Over 31 million people living in an area of almost 1.4 billion square kilometres: that's Europe's Nordic region, where the density of population and stores is low, but opportunities for expansion are high. And when it comes to the retail sector within the different countries, it's the similarities - rather than the differences - that prevail.
Elsevier Food International, Vol. 4, Number 1, February 2001
Pascal Kuipers

The retail markets of Europe's Nordic region - more specifically Scandinavia and the Baltic states - are a striking amalgamation of both differences and similarities. Some countries belong to the European Union (Sweden, Norway and Denmark); others don't (Finland and the Baltic states of Estonia, Latvia and Lithuania). Norway joins the European monetary union and will have the Euro as its single European currency by January 1, 2002. Other Nordic Ell-memberstates, however, have either rejected the Euro (Denmark) or have postponed their decision on whether or not to introduce it (Sweden).
The economies of the Scandinavian countries are far more mature than those of the Baltic states; the markets of the latter are still emerging from past Soviet/Russian influence. The Baltic states have been implementing measures to reform and stabilise their economies since 1991, when they regained their independence. Throughout the 1990s these economies still focused on the Russian Federation, and in 1998 all three economies suffered due to the economic crisis there. Since the late 1990s, though, the Baltic states have been shifting their attention to the west. In March 1998, Estonia began EU accession negotiations and in December 1999 Latvia and Lithuania were invited by the EU to do so as well.

Retail similarities
Within the countries' retail sectors, though, it's the similarities that prevail. This is something that is particularly obvious within those Scandinavian retail sectors that are dominated by retailers with co-operative organisation structures. FDB in Denmark, NKL in Norway, KF Gruppen in Sweden and Finland's Tradeka and SOK are all co-operatives with important shares in their respective domestic markets. Food retail markets in Scandinavian countries are also highly concentrated. In 1999 the top three retailers had a combined market share of 73.2 per cent in Sweden, 74.9 per cent in Norway, 76.8 per cent in Finland and a staggering 82.5 per cent in Denmark. From a European perspective, these markets are among the most concentrated and it is interesting to note that the further south one progresses within Europe, the lesser the degree of concentration within the food retail markets. In Norway, for instance, concentration continues via mergers  in November 2000, Narvesen and REMA 1000 (a subsidiary of Reitan) announced an intended merger - and via acquisitions: in July last year, Norges Gruppen acquired Centra Gruppen. Traditionally retailers in Scandinavia are very much focused on each other and each others' markets. Sweden's largest retailer ICA, for example, acquired a 45 per cent share in the Norwegian retailer Hakon Gruppen back in 1992, and increased this to a majority share in 1999. ICA is also present in Denmark, as is Norwegian retailer Reitan Narvesen. Another example is Swedish food retailer Axfood, which acquired almost 25 per cent of Spar Finland last year.
When it comes to products, Scandinavian borders are easily crossed, too. Axfood's subsidiary 0&0 has a range of private labels called Eldorado. These are sold in Denmark (at Dagrofa, Denmark's third largest retailer), in Finland (at Spar, which also belongs to Axfood) and in Norway (in stores that operate under different banners, but which are all supplied by wholesaler Unil). ICA sells its private labels in both the stores of its Norwegian subsidiary Hakon and in Finland, where they are sold by market leader Kesko.
Consumers are increasingly prepared to cross borders, especially between Norway and Sweden. In 2000, cross-border shopping was worth SEK 10 billion (US$ 1.1 bn); many Norwegians are shopping in Sweden because the latter has adapted its VAT levels to EU standards. This makes products like cigarettes, meat and beer relatively cheap. The Swedes have built huge shopping centres north of Gothenburg just to serve this Norwegian clientele.
Given the Scandinavian retailers' tendency to flock together, ICA's announcement last year that it had sold half of its company to the Dutch retailer Ahold may have come as something of a surprise. In the years prior to this announcement, it was ICA who had tried to create a Nordic stronghold of Scandinavian retailers with enough purchasing and merchandising clout to playa major role in Europe as a whole - and to keep non-Scandinavian retailers from Europe or the US (guess who?) with a potential interest in the Nordic region at bay. Now ICA has allegedly 'sold its soul to the devil', other Scandinavian retailers have joined forces to create their own Scandinavian bastion, KF (Sweden), FDB (Denmark) and NKL (Norway) are all retailers with a co-operative organisation structure. Together, they have formed the joint purchasing alliance, Coop Norden. Finnish co-operative retailers Tradeka and SOK have also been invited to join. The first three retailers are said to be intending to merge into a Nordic retail alliance, representing total sales of SEK 96 bn (US$ 11.6 bn, 1999).

