ICA AB

views updated

ICA AB

Odengatan 69
Box 6187
S-102 33 Stockholm
Sweden
(46) 8 728 40 00

Public Company
Incorporated: 1917 as A.B. Hakon Swenson
Employees: 40,310
Sales: SKr 129 billion (US$21.09 billion)
Stock Index: Stockholm

The ICA logo dominates the Swedish grocery-retail industry. It is estimated that ICA outlets are patronized by about two-thirds of the nation’s shoppers. In many rural or outlying areas the ICA store is the only outlet—functioning as a general store as well as order-taker for goods not ordinarily stocked. The ICA name is also found on urban and suburban supermarkets and hypermarkets and convenience stores. Underlying their services is a gigantic and complex support system.

In 1917, 34-year-old Hakon Swenson, a minister’s son, pioneered what many colleagues called an impossible idea: a cooperative association of independent merchants competing for the same business. He had a strong entrepreneurial spirit and nearly twenty years of business experience behind him. He had worked for a wholesaler for seven years, progressing from messenger to purchasing agent, salesman, and manager. He then left to start his own business, a cigar factory. A change in the tobacco market caused him to close it ten years later, in 1915, but from this experience Swenson recognized that there were economies of scale, efficiencies in deliveries and distribution, and other benefits to be realized from pooling resources with similar firms—benefits that could not easily be obtained by the operator of a small business alone.

Swenson next went to work for a retailer, Manne Tossbergs Eftr., where his experience and talent for business brought him success. Within two years he had enough capital to buy a small but well-established retail business of his own. He opened A.B. Hakon Swenson December 1, 1917. A month later he opened a second store in another town, and on April 1, 1918, he opened one in a third town nearby.

As his ideas proved more and more successful, his contemporaries began to seek his advice on launching their own businesses. Some had worked with him previously and had become enthusiastic about his approach to solving the problems of the small, local entrepreneur. Svenson helped each one get a start in a business of his own, and gradually his idea for a cooperative association of friendly competitors took shape. A group of retailers met to compare notes on problems and opportunities, work out solutions, and improve their service to their respective communities, which were clustered in central Sweden.

By 1923 this group had contributed enough to a mutual fund to build and operate a shared distribution center at Västerås, site of the cooperative association’s headquarters. Sharing the cost of shipments to the center made a substantial difference in the cost of doing business in that area, and the group continued to prosper. Swenson studied modern warehousing operations in other parts of Europe and the United States, and continued to provide the kind of leadership to the association that enabled each member’s business to progress, which in turn attracted new members.

In the early 1930s, as the effects of the Depression began to erode other types of business, the cooperative association’s members still found themselves on firm financial footing since the economies accomplished by working together made it possible to keep prices down.

The number of members grew, spreading out over a wide geographical area, and new distribution centers were built. In 1938, A.B. ICA was formed.

In the early 1940s, there was some pressure from the government to react to wartime shortages by having ICA build its own mill and a margarine factory, but Swenson vetoed the idea. He preferred to concentrate the organization’s efforts on expanding the business it had built rather than starting a manufacturing division.

At that point, ICA existed on two levels: the retail stores, independently owned and operated; and the cooperative association, owned jointly by the stores. (ICA retailers agree to purchase 80% of their stock from the cooperative association’s wares.) Many of the stores, especially in remote areas, were operated by a husband and wife, and, in some cases, the entire family. As time passed, new generations of the same families took over the operation of the stores.

As the business grew, however, ICA’s structure became more complex. Some of the independent stores formed joint ventures with the association, and four main regional centers were established. ICA Hakon A.B., the original distribution center, is based in Västerås and serves central and northern Sweden; ICA Eol A.B., based in Göteborg, serves the South; ICA Essve A.B., based in Stockholm, serves the Southeast; and ICA A.B., which began the organization’s flourishing import business following World War II, is based in Stockholm and performs administrative functions. Each one of the distribution centers eventually became a separate company within the organization, creating new distribution centers within its area of operation as business grew.

In 1948, ICA Frukt och Grönsaker A.B. was established in southern Sweden to buy and distribute fruit and vegetables for domestic and international markets. In 1949 ICA acquired Hjalmar Blomqvist A.B. to supply member stores and boutiques with glassware and china; it is Sweden’s major supplier of dinnerware. In 1950, ICA bought Svea Choklad A.B., a producer of sweets. That same year, to keep employees and independent retailers informed and in communication with each other, ICA added a publishing arm to print and distribute an in-house newsletter. From that beginning grew one of Sweden’s largest publishing operations, ICA-förlaget A.B., which today produces weekly newspapers, trade and consumer periodicals, and books; it also operates a book club.

During the 1950s, consumers’ buying habits in urban and suburban areas began to change radically. These changes led to the substitution of self-service facilities for traditional service counters in many of the stores, and sent suppliers scrambling to international markets to meet the new demand for a variety of food choices.

New stores built during the 1950s and the 1960s were usually supermarkets or hypermarkets. These larger stores began to carry a greater number of nonfood household items as well as a wider range of foodstuffs. New stores were typically owned by the association at first, allowing the proprietor to buy it gradually, so that the store could get off to a profitable start without consuming an inordinate amount of the owner’s capital.

Hakon Swenson died in 1960, having overseen the creation of a network of retail and wholesale companies that became the largest in the nation. Succeeding administrators of ICA have continued in general to follow his policies and principles.

In 1967 ICA Rosteri A.B. began producing and marketing coffee and importing some from Latin America and Africa. In 1969, ICA Banan A.B. began importing bananas from Central America and ripening them in plants in central and southern Sweden.

ICA purchased Ringköpkedjan, a competing retail food chain, in 1982, and the following year the association purchased and installed a computerized order-preparation system. That year ICA also purchased Lindex, a chain of fashion stores selling women’s clothing, and Intervideo TV Productions-A.B. And in 1988, ICA bought Ellos A.B., a major mail order company.

Since its early days, ICA has pooled advertising strategies and resources to reach wider markets and minimize costs. As a part of this advertising effort, Intervideo TV Productions produces educational and advertising programs to be shown in ICA stores.

With an aggressive advertising program, dynamic growth policies, and continuing sensitivity to changes in market needs, ICA should continue to operate the dominant retail and wholesale food-supply network in Sweden.