distribution volume. It is expected the move will create cost savings as well as providing the firm with additional purchasing power. 

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ICA Norway enters cooperation agreement with Norgesgruppen
Solna, Sweden, January 14, 2013 ICA Norway has entered a cooperation agreement with Norgesgruppen in the areas of sourcing and distribution. The agreement is an important step for ICA Norway to ensure competitive prices for Norwegian customers and achieve long-term profitability. 
In recent years, ICA Norway has taken many measures to improve its results. Among other things, ICA's offering has been consolidated in two main chains, ICA and Rimi. The cooperation with Norgesgruppen is a major strategic effort.
"The changes that have recently been made at ICA Norway have been necessary, but not sufficient, steps to ensure the company's future development. Major strategic and structural measures, mainly in sourcing and logistics, have been necessary to ICA Norway's turnaround. The cooperation with Norgesgruppen is an important, forward-looking endeavor to eventually ensure a good customer offering and achieve profitability in ICA Norway," says Per Strömberg, CEO of ICA AB.
The cooperation agreement coordinates distribution and logistics between ICA Norway and Norgesgruppen's wholesale company, Asko. ICA will retain distribution in Oslo, Akershus, Østfold and parts of Buskerud, Vestfold, Hedmark and Oppland. In total, this represents over 40 percent of today's distribution volume. ICA will also retain the warehousing operations in Oslo, while other warehouses will be gradually phased out. The cooperation with Norgesgruppen, which takes effect on April 1, 2013, will allow ICA to supply its existing retail network more cost-effectively. The changes will take effect gradually in 2013.
The cooperation also means that Norgesgruppen will manage parts of ICA Norway's sourcing. However, ICA Norway will continue to source its private label products, fresh bread, some perishables and fresh seafood. 
"The agreement with Norgesgruppen gives ICA Norway better purchasing prices and more effective distribution," says Thorbjørn Theie, CEO of ICA Norway. "We have evaluated various alternatives and come to the conclusion that Norgesgruppen is the one that suits us best in terms of product selection and retail network. The agreement is forward-looking and gives us a good platform to strengthen our competitiveness."
The changes in ICA Norway's sourcing and logistics departments affect around 350 positions. The structural costs associated with these changes are estimated at NOK 150 million and will be charged against Q1 2013. The agreement will extend for at least five years and can be terminated by either party.
As required the competition authority in Norway, has been informed of the cooperation agreement.
ICA Norway operates 510 stores.

 

Original source: ICA