Baltic involvement
Scandinavian retailers are very much involved in the Baltic states, which they see as natural markets for business expansion. ICAI Ahold, Axfood and Kesko are the three main investors in the region. Late last year, ICA had 50 stores there (in 1999, it had only eight stores), and its
eventual goal is to have 200 to 250 stores. ICA holds a strong position in Latvia through its Rimi chain. Last year it acquired the Vikonda chain in Lithuania, where ICA currently operates 27 stores. This year, ICA plans to open its first hypermarket in the region. ICA's CEO Roland Fahlin recently stated that lCAI Ahold aims to become market leader in Latvia and Lithuania by 2002, operating a couple of hundred ICA stores with a total sales of SEK 2 billion (US$ 194 million).
Swedish Axfood has a company called Baltic Food Holding, which operates about 70 Spar stores, most of which are in Estonia. Last year it acquired seven stores operating under the Spar banner in Lithuania.
Last year, Kesko (Finland's market leader) decided to open a chain of larger supermarket stores under the name Super Netto, and it will be rolling out stores in all three Baltic States. The Finnish retailer targets a 20-25 per cent market share in the Baltic region. There are of course other retailers present in the Baltics too -like Norwegian retailer Reitan Narvesen, which bought 450 kiosks in Latvia in October 2000. The Baltic region's status as an emerging market is indicated by the fact that open-air markets still account for 40 per cent of Baltic food sales. These markets don't have to pay any VAT on food products, whereas supermarkets have to pay 20 per cent to 25 per cent VAT. At this moment a proposal is being discussed where both channels have to pay 18 per cent VAT. This is a decision that will surely advance the supermarket segment to the detriment of the traditional open-air markets. For foreign retailers, representation in all three Baltic states is a longer term investment, as these states are candidates to join the EU in the medium term. Despite the economic slowdown that all three Baltic states suffered in 1998 and 1999, living standards improved significantly in the independence period. The World Bank sees clear signs of economic recovery in all three states, with increasing GOP and dramatically decreasing inflation rates. But there is also a shady side: last year one of ICA's Rimi stores in Riga (Latvia) was bombed, killing one of the employees and badly injuring ICA's chief in Latvia. The police suspects mafia involvement. Crime and extortion though, are said not to have reaches such levels as to deter foreign investments in this promising Baltic region.

Denmark
The Danish retail sector is highly concentrated. Fifteen retailers dominate with the co-operative FOB being by far the largest company with a 38.3 per cent share in this US$ 11.9 bn market. Denmark's runner up is Dansk Supermarked and number three is Supervib, a combination of seven member retailers.
This top three accounts for 82.5 per cent of Denmark's food retail sales. Further concentration is expected, as the small and medium-sized independent retailers lose out to the large chains, which will see their logistics costs decrease dramatically thanks to the new bridges and tunnels connecting east and west Denmark. The Danish retail sector has the largest penetration of scanning systems and 80 per cent of its sales are scanned. Together with EDI. this allows for a quick flow of information. cutting down on stocks and improving delivery times. Discounters have a relatively high market share of 21 per cent 1998). This has increased due to improvements within the channel during the second half of the 1990s. Main players are Netto (Oansk Superrnarked), Aldi (a subsidiary of Aldi Nord. Germany) and Rema 1000 (a subsidiary of Reitan Narvesen, Norway).

