RIGA - The long-awaited and much-delayed merger of ICA Baltic and Kesko Food's retail operations in the Baltics took place on Jan. 3 when the two sides penned a final agreement, setting the stage for a battle of the retail giants in 2005.
Sweden's ICA Baltic, the parent company of Rimi Latvia, and Finland's Kesko Food set up a joint venture, Rimi Baltic AB, that will unite the two companies' operations and help it compete with the ambitious VP Market, the Lithuanian-owned retailer and the largest in the Baltics.
Rimi Baltic director Antonio Soares said the new entity would strive for a 25 percent share in the Baltics' dynamic retail market. In 2004 the combined net sales of Kesko's and ICA Baltic's operations amounted to approximately 690 million euros, according to a press release. The joint venture, which has been registered in Sweden, will have a total of 160 stores throughout the three countries, with a distribution center in each.
The merger, which was announced over a year ago, ran into a number of stumbling blocks and had to be delayed for several months. But with the two companies' main rival, VP Market, expanding at a dizzying rate, company executives apparently felt they could no longer delay in inking the final agreement.
VP Market operates a chain of 288 trade outlets - Minima, Media, Maxima, Saulite and Ermitazas - in the Baltics and reported sales of nearly 1.1 billion euros over the January to November period in 2004, a rise of 15.8 percent year-on-year.
According to the ICA Baltic-Kesko agreement, all Citymarket grocery stores previously run by Kesko Food in Latvia and Estonia will be transformed into Rimi Hypermarkets over the next several months.
The Supernetto discount stores, meanwhile, will retain their name, as will the Saastumarket discount chain in Estonia, which numbers 45 stores.
Soares said that Rimi Baltic AB would launch a chain of Supernetto stores in Lithuania. Soares, who was previously ICA Baltic's executive director, was elected director of Rimi Baltic. Kesko Food President Kalervo Haapaniemi will be chairman of the joint venture's council.
ICA AB and Kesko Food signed a letter of intent on the joint venture in December 2003, and the European Commission approved it in November 2004.
Kesko Food has five Citymarket stores and over 20 Supernetto stores in Latvia. In Estonia it has six Citymarkets and the Saastumarket chain.
ICA AB has 35 Rimi supermarkets and five Rimi Hypermarkets in Latvia, while in Lithuania it has 30 supermarkets and three hypermarkets, most of which use the Rimi trade mark. ICA AB's stores in Estonia include six Rimi supermarkets and one Rimi hypermarket.
ICA AB is one of the largest Nordic retailers with over 3,000 sales outlets in Scandinavia and the Baltics'. Kesko Food belongs to Finland's Kesko Group.