Review of the first half of the year … and the off to holidays

As midsummer is almost upon us and everyone in the Nordic countries tends to retreat to the holidays, it is an excellent time to review the past six months and call it a day.

The first part of the year has not been as eventful as the previous couple of years. The relenting growth of inflation has continued from the last year dragging many retailers into difficulties.

The curious case of Oda

The most spectacular fall from grace was seen by the Norwegian online grocery challenger Oda. For a couple of years, the company touted robust growth plans backed by ambitious growth openings of new warehouses. The rapidly changing financial market can be partly blamed for the sudden change of retreats from both foreign markets.

Oda withdrew from Finland after a robust year of operation. The most surprising decision was the retreat from Germany only after a few months of operation. Swift moves, after all, are too often accompanied by big mistakes. The people in companies, media, and venture capital seem to forget this dynamic. That prompted me to reflect on the age-old wisdom of Ingvar Kamprad, one of the most outstanding retail entrepreneurs ever from Nordic countries. IKEA’s rapid growth was not built quickly; the acceleration during the 2000s was built over decades.

Last of the pandemic winners fading to decline

Most of the so-called pandemic winners have gradually faded or crashed during the last year. Traditional grocery retailers like Kesko or ICA have come against almost historical sales declines. At the same time, one of the previous pandemic success stories to flourish in 2022, the DIY segment, has also seen declining sales. Also, Amazon has seen a slowing down in its growth figures. Especially their first-party sales have declined during the first part of the year.

European markets continue to perform somewhat differently to the US, where online has again outpaced the offline channel. In many European markets, the online medium has been struggling to grow. However, the online grocery markets in the UK and Sweden have seen sales decline plateau and, lately, even gradually grow. Maybe during the autumn, we will also see more normal growth from online retailers.

As some lose, some win

There are still some winners also. The German discounters Aldi and Lidl have wreaked havoc in almost every country they operate in. Traditional grocers, especially the quality-oriented ones, have struggled to keep up with the changing customer. In the Nordics, Willy’s and Prisma have also responded strongly to the high inflationary times. And then there are, of course, the FMCG manufacturers that sell snacks and sweets. Selling candies in every economic situation seems to be a good business.

Among the non-food retailers, Musti Group has continued its strong growth during the continuing boom of the pet care trend. Puuilo has maintained a very profitable growth trajectory in the discount retailing segment. In the challenged online grocery segment, the Dutch Picnic continues its strong march to conquer Germany and France. On the other hand, the meal kit market leader HelloFresh has seen slowing growth figures but still can boast of being the biggest and most profitable online grocery retailer and one of the few to keep growing throughout the pandemic.

The enduring business principles don’t change

Image source: jimcollins.com

These companies prove that the best can maintain growth even during difficult times. Business is not about being the fastest or fast to cross the finish line. It is about getting through the good and the bad times and improving the business. As the business author Jim Collins put it in his 20-mile-march -concept, the best companies tend to focus on discipline and consistency to manage bad and the good times. The biggest problem is probably not how to survive the crisis but how to manage the good times so as not to bloat the company with too many growth initiatives and costs that become an unbearable burden during the following bad weather.

If we learn something from the late and great Ingvar Kamprad, it is forward movement, but with “Reaching good results with small means”, i.e. in small steps, but always forward and with a conservative mindset towards costs. This is how great companies are built to last decades, even centuries.

Now, off to enjoy the summer rest. And then back in August, with fully charged batteries and new initiatives. I wish you a very nice summer to all of you!