Hope for ICA Maxi as the strong growth returns
ICA has returned to growing faster than the market after eight consecutive quarters of slower-than-market growth. It is possibly even more critical because ICA managed to do so faster than its main competitor, Axfood.
The price investments that ICA has done are working. The main price effort has been to the hypermarket chain ICA Maxi, which was the growth driver for the company. Maxi grew by +10,4%, much faster than the market (+6%), and even the most significant growth story of the Swedish grocery market over the past years, Willy’s. For the first time since Q3/2021, Maxi outgrew Willy’s.
“For the first time in a long while we achieved positive volume growth in our grocery retail operations and took market shares in both Sweden and the Baltic region”
ICA Maxi was the growth driver for the company, as the other chains were still growing below the market growth. This emphasises the importance of price in the current grocery marketplace in Sweden.
Axfood is seeing strong but diminishing growth
Axfood has been outgrowing the market for years, especially the market leader ICA. On an annual basis, Axfood grew faster than ICA (10,4% vs 6,1%). Also, Willy’s outgrew ICA Maxi handsomely every year (8,2% vs 16,8%).
However, the growth of Axfood has declined quite rapidly. In Q4/2023, the growth rate of Axfood fell below the growth rate of either the market or inflation, the first time since Q1/2021 that Axfood lost market share.
The growth driver of Axfood, discount chain Willy’s, was impacted most heavily as its growth rate dropped from 15,8% in the previous quarter to 9,1% in the last quarter.
The outgoing CEO of Axfood emphasised that 2023 has been a year of investment and that they will enable higher efficiency and cost savings during this year. One can only imagine that these savings will be put into lower prices. In an interview with Dagligvarunytt, Balkow emphasised that they do not aim to counter ICA’s price offensives but ”ensure that the price is as competitive as possible. We do not work with price initiatives but carry out adjustments and adjustments continuously to secure our position.”
“Our combined investments will result in significant efficiency improvements and cost savings starting in the second half of 2024”
From the competitive perspective, something to consider is also that Axfood has lost two of its most essential executives in a short period: CEO Klas Balkow announced that he will retire at the end of this year, and CEO of Willy’s Thomas Evertsson stepped down recently.
They both have enjoyed a great ride of growth for Axfood. Dagens Industri argued that the growth and investment spur of the previous years is also a natural time to pass on the baton to the next generation of leaders—the big question is who will replace Balkow as CEO.
Axfood, especially Willy’s, will need to up their game this year as ICA continues its price offensive. Willy’s is such a big part of Axfood revenue (54% of total) that the company needs to keep Willy’s growing (opening 15 new stores this year).
“Additional investments totalling SEK 1 billion in regular prices during 2024. This is a major initiative which we are carrying out together with the ICA retailers to ensure continued good growth and to meet customers’ price expectations, where price reductions will be made continually during the year starting in March.”
Axfood keeps on winning online
The online is one area where Axfood still wins ICA and the market. ICA had its 11th consecutive quarter when it lost market share online. At the same time, Axfood has been outpacing the online grocery market quite handsomely.
Axfood online sales have grown to be already 80% of ICA’s online sales. This figure was 65% only two years ago and 57% before the pandemic. With the current growth, Axfood could surpass ICA in the online channel in the coming years.
