Kesko, ICA merger going forward

May 20, 2004
Staff and wire reports

TALLINN - A Kesko official announced last week that the merger of the Finnish company's operations with those of Sweden's ICA in the Baltics is proceeding as planned.

"We are on schedule, and I believe the merger will become a fact in the summer," Seppo Hamalainen, the president of Kesko Food Baltics, told reporters on May 14.
The two sides signed a memorandum on merging their Baltic operations in December. The main goal is to increase market share and compete with Lithuania's rapidly expanding VP Market.
"Failure of the merger is unlikely, but naturally everything is possible. For example, we do not yet have an opinion of the competition board," said Hamalainen.
He added that the goal of the merger was to win a 25 percent market share by the end of 2006.
"Actually we will become the leader in Estonia and Latvia immediately after the merger," he said.
At the moment, ICA's market share in the Baltics is slightly larger than that of Kesko's, as the former owns chains in all the three countries and the latter only in Latvia and Estonia.
In Estonia, Kesko's business has been driven by the Saastumarket discount chain, which consists of 45 stores that together registered 783 million kroons (50 million euros) in turnover last year.
"The competition in Estonia is clearly smaller than in Latvia and Lithuania as there are more local chains there," he said. "As Prisma operates in Tallinn alone, we are regarding it, above all, as a local competitor."
"After the merger our market share in Lithuania will be that of ICA," he added.
Kesko's net sales in the Baltics totaled 245 million euros in 2003, or 6.5 percent of the Finnish company's 3.8 billion euros.
Hamalainen assessed the volume of the Baltic food retail trade market as 4.7 billion euros (1 billion euros in Latvia, 2 billion in Lithuania and 900 million euros in Estonia), and that the 2004 growth forecast stands at 5 percent.
Open markets and smaller shops control about 22 percent of the Baltic food market, while 28 percent is taken by small and medium firms. ICA's share is 8 percent, VP Market 23 percent, and Kesko Food 6 percent.
According to Kesko, the sugar price panic in the last couple of months has brought Saastumarket an extra 12 million kroons in turnover. The Saastumarket stores sold 1,850 tons of sugar during the sugar boom.

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