In Sweden grocery retail stores are operated in cooperation with independent ICA retailers, who own their stores. ICA Sweden is responsible for coordinated sourcing, logistics, central marketing communication and overall development of the store network. In the three Baltic countries all stores are owned and operated by the wholly owned subsidiary Rimi Baltic.
Apotek Hjärtat is playing an important role in ICA Gruppen’s efforts to achieve a leading position in health. Sourcing, organisation and loyalty programmes are coordinated with ICA Sweden.
ICA Bank fills a number of important functions within ICA Gruppen. In addition to providing a diverse range of user-friendly banking services, ICA Bank helps strengthen loyalty to the ICA stores while also reducing costs for the financial flows in the ICA system. Commissions and net interest income contribute to ICA Gruppen’s earnings, and when customers use ICA Bank’s own bank cards, the fees payable to other card issuers are reduced.
ICA Real Estate is one of the largest commercial real estate firms in retail in the Nordic region. The overall mission is to meet the Group’s long-term need for the right properties in the right locations. This is done through a combination of owning, leasing and developing marketplaces. The property portfolio is actively managed and properties are sold on an ongoing basis when the time is right. The tenants are primarily ICA stores, but may include other players as well.
ICA Sweden’s business and earnings model
In Sweden ICA Gruppen’s business within grocery retail is largely based on the so-called ICA Idea, which combines the local retailer’s commitment, local market knowledge and entrepreneurship with ICA Sweden’s economies of scale, efficiency and ability to run a large-scale operation. ICA Sweden owns the rights to the store location and the brand, while the retailer owns and operates the store.
The relationship between ICA Sweden and the individual ICA retailers is mainly regulated in the so-called ICA Agreement. Among other things, this details how the store network is to be developed and how the establishment of new stores is to be financed. Key elements of the agreement include the overall division of responsibility between ICA Sweden and the retailer, the principles governing the rights to the ICA brand and ICA Sweden’s right to compensation in the form of royalties and, in some cases, profit sharing. It also contains a preemption clause in the event that the ICA retailers want to sell their company or its operations.
In addition to the agreement between ICA Sweden and the individual retailers, there is also an overarching agreement between ICA Sweden and ICA-handlarnas Förbund which regulates how goods and services from ICA Sweden to the stores are to be priced and how the common operations are to be financed.
From centralised establishment to retailer-owned stores
New stores are usually established through a company that is majority-owned by ICA Sweden, which also provides the initial financing. Once the store has repaid the investment and the cost of establishment by generating its own profits, the retailer can buy and then own the business. On average, this takes place after around five years. Thereafter the retailer holds 99% of the shares in the company that operates the store. ICA Sweden remains a minority shareholder with 1% of the shares.
ICA Sweden’s revenue
- 76 procent of ICA Sweden’s revenue comes from wholesale sales of external and private label products within food and non-food (incl. fees for logistics and infrastructure)
- 16 procent comes from Non–food in Maxi ICA Stormarknad
- Additional services at market prices, in areas such as accounting and advertising
- Fees to finance the joint organisation (“ICA Subscription”)
- Sales-based royalties
- Profit sharing based on results (for larger stores, mainly Maxi ICA Stormarknad)
Factors influencing ICA Sweden’s results
ICA Sweden’s revenues come largely from wholesale sales of goods to the stores. ICA Sweden is contractually entitled to a percentage mark-up that varies depending on the type of goods. Other remuneration with a direct impact on results includes royalties and profit sharing.