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ICA Sverige AB. Anders Svensson, CEO

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Anders Svensson, CEO

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Market leader in Sweden for 47 years

• 11.5 million customer visits per week • Market share 36.7 %

• Store sales SEK 98,272 million • Net sales SEK 65,750 million • 1,330 stores

• 7,229 employees (excl. stores)

• Store sales have increased more than the market for 10 consecutive quarters

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The ICA idea is unique

•Independent retailers in co-operation, who successfully combine diversity and local adaptation with large-scale operations and efficiency.

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ICA Sweden

– main supplier to ICA retailers

• Brands and marketing

• Product range development and sourcing

• Support for store operation • Logistics

• Establishment and upgrades • Retailer recruitment

• New business Our unique expertise is to encourage the

entrepreneurial spirit and meet customer

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ICA Sweden’s earnings via business model

Income from stores via ICA contract 24%

Supply of goods

to stores (wholesaling) 74% Sale of services to

stores 2%

The model provides incentive for ICA Sweden to promote sales and earnings in stores

(7)

ICA idea – overview systems and flows ICA retailers Ownership 10,000 external suppliers Other owners Dividend Membership Member service Cost reimburse-ment and profit Goods and services Consumers External suppliers

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Invoicing of cost reimbursements and profits from ICA to stores is governed by the business model

Optional

Market priced

supplementary services

e.g. accounting and marketing

Mandatory

Common organisation

aka. ICA Subscription Based on store sales (%)

Logistics charges

Based on wholesale sales (%) Profits Wholesale profits Based on wholesale sales (%) ICA contracts Royalty/Profit sharing

Royalty based on store sales (%)

Cost-based

supplementary services

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Stable development of sales and operating profit 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 0 500 1 000 1 500 2 000 2 500 3 000 Sales, SEKm

Operating profit, excl. non-recurring items, SEKm

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Stores which meet customer needs daily, weekly and lifelong

Number of stores: 77 Sales: SEK 28 735 million No. of items: 30 000-45 000

Number of stores: 121 Sales: SEK 23 577 million No. of items: 10 000 – 30000

Number of stores: 431 Sales: SEK 30 919 million No. of items: 8 000 – 10 000

Number of stores: 688 Sales: SEK 15 041 million No. of items: 5 000-8 000

Number of stores: 4 No. of items: 800-900 Number of pharmacies: 56 No. of items: 3 800

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Continued strong sales in Swedish ICA stores

Store sales July-September 2013 January-September 2013

SEKm Change all stores Change like-for-like SEKm Change all stores Change like-for-like

Maxi ICA Hypermarket 7 477 5.0% 3.6% 22 171 4.5% 3.5%

ICA Kvantum 6 061 4.3% 2.2% 17 995 4.3% 2.3%

ICA Supermarket 8 206 2.8% 3.5% 23 691 2.7% 3.6%

ICA Nära 4 186 3.4% 3.7% 11 738 2.6% 2.8%

TOTAL 25 930 3.9% 3.3% 75 595 3.6% 3.1%

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ICA 36% Coop 15% Axfood 13% Bergendahls 5% Lidl/Netto 4% Other grocery stores 9%

Other sales channels 18%

Market shares of ICA stores and competitors*

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Tyresö Huddinge Botkyrka Salem Nyköping Eskilstuna Västerås Håbo Upplands Väsby Upplands-Bro Täby Sollentuna Danderyd Järfälla Sundbyberg Solna Stockholm Österåker Värmdö Trosa Nynäshamn Haninge Norrtälje Vallentuna Ekerö Nykvarn Södertälje Nacka Lidingö Vaxholm Sigtuna Enköping Gnesta Oxelösund Flen Katrineholm Strängnäs Norrköping Sala Knivsta 2,052,800 population (average 2012) ICA’s market share 2011: 29.57%

