Goals and strategy

VALUES

Simplicity, entrepreneurship and commitment

VISION

We make every day a little easier.

MISSION

We want to be the leading retailer focused on food and meals.

STRATEGic themes

Strengthen customer loyalty and brand position

Strengthen and expand our customer offering

Optimize and broaden our sales channels

Simplify our business

Engage and develop our people

Excel in corporate responsibility

FINANCIAL GOALS

Increase sales faster than the market

Operating margin of at least 4%

Return on capital employed of 9%

Net debt/EBITDA <2.0

Dividend 50% of net profit for the year

SUSTAINABILITY TARGETS

Reduce ICA Gruppen’s direct climate impact by 30% by 2020 compared with 2006

100% of ICA’s corporate brand suppliers in high-risk countries will be socially audited

80% of ICA Gruppen’s private label food suppliers to be quality certified

ICA'S GOOD BUSINESS

Be driven by profitability and high ethical standards

Listen to customers and always base decisions on their needs

Nurture diversity and growth among its employees

Maintain an open dialogue internally and with the community

Ensure quality and safe products

Promote a healthy lifestyle

Adopt sound environmental practices to promote sustainable development

ICA Gruppen’s vision is to make every day a little easier. The overall goal is to firmly establish our position as the leading retail company focusing on food and meals. The Group strategy establishes the frameworks and priorities for everything we do to secure our position for the long term.

ICA Gruppen’s strategy is based on the Group’s shared strengths and a comprehensive understanding of both our business environment and our markets. It consists of six long-term strategic themes that set the direction for all operations within ICA Gruppen. Having common and overall strategic themes makes it easier for the Group and the employees to set priorities from a holistic perspective.

In addition to the longer-term themes, a number of shorter-term common priorities are identified every year. These are assigned goals and broken down into company-specific activities which are then followed up on a quarterly basis. These priorities, which are critical for ICA Gruppen’s strategy, also facilitate cooperation and take advantage of synergies between different businesses within ICA Gruppen.

 At ICA, a commitment to sustainability and strong community engagement go hand in hand with long-term profitability. ICA’s customers and other stakeholders should feel secure and confident in ICA and its businesses. ICA’s Good Business guidelines describe the Company’s ethical standards and corporate social responsibility.

Strategic themes and priorities

ICA Gruppen will nurture and continue to build its strong brands and strengthen customer loyalty in every market through effective, well-targeted marketing activities and sound decisions. The most important brands are ICA and Rimi. ICA Gruppen is working on further defining and developing its brand-related promises. Customer loyalty programmes are a key part of ICA Gruppen’s offering and create added value for both customers and the Group. Loyalty programmes have so far been successfully used in both Sweden and the Baltic countries where customers receive unique offers based on individual purchasing patterns.

Strategic priorities

2013
Turnaround the Norway business

2014
Turnaround the Norway business
Develop and leverage leading CRM

The Group’s goal is to increase sales through a strong range of new products and services. Among other things, ICA Gruppen will concentrate more on fresh foods and pharmacy items, and in general ensure that prices are competitive in every country, which is an essential aspect of a strong customer offering. Private label products are also a focus area which give customers better value and contribute to a unique product range.

2013
Increase profitable private label penetration  
Ensure competitive pricing and fair price perception  
Develop the portfolio strategy  

2014
Further strengthen the Private Label offering

Ensure competitive pricing and fair price perception

Implement the portfolio and non-food strategy

ICA Gruppen will focus on continuing the store expansion and ensuring that the Group has a well-adapted network of stores. Together with the retailers, the store formats will continue to be developed based on customer demand. In addition, ICA Gruppen will seek to achieve additional sales by developing and integrating complementary sales channels. Being a leader in online retail will be a critical success factor for the Group. ICA’s network of stores will constantly be renewed and developed with a particular focus on the geographical areas where ICA is under-represented.

