Managing "The New Normal" - Per Strömberg CEO ICA Gruppen ICA Gruppen Capital Markets Day, December 9, 2020
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Managing “The New Normal” ICA Gruppen Capital Markets Day, December 9, 2020 Per Strömberg CEO ICA Gruppen Anders Bärlund CSO ICA Gruppen
A very different year.. Rapidly changing customer behaviour and preferences Extreme online growth Periodic strain on supply chain Managing new ways of working Supporting society…
The “S” in ESG has been much in focus in 2020 – and we have
been supporting society in many different ways
Supporting risk groups… … smaller businesses … and the society
• Cooperation with the Red Cross • Supporting local suppliers in • Many local initiatives by ICA
to facilitate deliveries different ways to make it easier Retailers across Sweden
for them to sell through our
• Free pharmacy deliveries for 65+ stores in Sweden and the Baltics • “Energy” packs for health care
staff (Rimi)
• Rapid scale-up of last mile • Settling payables faster to
delivery service ICA Pronto support smaller businesses • Food bank for people who lost
prioritizing risk groups their jobs (Rimi)
Our strategy remains on track – but some areas will need even
more focus post COVID-19
In particular:
• Online
• Price value
• Sustainability and Health
… have become even
more important
Shifts in ”the new normal”
Price value Online Sustainability/Health
Supply chain Ways of working
Ambition 2025
ICA is for everyone. We serve all
customer segments with relevant price-value
and locally adapted offerings
We have the leading everyday food ecosystem built around inspiring local marketplaces with supporting products, services and infrastructure
We are recognized as one of the corporations doing the most to improve public health
We are known as a trusted source
of guidance to make relevant, healthy
and sustainable choicesWe
Weare
areindustry
industryleader
leader
ininprogressing
progressingtowards
towardsaaclimate
climate
net-zero
net-zerobusiness
businessWe are the most attractive and appreciated employer with the proudest employees
We are known for entrepreneurship, modern
ways of working, continuous learning and
that together we make a differenceWe are a trusted data-driven company,
with relevant and personal products and services,
based on data that we use across the ICA-system, to
the benefit of all stakeholdersWe are deeply data-driven in our daily work and we leverage data to develop our business
Our updated step-change areas for the next 1-3 years
E-commerce and digital
Strengthened food ecosystem
transformation
Best in class grocery Mortgage growth Online profitable growth Price, promotion & Urban strategy 2.0
e-commerce offer assortment
Strengthen customer loyalty ICA Insurance profitable Min Doktor success Expand convenience and Strategic and active
and price value proposition growth meal solutions portfolio management
Data driven transformation supported by AI/AA
Transformation to reduce cost and build new capabilities
Climate beyond neutrality
Make healthy choices easyICA continues to be the #1 grocery retail brand in Europe
Top 10 strongest Supermarket/Hypermarket store
brands (SEI) in Europe
2020 (vs. previous year) Data updated
1 Sweden 4.7 (4.7) –
2 Switzerland 4.0 (4.3) ▼
3 Slovakia 3.9 (3.6) ▲
4 Portugal 3.9 (3.7) ▲
5 Spain 3.8 (3.3) ▲
6 Netherlands 3.8 (3.6) ▲
7 Portugal 3.7 (3.3) ▲
#1 Nice to shop at (>2x #2) 69%
8 Finland 3.4 (3.4) –
#1 Makes it easy to shop when
9 Slovakia 3.4 (3.3) ▲ 64%
and where I will (>2x #2)
10 Bulgaria 3.4 (3.3) ▲ #1 Has private label I like to buy (~2x #2) 63%
Source: Nielsen SEI 2020 Source: ICA Brand Tracking Q3 2020To summarize… Strategy remains on track and brand position is strong Enhanced focus on online, price-value, sustainability and health We are aligned to continue delivering on our targets
Strong performance and well positioned for “The New Normal” ICA Gruppen Capital Markets Day, December 9, 2020 Anders E Svensson Deputy CEO ICA Gruppen & CEO ICA Sweden
ICA stores are gaining market shares in recent months..