Great er St c ok holm Varberg Lerum Partille Göteborg Mölndal Uddevalla Lilla Edet Grästorp Essunga Alingsås Tjörn Kungälv Öckerö Gnosjö Mullsjö Habo Gislaved Vaggeryd Jönköping Värnamo Falkenberg Kungsbacka Härryda Stenungsund Orust Sotenäs Ale Vårgårda Bollebygd Karlsborg Tranemo Mark Svenljunga Herrljunga Vara Tibro Lysekil Vänersborg Trollhättan Borås Ulricehamn Lidköping Skara Skövde Hjo Tidaholm Falköping 941,530 population (average 2012) ICA’s market share 2011: 32.93%

Great er Got henbu rg Staffanstorp Burlöv Malmö Kävlinge Lund Vellinge Hässleholm Klippan Hörby Höör Eslöv Skurup Tomelilla Helsingborg Karlshamn Sölvesborg Svalöv Östra Göinge Bjuv Lomma Svedala Sjöbo Bromölla Perstorp Åstorp Landskrona Ystad Trelleborg Kristianstad Simrishamn 604,472 population (average 2012) ICA’s market share 2011: 30.20%

Great

er

M

alm

ö

ICA has bigger shares in rural areas but smaller shares in conurbations

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Store network one of our most valuable assets

• New store openings

• Exterior changes and profile changes • Format & concept development

1,330 stores throughout Sweden More than 200 stores upgraded every year

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Establishment process

and retailer career path survey Retail

Retailer recruitment

Employed/ independent

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ICA contract at establishment

Example

• ICA finances new establishment • Store operated as subsidiary

• When initial losses and structural costs including interest have been repaid the retailer can acquire the store at book value • After the retailer has acquired the store a

royalty and in some cases profit share is paid to ICA.

• Retailer is obliged to offer ICA first refusal for store at a predetermined value.

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ICA contract allocates earnings

Example from an actual Kvantum

1 2 3 4 5 6 7 8 9 10 -20 000 0 20 000 40 000 60 000 80 000 100 000 SEK thousand ICA’s share of store earnings Retailer’s share of store earnings

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But ICA also makes money on sales to stores Example from an actual Kvantum

1 2 3 4 5 6 7 8 9 10 -20 000 0 20 000 40 000 60 000 100 000 120 000 SEK thousand 80 000

ICA’s wholesale profits

ICA’s share of store earnings

Retailer’s share of store earnings

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Planned establishment 2014

Stabby, Uppsala, April Farsta, Stockholm, May

Barkarby, Järfälla, May Gnista, Uppsala, Oct

Tybblekullen, Örebro, Nov

Sjöstaden, Stockholm, April Älvsbyn, Sep

Kramfors, Oct Mönsterås, Oct

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Driving forces and customer trends

Source: SCB, Restaurant Index, Internet and Swedes, Swedish National Institute of Public Health.

More older people Urbanisation Multi-cultural Eating out Technology

Public health problems To feel well To be smart To feel secure To be good To be myself To have fun Affordable & smart Sustainable & local Fun & enjoyable Personal & engaging Digital & analogue Open & honest Healthy & natural Simple & convenient

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Priorities ahead

Strategic themes

Simplifyour business

Strengthen customer loyalty & brand position

Engage & develop our people

Strenghten & expand our customer offering

Excel in corporate responsibility

Optimize and broaden our sales channels

Price Digital

Health Efficiency Loyalty/CRM

Dialogue with retailers

Leadership & values

ICA Sweden 2014 Fresh PL Vision We will make everyday a little easer

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A wide range is fundamental

Items for all tastes and

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Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

Price focus – value for money

• Discount range in all stores

• Good implementation of pricing strategies • Price and range ladder

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Our private labels: quality, choice and a good price

Advantages for customer

• Lower price • Assured quality • Unique items

Advantages for store

• Profitability • Unique items • Assured quality

Advantages for ICA

• Strengthens the brand • Profitability • Bargaining power Active and emotional choice Objective: customer’s first choice

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Fresh foods drive sales and position

