The main players are keeping their cards close to their chest, but talk of acquisition activity is currently rife in the Nordic food retail sector, with persistent speculation about possible takeovers and new alliances in Sweden and Norway.
The combined value of the Nordic markets is nearly SKr500bn and the region’s 20 million customers are now within reach of most of the major retailers through their increasingly efficient pan-Nordic distribution networks and strong purchasing logistics. A year ago, the food retail sector in these countries seemed relatively competitive, judging both from the main operators’ relative size, market share and financial results. Over the last six months or so, however, the Nordic retail food market has been dramatically reshaped and the main players are readying themselves for further action. Several of them are also thought to have an eye to the hitherto maiden Baltic markets of Estonia, Latvia and Lithuania. “Big is beautiful” seems to be the ruling motto of the Nordic food retail industry.
Go deeper with GlobalData
Axfood taking on ICA and KF in Sweden
First let’s take a look at what has happened so far, starting in Sweden. Market leader ICA, which controls a market share of 34.8%, and second-placed consumer cooperative group KF were long the two leading rivals. Today, the new Axfood group, created by the merger of the publicly listed Hemköp chain and D&D Gruppen and controlled by the private group Axel Johnson, is fast posing a threat to the comfortable status quo. Axfood already has an 18.6% market share and is breathing down the neck of KF, which is just ahead at 19.4%. Axfood’s managing director Mats Jansson confirmed that the group is hungry for expansion and is set to become one of the three largest food retailers in the Nordic region within the next five years.
“Axfood shall, in one form or another, be part of a constellation that has at least 20% of the Nordic market, which equals a turnover of SKr80bn,” Jansson told business paper ButiksSäljaren.
Ahold/ICA merger not going smoothly?
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataMeanwhile ICA, while safely guarding its number one slot in Sweden and the Nordic region, has moved into Denmark by buying a 50% stake in ISO, and rumours in recent weeks saw ICA courting the number four REMA 1000 group in Norway. As of yet, neither of the companies has commented on the speculation, and internal struggles within the ICA group following the tie-up with Dutch giant Ahold could have a dampening effect on ICA’s external affairs in the short to medium term.
So far, cooperation between the two groups has not been going as smoothly as they had hoped. Critical voices within the group of independent retailers dislike the tighter guidelines and restricted independence for the managers determined by their new Dutch parent, and just this week, a report in the business weekly Köpmannen cited Ahold sources, saying the company was unhappy with the returns showed by the ICA group.
Rema 1000 – hunter or prey?
In Norway, the number two Hakon Group is already a part of the ICA-Ahold empire. The privately held Norwegian REMA 1000, for its part, countered rumours that it could be a target for acquisition by ICA by saying it may very well bid for Sweden’s Axfood group as a way to secure rapid growth ahead of its planned stock market listing later this year.
“To buy Axfood is a future possibility. And I have no problems raising money,” said owner Odd Reitan. Mr Reitan would have to dig deep if he were to bid for Axfood however, which has a current market capitalisation of SKr34bn.
Big plans at Bergendahls
Analysts have pointed out that the fast-growing and profitable Swedish group Bergendahls has yet to figure in any of the alleged deals. The family-controlled food retailer may be a much smaller player than some of its competitors, but it is nevertheless the number four in Sweden. Moreover, Bergendahls has an ambitious growth forecast, seeing annual turnover rise from SKr4bn to SKr7bn within the next two years. It plans to grow sales organically by expanding its network of outlets further north from its cradle in the southern town of Helsingborg.
Cooperatives slow to join the acquisition race
Another group that has so far held back are the Nordic consumer cooperative food retailers. It is true that in January KF of Sweden, FDB of Denmark and Norway’s NKL got together to form Coop Norden as a tool for future “cooperation and integration.” So far, though, nothing from that cooperation has materialised into any structural or strategic changes.
The very nature of the cooperative ownership structure naturally makes it more difficult for them to participate in the wave of mergers currently sweeping the sector, although analysts stress that they too are certainly considering restructuring further.
Sweden’s KF is also currently reshaping its range of different formats and will let go of the troubled discount chain Prix. The measures are, of course, necessary to halt the group’s dwindling market share and to put the brakes on its losses. However, the revamp could also be interpreted as a strategy for making itself more attractive for future partners.
Finland thus far immune to takeover activity
Curiously enough, not many of the rumours have managed to cross the Baltic Sea into Finland. The price-sensitive Finnish market remains the fortress of market leader Kesko and runner-up S-gruppen. After ICA sold its stake in Kesko a couple of years ago, the only Nordic interest in the Finnish market is Axfood’s ownership of the 330-outlet Spar chain.
It was only to be expected that market leader ICA would take the lead in the restructuring of the Nordic food retail market. It has also been ahead of others to tap the Baltic region and has an interesting partnership with Statoil to serve the group’s food at its Nordic petrol stations. But others are acting swiftly and its position could easily be rocked by a few cross-border deals. If another global player joins Ahold to add its weight to a deal, the Nordic food retail map could soon be hard to recognise.
Everything to play for in SKr500bn market
Ahold’s inroad into the Nordic markets is the first deal so far completed by a non-Nordic player and analysts believe it is unlikely to be the last.
The rapid Nordic consolidation is being viewed as an attempt to fend off the potential threats posed by the European crusade of the US retailer Wal-Mart and other companies of its ilk. The irony may very well be that the local players have only succeeded in making themselves attractive enough for others to consider an acquisition. Wal-Mart itself is unlikely to make a bid for Nordic expansion until its relatively young operations in Germany and the UK have settled down, However, Intermarché of France, which already has interests in the Nordic region through its Spar group, has been mentioned as one possible new entrant.
