Drivers and trends in the grocery retail market

The pace of development in the grocery retail market and among consumers is increasing. Understanding the business environment, how it is changing and the effects this is having on ICA Gruppen is critical in order to meet the needs and demands going forward. Below is an explanation of some of the biggest changes and challenges facing grocery retail, and what ICA Gruppen is doing to turn them into business opportunities.

More single-person households and urban dwellers

The population of Sweden and Norway is growing. According to forecasts, Sweden’s population will exceed 10 million by 2017. The main drivers of this trend include longer life expectancy, rising birth rates and increased immigration. In the Baltic countries the trend looks different. The populations there have been falling since the beginning of the 1990s. Common to all five countries is that more people are moving to the cities, which is resulting in the depopulation of rural areas and smaller towns. Alongside this trend is the increase in the number of single-person households or low-occupancy households. In Sweden almost every other household is a single-person household. This is largely due to people creating family units later and to an increasing percentage of elderly people in the population.

Examples of solutions within ICA Gruppen

  • Increased focus on establishing new stores in big cities
  • New salad bars in the Rimi stores in the Baltic countries
  • Continued investment in ICA To Go in Sweden; go-ahead for testing an additional 10 stores in metropolitan areas

Widespread digitalisation

The digitalisation of society continues. There is a trend towards a higher level of connectivity with the use of more and more devices: computers, smartphones and tablets. The number of users in recent years has been relatively constant, although usage among people who already use the internet is increasing. Mobile internet use is growing drastically. Online sales continue to increase and as it develops and better services are offered, grocery retail is expected to advance as well. There is also a clear trend towards the growth of virtual stores, QR codes, apps, positioning services, price comparisons and mobile coupons.

Examples of solutions within ICA Gruppen

  • The ICA Handla online shopping app
  • Rimi Pluss 2.0 in Norway
  • ICA Bank offering mobile banking
  • Upcoming online sales solutions
  • More digital marketing in Sweden

Increasingly sharp focus on prices

The grocery retail sector in ICA Gruppen’s markets saw growing competition in 2013. A high rate of expansion among competitors, new and upgraded stores, combined with a strong restaurant and café trend is intensifying the fight for the customer’s money. Alongside this trend is the continuing economic turbulence in the world which has caused consumers to be more cautious in recent years. Today’s consumers want to make smart choices and get a good deal. Apps and other digital tools are increasing transparency and helping consumers stay informed about prices and other ways of adding value. The right price experience and value for money are strong drivers when consumers choose where to shop.

Examples of solutions within ICA Gruppen

  • Investment in private labels (Sweden: ICA Basic; Norway: Smart 365 and Selection Arne Brimi)
  • Rimi’s prices in Norway
  • New low-price guarantee in Säästumarket stores in Estonia
  • Campaign initiatives in Latvia and Lithuania

Solutions that make every day a little easier

Many consumers are pressed for time in their daily lives and are looking for solutions to simplify and improve grocery shopping and meal preparation. Grocery stores should be easy to navigate and have a broad range of products. Despite the abundance of information, inspiration and recipes, on any given day a vast majority of consumers do not know what they are going to eat for dinner that evening. Well-balanced ready-prepared meals and pre-packed grocery bags have emerged as a response to a desire by consumers to simplify their lives.

Examples of solutions within ICA Gruppen

  • In-store banking and pharmacies in ICA stores
  • ICA Grocery Bag makes meal planning easier
  • The Rätt Enkelt range of ready-prepared meals
  • Special sections for pizza, sushi and salads in the stores in the Baltic countries

We want to live well for the rest of our lives

The trend towards being healthier is still strong and is driven in particular by a desire by consumers to live a long and healthy life, but also by today’s ideals for both the body and the soul – we want to look good and feel good. Despite this trend, obesity is an increasingly serious problem in many parts of the world. In Sweden one in two men and one in three women are considered overweight. Studies show that consumers think the health ideal is hard to attain, particularly in their daily lives. There is a clear link between diet and health, although exercise plays an important role as well. Fruits and vegetables in particular are associated with good health.

Examples of solutions within ICA Gruppen

  • Focus on fruits & vegetables, e.g. organic fruit in bulk in Sweden
  • Fruits & vegetables training in Norway
  • ICA’s sugar-free jams sweetened with Stevia, a natural plant extract sweetener
  • Take a Green Year campaign in Sweden 
  • Rimi is one of the sponsors of the Riga and Vilnius marathons

Corporate social responsibility even more important

Studies by ICA conducted with a panel of customers in the summer of 2012 show that an overwhelming majority of customers are concerned about the climate threat and more than eight in ten think it is important to make sustainable choices when grocery shopping. Corporate social responsibility is not just about the climate; it is also about the importance of having a sustainable value chain, a structured process in the stores to ensure quality and protect the environment, efficient goods transportation and choosing suppliers who provide good working conditions for their employees and good living conditions for their animals. A fundamental factor in securing and retaining consumer trust is behaving in an honest and transparent way.

Examples of solutions within ICA Gruppen

  • ICA’s Good Business values, seven position statements for sustainability work, permeate all of the Group’s operations
  • Environmental and quality certification of stores and of sourcing and logistics processes
  • Social audits to improve working conditions at supplier premises in high-risk countries
  • Quarterly reports on sustainability work
  • Labelling to guide customers to make sustainable choices

Geographical markets

ICA Gruppen is mainly active in five geographical markets: Sweden, Norway, Estonia, Latvia and Lithuania, where the core business is grocery retail. In 2013 the markets experienced growth, expansion and continuing stiff competition.

Economic growth in the Baltic countries was higher than in Norway and Sweden in 2013. This was not, however, reflected in consumer confidence in the economy. In Sweden and Estonia consumer confidence strengthened during the year, while households in Norway were less optimistic. In Lithuania and Latvia optimism increased at the beginning of the year before falling back in the autumn.

In terms of structure and consumer patterns, the grocery retail markets in the five countries have both similarities and differences. In all of the countries the markets are dominated by a limited number of players. Competition for customers is tough. In Norway and the Baltic countries in particular, the expansion rate in recent years has been very high, especially in the discount segment. In these markets, price and price perception is in general a stronger competitive factor than in Sweden.

In all of the countries a growing proportion of retail sales take place in big cities; either in the city centre or in shopping centres just outside. All countries, but particularly Sweden and Norway, have seen growth – albeit from a low starting point – in online grocery sales and pre-packed grocery bags for home delivery.

In Sweden customer loyalty is high, even though it has declined, while in Norway it is generally lower. Norway is a special case from a purely geographical perspective with a population that is spread out and long distances to travel, which is particularly challenging for logistics and transport flows.

There are quite significant differences in terms of the grocery retail market’s share of total disposable income. In Sweden and Norway the average household spends about 10–12% of disposable income on food and groceries. In the Baltic countries the figure is approximately 20–30%.

There are big differences in population sizes as well. The population of Sweden and Norway is growing, while there has been a significant decline in the population in all of the Baltic countries.