Scandinavia: four trends shaping grocery retail

Date : 16 June 2015

Following recent visits to key markets in northern Europe, Senior Retail  Analyst Harriet Cohen considers four trends shaping grocery retail across the region.




This article was written by Harriet Cohen, Senior Retail Analyst in IGD's international research team. Harriet is responsible for shaping IGD's research into Scandinavia; as well as contributing to IGD's broader European research programme. Harriet regularly travels to markets in the region, visiting stores and engaging with retailers and manufacturers. She brings five years of experience working for leading UK retailers to IGD. To learn more about how IGD's research can benefit your business further, please get in touch. 
@RetailAnalysis

1. Discount: the hot channel to watch

In Norway and Denmark discount is the biggest grocery retail channel, representing approximately 60% and 40% of sales respectively.

Most leading retailers operate multi-format strategies with an emphasis on discount and an accelerated programme of store openings and the introduction of new concepts is likely to drive future growth.

Dansk Supermarked’s Netto banner is planning record store openings in 2015, while competitor Coop Danmark recently unveiled its latest discount concept offering a new design, a wider variety of meat products and inspiring meal solutions. It plans to invest €40.3m in converting 444 stores to the concept within two years.

Elsewhere, neighbouring Finland is one of Lidl’s fastest growing markets, driven by strong price perceptions, emphasis on local sourcing and breadth of range.

2. Online: room to grow

Online in Scandinavia is less developed than elsewhere in Western Europe, although there has been a recent surge of activity as a number of retailers look to build their online proposition.

Finnish market leader S Group made a series of advancements in the latter half of 2014, including launching its first dark store, as well as launching drive thru and airport click and collect services.

Competitor Kesko also offers an online grocery service and recruited Anni Ronkainen as Chief Digital Officer from Google earlier this year. Watch this space for future developments.

Elsewhere, Sweden’s ICA plans to roll out online to 50 stores following a successful trial in November, and has also tested a drive thru concept, while smaller rival Axfood only began trialling e-commerce last month, offering online ordering to 100 employees. There are plans to extend the trial this autumn.

In neighbouring Denmark, Coop Danmark has partnered with Post Danmark to extend its online grocery service outside of Copenghagen. Close rival, Dansk Supermarked, does not yet operate an online grocery service, although there has been a series of recent developments to its online non-food proposition, including the recruitment of Kenneth Nielsen as Group Digital Director from Amazon. Dagrofa, Denmark’s third largest grocery retailer, launched an online supermarket for small businesses in April - a unique opportunity since Metro Cash & Carry exited Denmark last year.

There has been less activity in Norway compared to other markets, although REMA 1000 is partnering with online grocery retailer Kolonial to supply grocery products via the www.kolonial.no website.

3. Health and organic: rising up the agenda

To help consumers to eat healthily, authorities in Norway, Sweden and Denmark use a keyhole symbol as a joint nutrition label. Products with this symbol typically have less fat, sugar, salt and more fibre than those without it.

Health & organic has continued to rise up the agenda. Organic sales at Swedish retailer ICA, for example, increased by 55% last year and health is at the heart of its strategic priorities. Last year, it acquired Sweden’s largest private pharmacy chain, Apotek Hjärtat, for €618.2m, giving it the number two position in the country’s pharmacy market. Earlier this year, ICA also launched a new healthy living private label range, ICA Gott Liv.

Coop Sverige’s organic sales increased by 40% in 2014, while Axfood has taken the trend to the next level by launching its first organic store in Stockholm.

Organic is also popular in Denmark. Coop Danmark launched a pop-up organic in February and has a long term ambition to grow organic sales from 7% to 15% of overall sales, while Dagrofa offers loyal shoppers shoppers 10% off selected organic products in its KIWI discount stores.

4. Price focus: set to continue

In Norway and Denmark the focus on price is intensified by the presence of electronic shelf labels, which allow retailers to respond more quickly to a competitor’s price activity.

In Finland, S Group recently cut prices on hundreds of popular products by an average of 10%, following earlier reductions in January, in a bid to become ‘the most affordable grocery store in Finland’. A recent article in the Helsinki Times reported the prices of '30 popular grocery items' at S Group's Prisma hypermarket format and Kesko's supermarket format had drastically fallen over the last few months, while Lidl prices had declined by less. As a result, the Prisma Jumbo store overtook the Lidl Kamppi store to offer the cheapest shopping basket.

While discount, online, health, organic and pricing strategies are undoubtedly where many in the Scandinavian market are focusing their priorities, it will be interesting to see how they can further differentiate and to stand out amongst the crowd. We have already seen iBeacons being used by Coop Sverige, a pop-up gourmet restaurant from Lidl and Coop Danmark’s exciting new flagship store in Copenhagen Central Station, and there are sure to be even more tactics put in play as competition grows.

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