Important events in 2013
The most important strategic priorities for the whole of ICA Gruppen include turning around the trend within ICA Norway by creating a foundation for the long-term profitability of the operations. To succeed in this, a number of forceful structural changes have been made in recent years. In 2012 the Norwegian Maxi stores were sold at the same time as extensive efficiency improvements were made in administration.
These measures were important and necessary, but far from adequate. A number of the most difficult issues in efforts to turn ICA Norway into a profitable business relate to securing good purchasing prices and the need to comprehensively improve distribution efficiency given Norway’s geography. The long distances and a population that is very spread out require coordinated and efficient goods transportation processes.
In January 2013 ICA Norway and Norgesgruppen entered into a cooperation agreement within purchasing and logistics. The aim was to secure competitive prices and achieve long-term profitability for the Norwegian operations.
In the spring the Norwegian Competition Authority launched a review of the cooperation agreement and imposed a temporary suspension on the agreement while the review was in progress. ICA Gruppen appealed the decision and in July 2013 the Royal Norwegian Ministry of Government Administration, Reform and Church Affairs (FAD*) announced that the sourcing part of the agreement could proceed while the Competition Authority continued with its review. The Norwegian Competition Authority subsequently continued its review of the agreement. On 13 February 2014 the Norwegian Competition Authority informed the Company in an advance ruling that it is to block the cooperation. The Company is now evaluating the ruling and the consequences that it may have for the Company’s operations in Norway.
*As of the 1 January 2014, the FAD will cease to exist. Most of its assignments will be taken over by the new Ministry of Local Government and Modernisation.
More emphasis on governance and management
In 2013 a lot of energy was put into more clearly defining roles, responsibilities and ownership regarding specific areas and projects. One example of this was when responsibility for operational performance was shifted in 2013 from the sourcing director to those responsible for each store profile. These now have overall responsibility for operational development and performance. Linked to this is a sharper focus on business expertise, where cooperation, customer focus, responsibility and profitability are key words.
Further development of stores and the product range
In 2013 3 new stores were opened and 28 were closed. Also, the remaining ICA Nær stores were converted into Rimi and Matkroken stores.
A new strategy was adopted during the year for private label products. From in the past when ICA Gruppen had several different brands, there is now one brand within the low-price segment and a few others in the medium and premium segments. The goal is to create a more attractive offering and facilitate for customers.
The first stage of a new price strategy for the Rimi stores was launched during the year to gradually improve price perception. Competition in the market is tough and the goal going forward is to put Rimi in an even stronger position in the low-price segment while also improving price perception. The first measure in 2013 was to reduce the price of lunch and dinner related foods as well as several hundred other products. Price reductions in other categories will continue in 2014.
Action programme 2012–2013
In addition to reviewing sourcing, logistics and governance, ICA Norway has also implemented a cost-cutting programme resulting in annual savings of around NOK 50 million. One of the main actions is staff cuts equivalent to around 180 annual positions. A decision was also taken to postpone upgrading the ICA Supermarked stores for the time being and delay investment in the pre-packed grocery bag concept.