Nordic Retail Industry February 2020 Top Nordic retailers Company Category HQ Turnover (‘000 EUR) H & M Hennes & Mauritz AB Clothing retail company Sweden 20,342,064 Coop Danmark A/S Food retail and wholesale Denmark 4,759,424 Circle K Sverige AB Convenience stores Sweden 3,654,024 IKEA AB Furniture retail Sweden/Netherlands 2,757,049 Lidl Suomi Kommandiittiyhtiö Grocery chain Finland 1,449,327 Circle K Danmark A/S Convenience stores Denmark 1,253,885 Bergendahl & Son AB Wholesales and retail food, fashion Sweden 1,220,986 Circle K Norge AS Convenience stores Norway 1,219,129 Fakta A/S Supermarkets Denmark 1,143,554 Stockmann Oyj Abp Department store Finland 1,055,900 Ikea AS Furniture retail Norway 811,058 Norsk Butikkdrift AS Grocery chain Denmark 798,071 Tokmanni Group Oyj Retail chain Finland 796,500 Coop Øst SA Food retail and wholesale Norway 707,791 Coop Midt-Norge SA Food retail and wholesale Norway 619,882 Source: Largest companies 1 © 2020 Deloitte NSE LLP. All rights reserved. Sweden 2 © 2020 Deloitte NSE LLP. All rights reserved. Sweden (1/2) Consumer landscape • Sweden is a wealthy country with one of the highest 58,425 59,707 61,115 70,000 56,914 800 levels of GDP per head in Europe, at estimated USD 60,000 55,371 701.3 736.2 55,371 in 2019. Economic growth has strengthened in 642.7 recent years, and prospects compare favorably with 50,000 586.9 600 535.2 most other west European countries. 40,000 • Most consumer goods industries are highly import oriented 27,826 30,063 31,416 400 30,000 23,466 25,475 and dominated by multinational companies, although Swedish 20,000 retail chains hold leading positions in the furniture and 200 clothing sectors notably IKEA, the largest furniture retailer 10,000 worldwide, and Hennes and Mauritz (H&M), the second largest 0 0 clothing retailer in the world. 2019 2020* 2021* 2022* 2023* • Consumer spending will grow relatively firmly as incomes rise GDP per head (USD) Private consumption per head (USD) modestly owing to positive real wage growth and a general drop in unemployment. Nominal GDP (USD Bn) Retail landscape • The Swedish market is mature. Growth will be driven 120.0 2.1% mainly by innovation and replacement needs for 104.8 2.0% 100.0 2.0% consumer electronics, especially as Swedes are 92.2 100.0 2.0% generally early adopters and want the latest electronic 84.1 goods. Growth will also be driven by food products 77.1 1.9% 1.9% 1.9% 1.9% 80.0 owing to health concerns. 1.9% 49.2 • Changing demographics and sociological trends, like more 44.8 53.3 55.7 60.0 40.7 49.1 1.8% single-person households, will support long-term demand for 43.0 46.7 36.4 39.3 1.8% housing, household goods, healthcare and leisure. Population 40.0 1.7% ageing will shift spending patterns from clothing to pharma and health products, and to high-end leisure activities. 20.0 1.7% 1.7% 1.6% • Demand for food and drink will grow steadily in 2019-23, with organic, locally sourced and health food gaining market share. 0.0 1.6% Because of lifestyle changes and rising income levels, 2019 2020* 2021* 2022* 2023* consumption of packaged and easy-to-cook foods will Retail sales (USD bn) Non-food retail sales (USD bn) continue to rise. • Non-food product sales will grow in 2019-23, on the back of Food retail sales (USD bn) Consumer price inflation (%) sustained economic growth and rising incomes. Source: Economist Intelligence Unit *Estimated numbers 3 © 2020 Deloitte NSE LLP. All rights reserved. Sweden (2/2) Grocery retail market share (%) • The retail market is well developed and consolidated. A few large chains account for over half of the retail market and dominate food retailing, clothing and furniture in particular. 2.1% 4.7% • The retail food market is dominated by ICA and Axfood. Axfood is particularly strong in the hard- 7.0% discount segment through its Willys brand. • Discount stores (mainly Germany's Lidl and Denmark's Netto) have been present in Sweden since the 2000s, but sales floundered for some time. Consumers tended to prefer large grocery chains such as ICA, Coop and Axfood (operating Hemkop, Willys and PrisXtra). 16.9% 51.5% • However, Lidl is seeking to boost its market share by expanding its range of organic and locally sourced foods. In doing so, Lidl is hoping to tap into the preference of Swedish consumers for items that promote sustainability and healthy living. 