..and we continue to outperform
Total sales.. market growth online
14% 250%
12%
200%
10%
150%
8%
6%
100%
4%
50%
2%
0% 0%
DVI Index ICA Total ICA LFL DVI online ICA Online
Source: DVI (Dagligvaruindex) by HUI, on behalf of The Swedish Food Retailers Federation…with significant volume growth
driving earnings in 2020
Q3 EBIT growth ..and YTD
+8.7% +12.2%
3 237
1 208
1 111 2 885
2019 2020 2019 2020Our main focus areas remain relevant, but COVID-19 has led to
higher priority in certain areas
Sustainability
E-commerce and health Price value Personalization Meal solutionsMarket leader online since 2017 – online demand
surged in 2020…
+96% Online, share of total store sales
ICA online sales (MSEK)
4,499
Year 2019 R12 Nov 2020
Regular online
Meal kits
1.6% 3.4%
+33%
2,294 4 219
+42%
1,729 • Reaches >85% of Swedish
+50%
+43% 1,221
population
2 026
• Share of sales through
813 1 465
568 975
Stockholm dark store ~10%
614 • Home delivery share ~35%
415
153 199 246 264 268 280
R12 Nov
2015 2016 2017 2018 2019 2020…with more and more ICA retailers offering online 66 new stores have gone online in 2020 – 360 in total Online sales share for participating stores were 6.3% YTD Q3 >70 stores using the dark store in Stockholm
Our partnership with Ocado is a key driver for long-term
online profitability
World leading ONLINE platform Automation in central fullfillment (CFC)
• AI-supported shopping journey to drive basket • Automation in CFC leads to an increased
size and margin improvement efficiency
• Platform realizes a wider assortment in CFC • Targeting at least a doubling of picking
• Better and more reliable manual pick productivity compared to the dark store
• Partnership with world leading retailers • Ocado is investing heavily in further automation
and AI-supported process execution in the CFCImportant online milestones up to 2022…
June December Spring November Spring
Limited B2C MVP B2B Dark store Tests start in Volume ramp-up
Gothenburg starts Stockholm CFC in CFC begins
on OSP as an MVP
2020 2021 2022
September November February Summer December
Public MVP Ocado starts First store has Conversion of All stores
B2C the installation converted to OSP Dark store in converted to
in the CFC Roll-out starts Stockholm to OSP OSP
MVP=Minimum Viable Product. OSP=Ocado Smart Platform..with some temporary and limited financial effects
Operations
Rapid corona-driven volume increase in 2020
ICA online 2.0 first store pilot in September
2020 Financials
Volume driven higher cost level in dark store
Project driven higher costs when moving into implementation phase
Operations
Migration of stores to MVP OSP starts
Dark store in Gothenburg opens and dark store Stockholm converted to OSP
2021 End of year all stores are converted, and CFC testing starts
Financials
Project implementation and OSP conversion costs
Estimated margin effect vs 2020 (all things equal), approx. -0.1pp
Operations
Adding functionality to OSP
Commissioning of Ocado CFC in Stockholm
2022 Financials
Warehouse commissioning costs
Estimated margin effect vs 2021 (all things equal),Price value will become even
more important
We will use a variety of tools do drive price value…
1 Investments in key 2 Campaigns and 3 Strategic work
products with high communication with assortment
price sensitivity
4 Sales support to 5 Strong private 6 Loyalty program
the ICA stores label offer key to personalize
price value
28ICA’s private label: five growth platforms to
build customer loyalty LONG-TERM FOCUS
Increased price value
Ambition Customer’s preferred choice
Strengthened private
label brand
Increased sales, differentiation and Assortment development
Objective
strengthened loyalty at the forefront
Proud and engaged
store employees
For A Good For A Good For inspiring For a For
Growth
Tomorrow – Tomorrow – dining simpler affordable
platforms Sustainability Health experience life choices Secure a good private