Seasonal thinking and innovative meal solutions

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We want to make it easy for customers to live healthily

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ICA’s Good Business: to meet customer expectations for transparency, quality and food safety

Key for accountability:

• Transparency • Morals and ethics • Food safety

• Animal welfare • Local products*

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Sweden: 4.6

Spain: 4.3 Switzerland : 4.2

4: Bulgaria: 3.6 5. Netherlands: 3.5 6. Romania: 3.4 7. Slovakia: 3.2 8: Portugal: 3.4

1

2

3

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ICA Stig concept

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National and local marketing

ICA-wide Profile ICA stores

TV

Buffé monthly magazine ICA.se DR CSM Billboards In-store TV Local advertising Mail shots

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Our digital communication today

ICA’s apps have been downloaded a million times

ICA.se Sweden’s largest food site with

a millions visits a week

200,000 fans on Facebook, Sweden’s 7th

largest company

ICA is most visible on Google

ICA Play Commercials shown five

million times a year on YouTube

ICA In-store TV reaches 8.2 million customers per

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Name Personal ID number Gender Address Store Time Products Purchase sum

Payment method Customer-driven

approach Customised offers

Adapted to local retailer

Customer database foundation for customer insights and CRM ~70 % of ICA’s sales value identifiable

Identified sales Unidentified sales % 100 75 50 25 0

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Online focus 2014-2017

A comprehensive ICA experience

Home delivery Collection

Store

Online

We want to maximise availability to customers by combining stores and online sales

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Market’s best online offering over time

Launch to start in autumn 2014

19

Kanaler

Cura pharmacy Non food

New business

Food

Banking services Services

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Local presence online as well

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Value chain – Efficient, flexible and sustainable

SOURCING

Sourcing from 2,500 suppliers worldwide. Many are ICA’s private label products.

WAREHOUSE OPERATIONS

Daily deliveries to ICA’s 6 warehouses.

ITEM PICKING

Every day 950,000 cases are picked for onward delivery to the stores. Automation is increasing.

TRANSPORT

Lorries drive a total of about 100,000 km per day and deliver to approximately 1,300 stores in Sweden.

WELL-FILLED SHELVES

ICA’s automatic order system ensures there are never gaps on the store shelves.

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Customer focused logistics chain world-class

More efficient, higher quality and lower environmental impact

2 5 24 22 28 3 0 1 5 0 51 33 34 35 3 6 39 56 5 7 52 4 4 54 53 46 45 59 5 8 66 67 6 0 12 15 70 16 73 71 68 77 18 1 76 74 78 0 81 82 84 85 86 83 88 89 90 91 92 93 96 95 98 94 2 97 8 3 BORLÄNGE KUNGÄLV HELSINGBORG KALLHÄLL/ VÄSTERÅS 2 5 24 22 28 3 0 1 5 0 51 33 34 35 3 6 39 5 6 5 7 52 4 4 54 53 46 45 59 5 8 66 67 6 0 12 15 70 16 73 71 68 77 18 1 76 74 78 0 81 82 84 85 86 83 88 89 90 91 92 93 96 95 98 94 2 97 UMEÅ BORLÄNGE KUNGÄLV HELSINGBORG 25 24 22 28 30 1 50 51 33 34 35 36 3 9 56 57 52 44 54 53 46 45 59 58 66 67 60 12 15 70 16 73 71 68 18 1 76 74 78 0 81 82 84 85 86 83 88 89 90 91 92 93 96 95 98 94 2 97 83 77 BORLÄNGE DC Kungälv DP Umeå DC Borlänge DC Helsingborg (via DP as previously – not shown) DP Västerås DP Örebro DP Uppsala DP Stockholm Syd DC Kallhäll … but more distribution points Fewer warehouses KALLHÄLL/ ÅRSTA

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Both invest in the customer offering and develop profitability

Cost efficiency Lower consumer prices More and increasingly loyal customers Increased volume Retained /increased profitability Develop customer offering

References

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