Ahold has announced a joint venture with Denmark’s Dansk Supermarked. Many thought that Ahold already had a firm enough footing in Scandinavia, following its joint venture and subsequent merger with the region’s leading grocery retailer ICA. But its new joint venture raises the stakes of the game once again. If others, especially the smaller players, are going to defend against this threat, they will need to act quickly.

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Ahold is still keen to build scale in the Scandinavian market. Its joint venture and subsequent merger with ICA gave it a significant presence in the region and the means to develop across several countries. In particular, Ahold has been keen to expand its larger formats and discount stores and the new Dansk deal will further strengthen Ahold’s ability to do this.

Dansk Supermarket has two fascias that interest Ahold: Bilka and Netto. The Netto fascia will be used as the vehicle for new discount stores in the region, which will fit in with Ahold’s existing discount stores. The Bilka format will be used as a pilot fascia for hypermarket stores.

The move makes strategic sense, as the Scandinavian market is highly consolidated and the opportunities for organic growth are limited. Those that want to expand face the choice of either entering into fierce competition with rivals, or seeking strategic alliances and potential takeover targets.

There has already been consolidation of this type prior to this move. Several companies merged together to form Axfoods and at the start of 2000 the co-operative retail unions of Denmark, Sweden and Norway formed Coop Norden. These mergers have the advantage of providing scale benefits and sharing of best practice, something that Ahold has always been keen to exploit itself.

Whilst it seems likely that there will be more consolidation across Scandinavian food retailing, the number of high quality retailers available for takeover, or for partnership, is continually decreasing. Given the buying power, scale and expertise that Ahold brings to the Scandinavian market, the rest will face intense pressure. The smaller players will need to make some good choices, quickly, if they are to survive.

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