2013
Build a leading digital sales position
Grow the retail business in Sweden and in the Baltic countries  

2014
Build a leading position online
Strengthen the store network (main focus on Cura, Lithuania, metro Sweden)

ICA Gruppen will be better at identifying and capturing synergies within the Group, while working to increase efficiency and adopting a mindset of continuous improvement. For example, significant synergies can be found in Assortment & Sourcing, including joint development of private label products and coordination of sourcing activities.

2013
Collaborate to capture synergies within the Group  
Ensure efficient operations with focus on supply chain  

2014
Exploit sourcing synergies

A common approach and a shared view of basic values increase clarity for the customer about who we are as well as the level of attraction of ICA Gruppen among current and future employees. This makes it easier to make the right decisions and thus improves internal efficiency. In 2013, ICA Gruppen launched its common values: simplicity, entrepreneurship and commitment. These values provide an internal compass and guiding principles for everyday activities. The focus going forward will be on implementing these values at both the office level and in the stores.

2013
Develop common ICA values  

2014
Implement ICA’s common values

ICA Gruppen will excel in corporate responsibility. Work in this area will permeate everything the Group does, lead to tangible results and ensure a sustainable value chain – from production to store. The aim is to continuously raise the level of ambition by leading the way on important issues such as conditions in production units, place-of-origin labelling, healthy products, environmental impact and food safety, while also steadily reducing carbon dioxide emissions. Through these efforts, ICA Gruppen wants to inspire other players while strengthening the Group as a player in the grocery retail market and creating value for society as a whole and for our customers.

2014
Support sustainable customer choices

Comments

In 2013 ICA Gruppen worked successfully according to the Group strategy and the nine defined strategic priorities. Goals were set for these and they were followed up quarterly to maintain a sharp focus and transparency. ICA Gruppen delivered in line with or exceeding the goals for all of the priorities, with the exception of turning the trend around in Norway. In January 2013 ICA Norway and Norgesgruppen entered into a cooperation agreement within sourcing and logistics to create a competitive cost position. In February 2014 the Norwegian Competition Authority issued an advance ruling stating that it intended to block the cooperation. Becoming a leader in digital sales is a long-term initiative that progressed according to plan in 2013 and is one of ICA Gruppen’s ten defined priorities for 2014. These priorities are considered critical to ICA Gruppen’s strategy and will facilitate cooperation and synergies within the Group for the areas selected. The majority of the priorities from 2013 remain in place with slight adjustments and there are three new ones defined as follows: Develop and leverage leading CRM, Exploit sourcing synergies and Support sustainable customer choices.

The loyalty programmes and CRM constitute an important area for all of ICA Gruppen’s markets. The starting points may vary, but all countries have ambitious plans for further improving their customer loyalty efforts. ICA Gruppen also has a large sourcing volume and there are good opportunities for synergies across national borders in several areas. With respect to ICA Gruppen’s sustainability work, in recent years the Group has been focusing on ensuring sustainability in the value chain and these efforts have been paid off. In 2014 the focus will be on making sustainable choices easier for the customer through the product range and through information provided.


Goals and outcomes

Financial targets   

 

ICA Gruppen is one of the leading retail companies in the Nordic region with a clear strategy for profitable growth. The Group’s financial targets will ensure that ICA Gruppen provides shareholder value over time and will reflect the Group’s focus on the stable grocery retail market.

The Board of ICA Gruppen has adopted the following long-term financial targets for the Group:

 

The goal refers to sales growth in each individual market to outperform the total market. To succeed, ICA Gruppen will continue to develop and expand the store network. There will be a particular emphasis on growth areas such as large cities in Sweden and the Baltic region, and on developing and enhancing digital sales channels. The goals applies primarily to ICA Gruppen’s retail businesses.

Outcome:
In Sweden ICA Gruppen grew faster than the market overall. Rimi Baltic had a growth rate slightly below the market. In Norway the growth was below the market.

ICA Gruppen will increase profitability by focusing on strong brands, internal efficiency, customer loyalty programmes and increasing the percentage of private labels. This goal relates to operating income excluding non-recurring items for the Group as a whole.

