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It is difficult to calculate exactly how big the margin (profit in relation to sales) that Ica has, since the Group makes twice as much money on groceries.
Each store makes its profit from sales to consumers, but it also has a common profit for Ica Sweden, which makes central purchases from food companies and sells to Ica retailers.
This represents around 75 to 80 percent of purchases from Ica retailers.
According to calculations of Livsmedelsföretagen trade association, the total margin is around 6.2 to 6.8 percent. It has risen from 5.5 percent in 2010, with a peak of 6.7 percent in 2014. In 2018, it was 6.3 percent.
In any case, these are profitability levels that are among the highest in the world, even measured against international chains.
The much larger European chains Carrefour (France, Southern Europe), Sainsbury (UK) and Lidl (Germany, Europe) have significantly lower margins, in the range of 1 to 4 percent. The closest is Belgium’s Colruyt, with around 5.3 percent in 2019. In Sweden, Lidl has just under half a percent margin, with just over 11 billion sales. The American giant Walmart has hovered around 4 percent in recent years.
At the same time, Ica pays tribute to Its historically successful business strategy – “collaborating free traders” – a system that combines a local entrepreneur and entrepreneur, with joint core acquisitions, smart logistics and large-scale transportation – is a growing criticism of chain market dominance. Ica has about 52 percent of grocery sales in Sweden. The three biggest players, Coop, Axfood and Ica, together have 90 percent. Axfood also has good margins, 4.5 percent in 2019, while Coop had 0.2 percent, after falling back last year.
It is an oligopoly market, some players, that has become so large and powerful that it makes competition difficult, according to Livsmedelsföretagen. Those who are going to sell their products to Ica are at a disadvantage. At the same time that Ica’s margins have increased since 2010, the profits of food companies have stagnated.
– It will be problematic because our suppliers will never be able to say no to the middle of the market when Ica pushes in different ways, says Carl Eckerdal, chief economist at the Livsmedelsföretagen industrial association.
The last 20-30 years have been in power increasingly shifted at the retail level, and purchasing power has increased, the organization says. Sweden and Finland have the most concentrated retail markets in Europe. The fact that food business margins have been reduced.
DN has been in contact with food manufacturers who believe that large chains, and in particular Ica, through aggressive acquisitions have pushed prices down and taken an increasing share of total margins. According to one of them, the pressure is at a level that it is almost impossible to run the company in a healthy way.
– One of the problems is that innovation disappears, there are fewer new products when you are not paid enough, because they are expensive to produce, says Carl Eckerdal.
That there will be a market concentration in Sweden it has natural causes, according to researcher Christian Jörgensen, from the Center for Agri-Food Economics at Lund University. This is partly due to geography – a fairly large country sparsely populated, long transports – coordination and large scale provide decisive advantages.
Although it is difficult to compare the margins between different chains, which have different character – Lidl, for example, in Sweden is more of a complement, with less service and without manual discs – and Ica is not a fully integrated chain either, because the retailers are free. buy a local range. But the high margins speak for themselves.
– If the margins are higher compared to other countries, it should be considered a sign of lack of competition in Sweden, says Christian Jörgensen.
Ica would like to emphasize that store owners compete with each other, “the worst competitor of an Ica retailer is often another Ica retailer,” as it is often called.
But it is true with modifications. Although there may be differences in prices in stores between different parts of the country, the prices and campaigns of the store format are largely the same regionally, according to Christian Jörgensen.
– But it could be said that they compete in the same way that you can go as easily to one Ica Kvantum as to another.
Ica also controls competition by having central control over the location of stores and where stores can be established.
The conceptualization of The stores, which are divided into the different store formats Maxi, Kvantum, Supermarket and Nära, is one of the reasons for the high margins. This means you can optimize and collaborate on an even higher level, according to Ulf Johansson, professor of marketing, in the Department of Business Administration in Lund.
– Once upon a time, 15 years ago, the Swedish grocery trade had very low margins internationally. Now there is a coordination where you can take advantage of the buying benefits, and then the margins have gotten stuck along the way, he says.
Large-scale and market dominance will also strengthen itself, including through more efficient logistics and transportation. In recent years, the large investment in EMV, own brands, is also increasing dominance.
– It is clear that suppliers are increasingly being pressured by chains that have their own brands and are taking an increasing market share, says Ulf Johansson.
However, there are no audiences data on what that development looks like.
– In general, there are many indications that chains and large suppliers are strengthening their positions and that small and medium-sized companies are finding it more difficult. Here, the development of own brands is an important factor, it also increases the margins of the chains.
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