Sweden
In 1999 large supermarkets and hypermarkets accounted for 73 per cent of Swedish food retail sales (US$ 21.2 bn). The number of retail outlets in Sweden dropped by half between 1970 (13.000 stores) and 1999 (6.400 stores). Consumption patterns are shifting, to the detriment of retail food sales. Swedes like to dine out or take-away. Between 1995 and 1999, the food service share in consumer spending increased from 17.2 per cent to 20.3 per cent. In the same period, the share of the retail declined from 82.2 per cent to 79.9 per cent. In the retail sector, the discount stores are gaining ground. In 1999 discount accounted for 11 per cent of sales. In 1990, this was only 3 per cent. Large supermarkets (over 2,000 square metres space) and hypermarkets like Maxi and B&W are also their business. Sales of grocery products in convenience stores,  petrol stores and kiosks increased from US$ 4.4 bn U5$ 5.3 billion in '999. Convenience stores saw the grocery products decline in 1999 by ten per cent to million. Supermarkets have joined C-stores in offering flexible opening hours, meaning that the latter have They have also lost a lot of business to petrol store their total 1999 sales increase by five per cent to US 1.3 billion. There is a striking difference in client base between kinds of outlets. Petrol stores are more frequently visited by families with children, while convenience stores cater primarily to singles or two-person households. The latter is hardly ever the primary food outlet. The former offer value because they are in convenient locations for car owners, who can do their shopping quickly while filling up their tanks, Petrol stores are therefore also replacing neighbourhood grocery stores. Internet grocery buying might well turn the Swedish market upside down in the near future, given that a recent survey indicated that 30 per cent of Swedish consumers want to be buying their grocery items via the Internet within five years time.

Norway
The top three retailers in Norway already account for a combined market share of 76.8 per cent, but this does not mean the end of the concentration game. Last year Norway's market leader Norgesgruppen acquired Centra Retail (it now controls 43 per cent of the Norwegian market) and Norway's number four, Rema 1000 merged with the Norwegian C -store operator Narvesen into a new company called Reitan Narvesen. This has combined annual net sales of over NOK 20 billion (US$ 2.1 billion; 2000). It is supermarkets, not hypermarkets, that are the dominant store type in Norway. The Norwegian government is very restrictive in allowing stores to open outside cities, which limits the perspectives of the hypermarket sector. Large supermarkets ranging in selling space from 1,000 to 2.500 square metres account for over four per cent of Norway's store base in numbers, but 22 per cent in total sales share. Smaller supermarkets (between 400 and 1,000 square metres) had a 47 per cent share in 1998. Discounters in particular performed well and are, in some low density population areas, the only available point of purchase.

Finland
Specialist stores such as butchers and greengrocers are completely lacking in the Finnish retail trade. In 1999 Finland had about 4.500 food retail stores, of which the 400 largest accounted for half of its total retail food sales (US$ 9-4 billion). Large supermarkets (+6.9 per cent) and hypermarkets (+6.3 per cent) had the highest sales growth in 1999, whereas sales at small shops «100 square metres) saw their sales drop by over ten per cent. Sales of grocery products at kiosks, petrol stores and convenience stores reached the US$ 2.2 billion level in '999. As in Sweden, petrol stores are the big winners in Finland (with sales of US$ 415 million in 1999), but this growth doesn't seem to be to the detriment of convenience stores. Finnish market leader Kesko is clearly confident of a healthy future in c-store retailing, given its launch last year in Helsinki of the new Pikkolo store concept (see Facts & Figures, page 11). In Finland, over 90 per cent of total food sales happen via scanning systems, which makes its retail business one of the most automated in the world.

Sources: ACNielsen, Stockmann Gruppen, ICA, M+M Eurodata, USDA Foreign Agricultural Service, The World Bank