label marginAccelerated private label growth 2020
pp
1,4
1,2
1,0
0,8
27,0% 0,6
26,5%
25,8%
25,3% 25,2% 0,4
24,6% 24,6%
23,9% 23,8%
23,1% 0,2
0,0
2016 2017 2018 2019 2020
Food Food & Non-food Growth food Growth F&NFWell positioned for “The New Normal” Strong performance in a turbulent market with big and escalating shifts in customer behavior Investing in online and transitioning to the new Ocado platform Ensuring customer loyalty and price value in uncertain times
Increasing benefits from digital acceleration ICA Gruppen Capital Markets Day, December 9, 2020 Jan Prokopec CDO ICA Gruppen
Strong contribution from our four prioritised digital focus areas
FOCUS AREAS
Food Personalized Advanced Process
Ecosystem & Digital Analytics & AI Automation
(Digital/e-commerce Marketing
and omnichannel)
Innovation and new technology
ENABLERS
New capabilities and ways of working
Data accessibility and qualityReaching Process Automation targets for 2020 – 100 MSEK
New target
for 2023:
200 MSEK
yearly run-rate
in EBIT
contributionMoving into industrial scale within Advanced Analytics & AI
Number of use cases during 2020
25
20 In 2020
we have gone
15 from single
pilots per
10 business area to
industrial scale
5
roll-outs
0
Q1 Q2 Q3 Q4
ICA Sweden Rimi Baltic Apotek Hjärtat ICA BankInnovation hub ICAx continues to strengthen our ecosystem
and operations across the Group
Express food deliveries Unmanned store makes Analytics powered tools
to customers 24/7 opening hours possible do reduce shrink in storeIncreasing our sustainability ambitions ICA Gruppen Capital Markets Day, December 9, 2020 Kerstin Lindvall Chief Corporate Responsibility Officer ICA Gruppen
Sustainability part of ambition 2025 and step changes
Ambition
2025
Step
changes
1-3 years
Climate beyond neutrality
Make healthy choices easyCustomers’ sustainability agenda is wide, but with growing attention to climate, local and health Reduce carbon footprint Eat more local food Reduce food waste Use plastic more sustainably Increase mental and physical well-being
2020 is the year ICA becomes climate neutral
> 70 % < 30 %Our new climate ambition from 2021 covers all parts
of the value chain
70% OF SALES HALVED
NET-ZERO
FROM SUPPLIERS IMPACT IN
2030
WITH CLIMATE 2030
GOALS
Primary production and Suppliers Warehouses, Stores and Offices CustomersHalved customers’ climate
footprint by 2030
New approach where we clearly take
responsibility not only for our own business, but
also our customers' carbon footprint – where the
major climate impact takes place in the value
chain.
An ambition in line
with the Paris
An ambition to halve customers' climate footprint Agreement, research
sits in line with the Paris Agreement and the and a healthy diet
recommendations of research.
Goes hand in hand with a healthy diet – eating
climate smart is almost always healthy.The journey toward halved footprint has already started, but
speed and effort will need to increase
Invest in national Reduce the
We are already and locally produced climate impact of
doing a lot that existing range
contributes! Guide customers to
sustainable choices Continue work on
our plastic strategy
Develop and offer more
sustainable products; Drive efforts for
innovation of new protein reduced food
sources and circular waste
thinking
No assortment … but a large movement from red proteins to white,
needs to be green, gray and blue is required.
"zeroed out”…Our Health Strategy 2025
– increased relevance in the light of COVID-19
Our health ambition Our ambition areas 2025
Our
definition
of health
We want to make it MENTAL WELL-BEING
easier for our
Good health is a state of customers to live
physical, mental and social healthy based on
well-being for people of all their opportunities PHYSICAL WELL-BEING
ages and with different and conditions, in
conditions in life.
order to reach their
full potential.