17.8% • Netto, which has over a 2% share in the discount format, was acquired by Coop Butiker & Stormarknader (Coop), which operates 240 of the total 650 outlets owned by Coop in Sweden in May 2019. The acquisition will help Coop increase sales volumes. • Almost all alcohol sales, except for beer, are through the state alcohol monopoly, Systembolaget. Although Systembolaget's stores may carry different varieties, there is no price competition among ICA Axfood Coop Bergendahls Lidl Netto them. However, wine may be purchased through importers selling directly to consumers. *2019 E- commerce • E-commerce in Sweden is growing rapidly, helped by an internet-penetration rate of 87.8% in 2018. About 9% of retail sales currently take place online, and this proportion will continue to expand over the forecast period (2019-23). • Online retail accounts for about 9% of total retail sales, lower than in the UK and Germany, but in line with the EU average. Swedish e-commerce customers estimate USD 92.4 Mn spend on e-commerce channels in 2018. • Purchases of consumer electronics accounted for 23% of all online purchases in 2018, while spending on clothing and shoes jumped by 23%; media and books (27%); health and beauty (32%); and furniture (12%). Toys and baby products recorded the least rate of expansion in online sales in 2018 with growth of 7%. Meanwhile the food sector grew at 6% growth in 2018. • The Swedish e-commerce market is mostly based on smaller, independent "web shops" such as Zalando (with a 21% market share), whereas US-based companies including eBay and Amazon hold market shares of 10% and 9% respectively. • Sweden has adopted m-commerce (e-commerce through mobile phones) payment systems comparatively early, partly reflecting a joint venture by four major mobile network operators - Telenor, Tele2, Telia and the Swedish branch of Three, that provided a joint mobile-payments platform in 2013. New start-ups since then have facilitated contactless payments, and further growth of m-commerce is expected in 2019-23. Source: Economist Intelligence Unit, Statista 4 © 2020 Deloitte NSE LLP. All rights reserved. Norway 5 © 2020 Deloitte NSE LLP. All rights reserved. Norway (1/2) Consumer landscape 69,016 70,177 71,566 80,000 67,274 600 65,021 540 • Although Norway’s consumer market is 510.6 560 500 60,000 459.3 477.2 small by European standards (with a 42,083 44,333 46,133 400 population of just 5.3m as at January 1st 38,068 39,986 2019), it is attractive to foreign suppliers, 40,000 300 particularly in the non-food sector. With few 200 local companies involved in manufacturing, 20,000 most consumer goods are imported. The food 100 sector is more sheltered from foreign 0 0 competition. 2019 2020* 2021* 2022* 2023* GDP per head (USD) Private consumption per head (USD) Nominal GDP (USD Bn) Retail landscape 100.0 2.3% 87.0 90.0 2.2% 83.1 2.2% • Retail sales are expected to continue 78.4 80.0 74.0 2.2% growing after a sharp slowdown in 2015, 70.0 especially in 2023. 70.0 2.1% 2.1% 2.0% • Real sales growth to average just 2.3% per year 60.0 2.1% 38.7 40.6 in 2019-23. 50.0 36.8 33.2 44.2 42.8 2.0% 37.8 42.7 40.4 • Retail sales in real terms grew by 5.5% in 2018 in 40.0 35.3 2.0% local-currency terms, but growth is expected to 2.0% 30.0 1.9% be slightly lower during the forecast period, 20.0 1.9% 1.9% despite an economic rebound and a subsequent 10.0 1.8% strengthening of Norwegian consumer confidence. • Household finances remain in good shape, and 0.0 1.8% low borrowing costs are underpinning demand for 2019 2020* 2021* 2022* 2023* credit. Household credit growth grew by 5.7% Retail sales (USD bn) Non-food retail sales (USD bn) year on year in January 2019. Food retail sales (USD bn) Consumer price inflation (%) Source: Economist Intelligence Unit *Estimated numbers 6 © 2020 Deloitte NSE LLP. All rights reserved. Norway (2/2) Grocery retail market share (%) • In 2018, Norgesgruppen was the leading grocery retailer in Norway, reaching a market share of roughly 43 percent, based on sales. • It was ahead of Coop, Rema and Bunnpris. • The Norwegian grocery retail and wholesaling group Norgesgruppen operates the supermarkets Kiwi, 3.8% Meny, Jacob’s, Spar, Eurospar, Joker and Nærbutikken, the kiosks Deli de Luca and MIX, the Dolly Dimple’s restaurants as well as the wholesaler ASKO. • The retail market for groceries is also characterised by a high degree of vertical integration, with wholesaling and retailing operations typically owned by the same company. When combined with the 43.2% homogeneity of Norways grocery retail sector, and the preference for known products, this has made it 23.7% extremely hard for foreign companies to enter the market without local representation.