ICA Baltic, part of Scandinavian retailer ICA, and Finland’s Kesko Food have signed an agreement to set up a 50/50 joint venture in the Baltic food retail market.

Under the agreement, the companies will combine their current operations in Estonia, Latvia and Lithuania. ICA and Kesko expect the new joint company to begin operations before the end of 2004, subject to the approval of competition authorities.

“The new company will support ICA’s and Kesko Food’s strategies for strong growth and profitability in the Baltic countries and will aim to become the leader of the Baltic market with a 25% market share in three years. Consumers in all three countries will benefit from wider and more varied product selections, while ICA and Kesko Food expect to gain synergy benefits in purchasing, store network development and logistics,” said ICA, which is 50% owned by Dutch retailer Ahold.

In 2003, ICA and Kesko Food had combined net sales of about €550m (US$672.3m) in the Baltic countries. The total value of the Baltic food market was approximately €4.7bn, and is growing at over 5% annually, ICA said.

ICA and Kesko Food plan to appoint Antonio Soares as CEO of the joint venture and Seppo Hämäläinen as deputy CEO. Soares is currently CEO of ICA Baltic and Hämäläinen is vice president of Kesko Food Baltic Operations.

The two companies currently operate a total of about 150 food stores under hypermarket, supermarket and discounter concepts in Estonia, Latvia and Lithuania, as well as three logistics centres.

ICA Baltic operates 77 stores in the Baltic countries. The company has five RIMI supermarkets and one RIMI hypermarket in Estonia. In Latvia, the company has 34 RIMI supermarkets and four RIMI hypermarkets as well as a logistics centre in Riga. In Lithuania, ICA has a total of 33 supermarkets and hypermarkets, most of which operate under the RIMI logo. In Vilnius the company has a logistics centre.

Kesko Food currently has six Citymarkets in Estonia. The company also owns Säästumarket, Estonia’s biggest discount retail chain, with 45 stores. In addition, Kesko Food has a SuperNetto cash and carry outlet and a logistics centre in Tallinn. In Latvia, Kesko Food has five Citymarkets and 17 SuperNetto discount stores.