SUSTAINABLE ANTIBIOTIC USETo summarize Sustainability remains of great importance to our customers Sustainability is high up on ICA Gruppen’s strategic agenda Our ambitions in climate and health have been strengthened – we are frontrunners and will deliver on expectations and create business value
Strengthening our #1 position and increasing online sales ICA Gruppen Capital Markets Day, December 9, 2020 Anders Nyberg CEO Apotek Hjärtat
The corona pandemic has had a large impact on our industry
Prescription sales growth per month
(volume) 20.9%
4.7%
3.1% 2.6% 2.4% 3.0%
2.3%
-0.6% -0.1%
-1.4% -1.2%
-4.4%
-5.4%
-7.2%
S O N D J F M A M J J A S OWe are now #1 in the market and our online sales are up 130%
Market share, Oct 2020 Growth online, Q3 2020
31 30
+77%
+130%
17
9
8
+53%
3
2
Apotek Apoteket Kronans Apoteks- Apotea Lloyds Others
Hjärtat AB Apotek gruppen apotek Market Apotek HjärtatOur integrated offering is even more attractive to customers…
Online Physical
pharmacies
Strong brand…enabling express home deliveries though our physical
pharmacies
1
2 2
hours
Order 3
Fulfilment
Delivery…making every day easier for our customers by offering co-delivery of groceries and pharmacy products
We have the strongest brand and will now invest to make it a
destination for online
52…and the app brings the pharmacy to your pocket!
Availability online
Manage Bli påmind om recept Finns dina läkemedel
Reminders and in pharmacies Shop in app
prescriptions som håller på att gå ut i lager?
nearbyImproving dark store and warehouse efficiency through automation Automated packing in dark store Warehouse automation
Our pharmacies continue to outperform the competition
Self-care sales per pharmacy (MSEK) Prescription volume per pharmacy
9.4 9.5
9.3 75 72 72
69 70
9.0 8.7
8.4 Apotek Hjärtat 70 67
66 Apotek Hjärtat
65
7.9 8.1
8.0
60
7.0 Competitors
Competitors
6.0 50
5.0
40
0.0 0
2014 2015 2016 2017 2018 2019 R12 2014 2015 2016 2017 2018 2019 R12
Sep Sep
2020 2020
Statistics from Sveriges ApoteksföreningMin Doktor is a competitive advantage for our customer offering and strengthens our market position
Maintaining our #1 position Market leader with e-commerce growing faster than market Strong focus on expanding e-commerce, leveraging our pharmacies, Min Doktor and ICA Largest pharmacy network with attractive locations
Rimi Baltic
– Strengthening and growing the Rimi brand
ICA Gruppen Capital Markets Day, December 9, 2020
Edgar Sesemann, CEO Rimi BalticOur warehouse in Riga operational
– enabler for cost efficiency across the Baltics
Main distribution point for all Baltic countries and all
product groups (84,000m2)
Operations from four temporary locations brought
under one roof has started
Innovative, environmental-friendly and ergonomic
solutions, which increase employee productivity
Space for online dark store available
Automatization and central production during spring
2021Adjusting and responding to new customer behaviour due to COVID-19 Customer habits Online gains significant share Price will become even more important All players prepare for new competition in Estonia and Latvia Need to reduce cost level to maintain profitability Focus on sourcing costs and individual store cost monitoring Recovery will take time Shopping centres comeback gradual. Tourist & border trade longer time to recover
Our online offering has been well received and is steadily
growing in all three markets
Sales growth will continue to be our
We have now established online in all three first priority in 2021
countries Geographical coverage
‒ Latvia October 2019 Focus on home delivery and Rimi Drive
‒ Lithuania March 2020
New features to increase
‒ Estonia May 2020 competitiveness
Rimi Baltic online sales share is already above 2% Marketing and promotions
and continues to grow
Operational excellence
Free delivery subscription pass was launched in Q3We are well prepared for new competition in early 2021
Rimi’s objective is to lose less than fair share, by improving on all fronts
Pricing and Marketing and
Assortment Stores People
promotions Communication
Regular price index Relaunch EDLP New store design New brand platform Retention
New F&V concept and for all formats “Everyday a little strategy for store
promotion concept assortment One brand better” staff
“Fresh 5” Visibility of strategy Share of voice Employer
promo and EDLP CR and branding
Competence sustainability
categories and
localCustomers continue to be very satisfied with Rimi – main drivers
for improved CSI are better price perception and assortment
RIMI BALTIC
ESTONIA LATVIA LITHUANIA
CSI
75.8 CSI
72.8
CSI
75.6
CSI
79.2
(+1.5) (+1.5) (+2.5) (+0.5)
GAP 1.4 (+0.8) GAP 6.1 (+1.1) GAP +3.3 (+0.3)
GAP 3.9 (+0.7)
Rimi Baltic improves customer satisfaction (CSI)
and gap to local competitors in all markets
The 2020 analysis is based on 49 552 responses. Last year’s results have been weighted to reflect the 2020 data collection mix.
