We make every day a little easier

2018 in brief

Highlights during the year

Strong online sales growth

The strong increase in online sales continued during the year. Online sales for both ICA stores and Apotek Hjärtat increased faster than the market in general during the year. The ICA stores’ online sales increased by 42% and Apotek Hjärtat’s by 55%. Hemtex’ online sales also increased significantly with growth amounting to 36%.

E-commerce warehouse opened

To improve efficiency and service for both stores and consumers, in spring 2018 ICA Sweden opened a central e-commerce warehouse. The warehouse will offer independent ICA retailers in the Stockholm region picking and direct delivery from warehouse to end customer.

Reduced greenhouse gas emissions

ICA Gruppen’s greenhouse gas emissions continued to decrease during the year. Since the base year 2006, ICA Gruppen’s total greenhouse gas emissions have decreased by 61%. The goal is for ICA Gruppen’s operations to be climate neutral by 2020.

115 bn

Sales 2018 in SEK

4.651 bn

Operating profit*

4.0 %

Operating margin*

*Excluding items affecting comparability

CEO’S COMMENTS

Strong core business and new digital opportunities

We are securing our strong positions in the grocery retail and pharmacy markets and, in the meantime, digitalisation is providing us with new opportunities for synergies and cooperation within the Group, especially those relating to using customer data and investments in new technology. Our digital agenda is comprehensive and is a common theme throughout our strategy. Our focus areas going forward will of course include continuing to develop our e-commerce offering.

A positive force in the community

We aim to be a positive force that helps to promote a more sustainable society. We aspire to inspire our customers to make sustainable and healthy choices and to reduce our own carbon foot-print. The target for ICA Gruppen’s own environmental impact is to be climate neutral by 2020. This is an inspiring and engaging goal, but also a challenging one.

Per Strömberg, CEO ICA Gruppen

Strategy

A long-term strategy for continued growth

ICA Gruppen’s strategy is aimed at ensuring continued, long-term and sustainable growth in a market in major transition. Five common objectives provide the framework, and sets together with the vision, the long-term strategic focus going forward.

Closer to our customers

Strategic objectives: We are where our customers are, locally, digitally and personally, with strong and affordable customer offerings

Background: In a market in heavy transition ICA Gruppen will meet the customers where they are – in both physical and digital channels, and provide strong offerings. This strategy includes investing in concepts, prices, product ranges, stores, pharmacies and a strong e-commerce offering.

Priorities 2019:

Online: Continue rapid growth, expand offering and strengthen last mile to win online

Store network & concepts: Develop our store network and format strategy with focus on convenience, urban areas and the hypermarket of the future

Trusted and relevant

Strategic objectives: We earn our customers’ loyalty with a great brand, a broad ecosystem and personalised, data driven communication

Background: ICA Gruppen’s breadth – groceries, pharmacy and bank – creates many opportunities for synergies, through a broad e-commerce offering, colocation and strong brands. The strong trust that people have in the ICA brand will be even more important in the future, as it becomes a platform for a broader range of digital services (ecosystems). It is also necessary for customers to be willing to share their data (purchase history). This data in turn enables offerings to be targeted and relevant, based on individual preferences.

Priorities 2019:

Personalisation & loyalty: Scale up smarter personalised offerings, improve the loyalty program and launch new digital services in our ecosystem

Empowered organisation

Strategic objectives: We are committed and inclusive. Together we build a fast moving and constantly learning company

Background: Rapid advances in the business environment are placing high demands on agility and continuous development – for ICA Gruppen as an organisation and also for every employee. To support this development there are numerous strategic initiatives relating to leadership, learning and skills development.

Priorities 2019:

Ways of working & competence: Improve and scale agile ways of working, collaboration between our businesses, and build critical competences e.g. IT development and advanced analytics.

Always better

Strategic objectives: We improve continuously and leverage technology to make it easier for our customers, improve efficiency and value for money

Background: Cost efficiency is crucial to ensure competitiveness in the long term. Measures to increase efficiency cover both infrastructure development and constant improvement of processes and methods. Digitalisation is also creating new opportunities to simplify, automate and optimise several administrative and manual processes.

Priorities 2019:

Core processes: Increase stability and cost efficiency in our core processes with particular focus on logistics and common sourcing

Automation & AI: Expand process automation and implement first AI/Data Science use cases for increased efficiency and optimised business processes

A positive force

Strategic objectives: We lead the development towards a more sustainable and healthy society – For a Good Tomorrow

Background: ICA Gruppen is intent on being a leader in social responsibility. Sustainability must be a common theme in everything the Group does; it must lead to concrete results and ensure the value chain is sustainable – from production to consumption. For a Good Tomorrow is the name of ICA Gruppen’s group-wide sustainability strategy with a focus on the following areas: local, environment, health, diversity and quality.