Outcome:
Overall the operating margin excluding non-recurring items increased in 2013 to 3% (2.7).

Return on capital employed is defined as operating income plus financial income, excluding effects of acquisitions, as a percentage of the average capital employed (equity plus interest-bearing liabilities). The operations of ICA Bank are excluded from both the income statement and balance sheet in the calculation. This is a key ratio that shows the return on the capital the Group is using, regardless of financing.

Outcome:
For the full-year 2013 the return on capital employed was 6.1%. The Group’s capital employed increased during the year from SEK 10 billion to SEK 50 billion as a result of the acquisition of the remaining shares in ICA AB.

Net debt is defined as the Group’s interest-bearing liabilities, excluding pensions and ICA Bank and cash and cash equivalents, in relation to operating income before depreciation and amortisation, EBITDA. The goal is to reduce net debt to two times EBITDA by the end of September 2014 when financing for the acquisition of ICA AB will be completed and the bridge loan will be replaced by other long-term financing.

Outcome:
As of 31 December 2013 ICA Gruppen’s net debt amounted to SEK 9.2 billion, equivalent to 2.1 times EBITDA pro forma.

The dividend goal has been set with sights on 2016 when the current C shares will be converted into ordinary shares, resulting in more shares carrying entitlement to dividends. The Board is aiming for a good and stable dividend that reflects ICA Gruppen’s stable earnings in grocery retail over the long term.

Outcome:
The Board of ICA Gruppen proposes a dividend of SEK 951 million, corresponding to SEK 8 per ordinary share for 2013. The dividend proposed is equivalent to 68% of the profit for the year.

Sustainability targets   

 

ICA Gruppen’s sustainability work is a strategic priority and is integrated into all of the Group’s operations.

To follow up sustainability efforts there are three overall sustainability targets:

 

 

 

ICA’s direct climate impact comes from operating stores and warehouses, goods transportation between warehouse and store, and business travel. The climate impact from the product range is not included.

Outcome:
Since 2006, ICA's direct greenhouse gas emissions fell by 18% (13), mostly due to long-term work with a number of actions in the areas of energy, refrigerants, transportation and business travel. Compared with 2012, ICA's direct greenhouse gas emissions fell by 5% in 2013. During the year, the use of renewable electricity in the Swedish stores increased and ICA has implemented measures for energy-efficient operation of stores in all markets. For example by putting lids and doors on refrigerators and freezers. In the logistic operations, several measures have contributed to the reduced emissions, including all carriers in Sweden reporting factual transport data, which was previously calculated according to agreed standards. An increased number of transports in Sweden are carried out with trucks that use alternative fuels, which also contributes to reduced emissions. Transition to refrigerants with less climate impact in the Baltic countries has also contributed to the emissions reductions.

Corporate brand products are primarily private label products. High-risk countries are defined according to the UN Human Development Index and Economic Security Index (UNDP).

Outcome: 

By the end of 2013, 77% (74) of the production units, factories, farms and processing plants in high-risk countries that produce ICA´s corporate brand products have been socially audited. Overall, the number of suppliers decreased in high-risk countries during the year as a result of, among other things, consolidated volumes for ICA and a continuous monitoring of the supplier base. In fruit, vegetables and flowers, however, the number of suppliers increased as a direct cause of ICA Sweden's health initiative but the proportion of socially audited suppliers of fruit, vegetables and flowers have increased even more so. Further efforts are needed in the coming years to support suppliers in efforts to ensure that production takes place in an acceptable form in terms of human rights.

80% of ICA’s corporate brand food suppliers will be certified to GFSI (Global Food Safety Initiative). Corporate brand products are primarily private label products.

Outcome:

At the end of 2013, 59% (57) of suppliers of ICA's corporate brand products were certified to GFSI. During the year, the number of suppliers has increased, resulting in an increased work to ensure that updated certificates are registered in ICA's monitoring system. When it comes to fruit and vegetables, ICA also works with local suppliers with a third-party standard that is not GFSI approved, this affects the overall outcome against the target.