CSI = Customer Satisfaction Index, GAP = Difference in satisfaction between the Rimi Store and local competition.
() Numbers within brackets shows development from 2019Creating value and enabling ICA to grow ICA Gruppen Capital Markets Day, December 9, 2020 Anna Nyberg CEO ICA Real Estate
Continued good valuation trend in our portfolio
Market value 2019 Market value 2020
5% 4%
6% 5%
• Lowering yields 15%
17% • Acquisition
SEK of logistic assets SEK
1%
1%
21.3 bn 23.9 bn 56%
• Land/Property
5% 60% 13%
Banking
6%
6%
ICA-store LPB-property Warehouse/logistics ICA-store LPB-property Warehouse/logistics
Other (not ICA-store) Ancore (JV 50%) Secore (JV 50%) Other (not ICA-store) Ancore (JV 50%) Secore (JV 50%)
Långeberga (JV 50%) Långeberga (JV 50%)Logistics will continue to be a major driver of
Real Estate investments
4 000 2020
Average net Net
3 000 investment investments • Acquisition of Hacksta
warehouse 1 BnSEK
2 000 Divestments • Other acquisitions include dark store
Gothenburg 300 MSEK* and
1 000 ICA Maxi Bålsta 190 MSEK
• Investments in CFC Brunna 400 MSEK
0
• Investments in Viby warehouse 80 MSEK
-1 000
2021
-2 000
Investments • Investments in CFC Brunna 200 MSEK
-3 000 • Investments in cold storage warehouse in
Hacksta 200 MSEK
-4 000 • Acquisition Land Property Banking
2015 2016 2017 2018 2019 2020 2021 250 MSEK
MSEK
Guidance
* Not included in market value in previous slides. Possession after validation date.Investing to strengthen online and logistics
Stockholm (Brunna, online) Gothenburg (Arendal, manually)
• Operational 2022 • ICA took over the property on
• Size 32,000 sqm, including office building October 26, 2020 and operations
• Total real estate capex 2018-2022 estimated planned to start in March 2021
at SEK ~1 billion • Size 17,200 sqm
• BREEAM Excellent • BREEAM Outstanding
Stockholm (Viby)
• New ICA Logistics site in Stockholm
• Operational summer 2020
• Size 7,500 sqm
• Sweden Green Building council, silverSecure new store locations and
minimize risk through collaborations
Developing multiuse properties
together with housing developers
in collaborations or joint ventures
Developing multiuse properties
including rental apartments for selling
to long-term property owners
Selling projects with an
ICA-store leaseSecuring premium locations for ICA
ONGOING PROJECTS
Lillsidan, Enköping Limhamn, Malmö Lindvallen, SälenSecuring premium locations for ICA
PLANNED PROJECTS
Brunnshög, Lund Årsta, Stockholm Södra Häggvik Sollentuna Arninge, TäbyCreating value and enabling ICA to grow • We continue to deliver a stable result and increase value in our real estate portfolio • We improve online cost efficiency by investing in logistics • We secure new store locations and create value through our urban strategy
Continued investments in online and digital – Long-term financial targets maintained ICA Gruppen Capital Markets Day, 9 December, 2020 Sven Lindskog CFO ICA Gruppen
Margins and growth remain strong vs peers
Peer group comparison 2015-2019, EBIT % Average sales growth in same period:
ICA +3.9% vs Peer Group +3.4%
Going forward:
• Improving online capacity, offering
and profitability
– Online projects in ICA Sweden will have
limited and temporary effect on group
4,3 margin, approx. -0.1pp in 2021 andWe maintain our long-term financial targets