Priorities 2019:

Climate & health: Drive our sustainability work For a Good Tomorrow with particular focus on health and climate

Sustainability

For a good tomorrow

ICA Gruppen aspires to be a positive force in society and sustainability is an integral part of all of ICA Gruppen’s operations. ICA Gruppen’s sustainability work is primarily carried out within five areas: local, environment, health, diversity and quality.

We will actively contribute to the local communities where we operate

Focus on local suppliers and communities

There is substantial and growing demand for locally produced food, both in Sweden and in the Baltic countries. ICA Gruppen is working in various ways to increase the amount of locally produced food in the product range, and to support rural areas and help keep communities alive. For some time ICA Sweden has been making adjustments to its dairy line to increase the proportion of Swedish raw materials in all private label dairy products, and to source more milk from dairy farmers in Sweden. In an annual survey in 2018, 56 percent of the respondents considered that ICA Sweden is good at Swedish raw materials.

To create business relationships between local suppliers and ICA stores, ICA Sweden also has a digital platform for retailers and suppliers. The platform enables ICA stores to ﬁnd local producers more easily.

"We will actively contribute to the local communities where we operate"

Examples of ICA Gruppen's activities

Offer locally produced products
Facilitate for small local suppliers
Sponsorship and fundraising to support the local community
Develop marketplaces that contribute services and jobs locally, and breathe life into the community

We will minimise our environmental impact, create climate-neutral operations and help our customers make more sustainable choices

Multiple initiatives to reduce environmental impact

An important aspect of ICA Gruppen’s sustainability work involves efforts to minimise the Group’s own environmental impact, which means, among other things, reducing greenhouse gas emissions, working to reduce food waste and offering sustainable products and services. The overall goal is for the Group’s own operations to be climate-neutral by 2020.

ICA Gruppen’s greenhouse gas emissions continued to decrease during the year, but at a slightly slower pace than previously. The explanations include increased goods transports and higher energy consumption in stores and pharmacies as a result of the hot summer in Sweden, but also a lower percentage of HVO in the fuel used for goods transports due to Swedish law requiring greenhouse gas emissions reductions.

”We will minimise our environmental impact, create climate-neutral operations and help our customers make more sustainable choices”

Examples of ICA Gruppen's activities:

Investments in energy-saving solutions, renewable energy sources, natural refrigerants and renewable fuels
Environmentally certified stores, processes and buildings
Offer sustainable products and services
Comprehensive programme to replace fossil-based plastic packaging

We will actively contribute to improved public health by utilising the strength of our entire organisation

Comprehensive health offering

One of ICA Gruppen’s main priorities is to help promote better public health. Through grocery stores, pharmacies and Minutkliniker the Group is working in several areas of healthcare – from preventing, caring for and curing to inspiring and guiding people to a healthy lifestyle and sound personal finances. The goal is, by 2020, to be perceived by consumers as the actor in the market that is best at helping them make healthy choices.

Through products and services that address issues relating to allergies, trends and lifestyles, ICA Gruppen can spread information and inspire customers to make conscious choices on a daily basis. This information is always based on official dietary guidelines and the Nordic nutritional recommendations.

”We will actively contribute to improved public health by utilising the strength of our entire organisation”

Examples of ICA Gruppen's activities:

Guiding customers by means of labelling, healthy recipes and campaigns
Offer a healthy range of products
Internal training in CPR
Health and exercise initiatives for children

We will enhance our competitiveness by increasing diversity in our organisation and making the most of differences

Emphasis on increasing diversity

ICA Gruppen is working actively to spread knowledge about diversity and inclusion, to increase awareness of unconscious bias and to prevent offensive treatment. During the year a large number of activities were carried out in various parts of the organisation. Several of the activities were aimed at increasing awareness among ICA Gruppen’s managers and employees about the Group’s zero tolerance for discrimination and harassment, the grounds of discrimination and what they mean, as well as routines to deal with discrimination.

”We will enhance our competitiveness by increasing diversity in our organisation and making the most of differences”

Examples of ICA Gruppen's activities:

Projects to increase equality and diversity
Initiatives to increase employment for individuals experiencing difficulty entering the job market
Local partnerships to increase diversity and offer jobs

We will ensure that quality and social responsibility always guide our operations and business relationships

Monitoring and audits to ensure quality

Customers should feel safe shopping with ICA Gruppen. The whole range of products must live up the Group’s quality criteria and be produced in an acceptable way with respect to human rights. The products sold by the Group must of course follow laws relating to labelling and ingredients, and good animal welfare must be ensured to the greatest extent possible.

ICA Gruppen works in a structured way with respect to standards and certification to ensure quality and social responsibility in all processes. Country-of-origin labelling and traceability are important parameters in quality assurance.