R12 Long term Average
Target
(30/9 2020) targets last 3 yrs
Sweden
Grow faster than the market Baltics All markets
Pharmacy
Operating profit excl. items
4.6 4.5 4.3
affecting comparability,%
ROCE1,% 9.1 7.5 8.2
Net Debt/EBITDA2 2.0xWarehouse acquisition brings 2020 capex to all time
high, but lower level in 2021…
6 000
~5,000
5 000
4 000
~3,500
3,080 2,000
3 000
Retail
Guidance
2 000
Retail & 2,000
Bank
1 000 Real Estate
3,000 1,500
Real Guidance
Estate
0
2015 2016 2017 2018 2019 2020 2021
Capex
MSEK Actual Guidance
Real Estate = ICA Real Estate (Sweden)..while online investments remain on
same level and store network increasing
6 000
• IT, online & digital remain on
~5,000 same level, ~900 MSEK
5 000
• Store network; ICA Sweden,
Rimi Baltic, +300 MSEK
4 000
~3,500 • Rimi B; new DC commissioned
3,080 in 2020, -300 MSEK
3 000 IT, online & digital
• ICA Real Estate -1,500 MSEK
Store network/logistics
2 000
Rimi B real estate
incl. new DC In addition:
1 000
Real estate Sweden • Capital injection in new
mortgage business estimated
0
at 300 MSEK (not in graph)
Capex 2019 2020 2021
MSEK GuidanceICA Sweden – commissioning online projects, price value
Rimi Baltic – meeting new competition
MARKET, uncertainty high
due to COVID-19 FOCUS AREAS
• Grow faster than the market, maintain margins long-term
• Execute and commission Online 2.0 by 2022
ICA Estimated market growth in
• Strengthen customer loyalty/price value proposition
Sweden 2021: 0.5% (price 1.5)
• Meal solutions/health strategy
• Organizational efficiency, digital transformation
Estimated market growth in • Grow faster than the market, long-term stable margins
2021: • Manage new competition
Rimi
• Estonia: 3% (price 0) • Online offering/convenience/meal solutions
Baltic • Latvia: 3% (price 2) • Strengthen store network – especially in Lithuania
• Lithuania: 5% (price 2) • Leverage new DC in RigaApotek Hjärtat – online growth and network optimization
Real Estate – portfolio management, securing value creation
MARKET, uncertainty high
due to COVID-19 FOCUS AREAS
Estimated market growth in • Grow faster than the market, improve margins
2020 4-5% (priceICA Bank – launching a mortgage company
Group – costs on same level in 2021
MARKET, uncertainty high
due to COVID-19 FOCUS AREAS
ICA • Repo rate 0% • Launch new mortgage company
• Intense bank competition • Broaden existing customer relationship/omni-channel
Bank & • Insurance market growing at • Profitable growth of insurance business
Insurance steady pace ~3% • Scale-up use of digital tools – AI/Advanced analytics
Group Central functions incl. ICAx • Group costs in 2021 ~450 MSEKContinued investments in online and digital Temporary and limited impact on margins Long-term financial targets maintained
Disclaimer This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although ICA Gruppen AB (publ) believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. Important factors that may cause such a difference for ICA Gruppen AB (publ) include but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels. This presentation does not imply that ICA Gruppen AB (publ) has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided.
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