”We will ensure that quality and social responsibility always guide our operations and business relationships”

Examples of ICA Gruppen's activities:

Social auditing of suppliers
Quality-certified stores, processes and suppliers
Action plan for food fraud, traceability tests
Ensure high standards of animal welfare

Value creation

Responsible value creation

ICA Gruppen’s overall aim is to ensure that the right conditions exist for continued stable value creation that is sustainable in the long term. From a strong market position, ICA Gruppen’s operations are intended to help generate value for customers, shareholders, independent ICA retailers, suppliers and employees – but also for society in general.

Its size and close proximity to the end consumer gives ICA Gruppen resources and a real opportunity to make a difference. ICA Gruppen seeks to be a positive force and to contribute to more sustainable development – for society in general and at the local level, but also for individual people. For ICA Gruppen good profitability goes hand in hand with active community engagement and taking responsibility.

Trends

Significant changes in the business environment and markets

Some major trends are impacting ICA Gruppen’s operations. Among the main ones are extensive and fast digitalisation, changed consumption patterns and an increasing focus on health and responsible behaviour.

New consumer behaviour

Competition in grocery retail is tough and has ramped up in recent years. The main reasons include the growth of discount chains, e-commerce, continued blurring of industry lines and tougher competition from other channels – not least, restaurants and cafés. In cities the big shop is on the decline; instead people are doing a growing percentage of their shopping when on their way to and from work. There is a simultaneous increase in demand for high-quality ready meal solutions.

ICA Gruppen’s response to changes in the market:

Better availability through digital channels
Complete meal solutions
Menu baskets
Ensuring the right price perception among consumers

Sustainability and responsibility

Environmental, social and financial sustainability have become “hygiene factors” and are also driving growth. Responsibility, environmental impact, business ethics and control of both a company’s own organisation and its external supply chain are increasingly important factors. Consumers are demanding more sustainable products and services, and suppliers want to work with innovative, long-term and stable customers. Being a responsible employer is and will continue to be an increasingly valuable asset among employees of today and tomorrow.

ICA Gruppen’s response to changes in the market:

Expanded organic and locally produced offering and climate-smart services
Communication in stores and pharmacies to guide customers to sustainable choices
Initiatives to reduce food waste in stores, warehouses and at home
Environmentally and quality-certified stores, sourcing and logistics processes
Ambitious work to reduce climate impact

Health and wellbeing

Among the most obvious trends in society is an increased focus on physical and mental health. The health aspects span a broad spectrum of areas where diet, exercise and finding a balance in life are increasingly important lifestyle issues. Interest in food ingredients and production methods has grown significantly in recent years. But the experience with food should not be complicated. Today’s consumers demand food that is both healthy and delicious. What we eat and consume – both products and services – must reinforce a desired image, lifestyle and identity.

ICA Gruppen’s response to changes in the market:

Increased range of healthy products
Environmental and health labelling of products
Advice on health and medicines in pharmacies
Minutkliniken (minute clinics) adjacent to stores and pharmacies

Digital and transparent

Fast digitalisation and technical development are greatly impacting both consumers and companies. In retail, every part of the value chain is affected – from product development, sourcing, logistics and product supply to product offerings, marketing and interactions with customers. Mobile devices, constant connection and faster processes are completely changing the prerequisites, and presenting opportunities as well as challenges. Digitalisation is also driving changes in purchasing behaviour and allowing new players with new business models to emerge.

ICA Gruppen’s response to changes in the market:

Major focus on e-commerce
Using data for customised marketing
Sweden’s biggest food website – ica.se
Joint loyalty programmes
Digital banking services
Same-day home delivery of medicines

Demographic changes

From a demographic perspective, ICA Gruppen’s markets are affected by ongoing urbanisation, immigration and changes in age demographics. Meanwhile, the percentage of single-person households continues to grow. These trends are having a significant effect on what people consume, as well as when and how.

ICA Gruppen’s response to changes in the market:

New stores in metropolitan areas
Development and adaptation of assortment and offerings to match changes in demand

Less predictability

Rapid technical development and major changes in consumption patterns are reducing predictability, making long-term planning more difficult. Agility is therefore increasingly important, especially for large companies. The changes taking place require significant leadership adjustments, an emphasis on learning and always being able to secure the right talent.

ICA Gruppen’s response to changes in the market:

Increased focus on innovation and agility
Leadership adjustments
Securing the right talent – short term and long term
Increased competitiveness through diversity

Segments

Review and change processes continue

2018 was a year of transition for Hemtex, with a strong emphasis on continuing to make changes to achieve long-term stable profit development.

About Hemtex

Hemtex is one of the Nordic region’s leading home furnishing chains. At year-end 2018 there were 147 stores in total, of which 129 were in Sweden, 13 in Finland and 5 in Estonia. Of the stores, 133 are owned by Hemtex and 14 are franchises. At present a process is under way to make comprehensive changes, the over-all goal of which is to lay the foundation for long-term, sustainable profitability.

1,020SEK m

Net sales 2018

13SEK m

Operating profit/loss*

1.3 %

Operating margin*

*Excluding items affecting comparability

Download the Annual Report 2018