Required Report - public distribution

**Date:** 07/07/2005

**GAIN Report Number:** SW5009

SW4020

**Sweden**

**Retail Food Sector**

**Report**

**2005**

**Approved by:**

![](media/image1.wmf)Margaret E. Thursland

U.S. Embassy Stockholm

**Prepared by:**

Bettina Dahlbacka

Agricultural Marketing Specialist

**Report Highlights:**

The recent consolidation and restructuring of the Nordic retail food
sector offers interesting opportunities for U.S. suppliers in terms of
volume and variety of products in demand. Best prospects include
seafood, convenience food, and products appealing to the health
conscious. Additionally, the market is expanding for international and
ethnic cuisines. A major impediment to increased U.S. sales is consumer
resistance to products containing genetically modified (GMO)
ingredients. Nevertheless, a weak dollar in 2003 and 2004 has fueled new
interest in U.S. food products.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Stockholm \[SW1\]

\[SW\]

**SECTION I. MARKET SUMMARY**

# SWEDEN AND FINLAND

Economic growth in both Sweden and Finland has strengthened domestic
demand for high-value consumer-ready products. Low inflation and reduced
interest rates have kept consumer confidence high. Private consumption
is expected to grow by about 2-3% per year in Sweden and Finland during
the next few years. Retail food sales have remained high and further
growth is expected. The relatively low dollar exchange rate in 2003 and
2004 has fueled new interest in U.S. food products.

The food retail sector in these markets is predominantly integrated and
concentrated. In both Sweden and Finland, the three largest
import/wholesale groups supply about 80% of the market. Restructuring of
the Nordic retail food sector continues as pan-Nordic mergers and
cooperative agreements seek to achieve greater efficiencies and
economies of scale to fend off other European competitors. Swedish and
Finnish retail chains are meeting the stiff competition through
increased efficiency \-- centralizing purchases, forming international
alliances and expanding operations within the Nordic/Baltic region. In
these concentrated markets where retailers have such large market share,
growth at home becomes virtually impossible. Looking abroad, in the form
of mergers and cooperation at the international level, has become the
only possible path to growth.

The fastest growing \"concept\" in the food retail trade in Sweden and
Finland is discount stores. While discount stores currently only account
for about 10-13 percent of the retail trade in Sweden and Finland,
volumes have tripled over the last ten years. Growth figures are showing
no signs of leveling off, and this, of course, has stirred interest
among foreign players to enter the domestically dominated Nordic food
retail market. The German hard discounter Lidl has already established a
presence in all of the Nordic countries. Other players are likely to
follow. The entry of Lidl has undoubtedly changed the dynamics of food
retailing and is putting pressure on the previously unthreatened Swedish
and Finnish grocery conglomerates. Swedish and Finnish retailers are
responding by refocusing their stores to a more price-oriented basis and
introducing new private label items to match Lidl's low prices. Also,
many retailers have opened up their own discount stores.

The trend throughout Europe of fewer but larger players continues. In
2003, 75% of Swedish retail food sales of approximately USD 19 billion
went through large supermarkets and hypermarkets. In Finland, the 396
largest stores accounted for half of total 2003 retail food sales of USD
12 billion. There were 6,060 food retail outlets in Sweden in 2003
compared to 13,000 in 1970. In Finland, there were 4,163 outlets in
2003, slightly fewer than during the previous year.

Swedish and Finnish consumers are gravitating towards fresher, more
convenient and more nutritious foods. High demands are made on food
quality, origin and environmental concerns. The ongoing
socio-demographic changes with busier life styles and increasing
single-person households are affecting food retailing to a high degree.
Retailers are shifting their product ranges towards an increasing share
of healthier, ready-to-eat foods and home meal replacements. Eating out
is growing faster than traditional retail sales. Both in Sweden and
Finland, about 20 percent of meals are currently eaten out of the home.
Fast food is the segment benefiting most from this trend. American-style
fast food chains, sushi bars and coffee shops are extremely popular in
these markets.

Organic and functional foods are gaining in popularity with significant
consumer awareness in the area of food safety and healthy eating habits.
This includes not only products with low fat benefits, but also those
with nutritional advantages, such as added fiber, vitamins and minerals,
or ingredients with perceived disease-preventative qualities. Consumers
are willing and able to pay higher prices for food and drink products
that fall into these categories. Also, through increased travel and a
willingness to move away from their culinary traditions, Swedish and
Finnish consumers are more open to ethnic foods.

Internet retail food sales have been limited despite the region's high
per capita ownership of computers and consumers' expressed interest in
online food purchasing. The positive outlook of major retailers towards
this sales vehicle has changed as the list of retailers terminating
their websites is long. Currently, there are only a few profitable
internet operators in food distribution in Sweden and Finland.

Average exchange rate 2003 in Sweden: US\$ 1 = SEK 8.09

Average exchange rate 2003 in Finland: US\$ 1 = EUR 0.88

**[Advantages and Challenges Facing U.S. Products in Sweden and
Finland]{.underline}**

  ----------------------------------- -----------------------------------
  **Advantages**                      **Challenges**

  Sophisticated markets. High         U.S. products at a price
  acceptance of new products and      disadvantage compared to
  concepts. U.S. products are         competitors based in the European
  considered high quality and trendy. Union.

  Growing consumer demand for         High distribution and shipping
  value-added products, convenience   costs.
  foods, international/ethnic         
  cuisine, \"functional\" and organic 
  foods.                              

  Location gives access to a          Strong hesitation with respect to
  Nordic/Baltic market comprising 25  genetically modified products.
  million consumers.                  

  High standard of living,            No access for hormone-treated beef
  well-educated workforce, growing    from the U.S.
  incomes. English is widely spoken.  

  Favorable dollar exchange rate.     
  ----------------------------------- -----------------------------------

SECTION II. ROAD MAP FOR MARKET ENTRY

### 

As stated above, these markets are dominated by only a few
import/wholesale/retail groups, and therefore, U.S. exporters have a
relatively easy job of locating potential buyers. However, for the same
reason, it may be difficult to get in the door. Depending on the product
and the volume, there are different ways for American exporters to
penetrate these markets:

-   retailers/wholesale groups (large quantities)

-   specialized importers/distributors (niche and select brand name and
    private label products)

-   agents (products with strong brand names)

**[Market entry strategies for U.S. food products should
include:]{.underline}**

1\) Market research in order to assess product opportunities and
existing competition.

2\) Advance calculation of the landed cost of a product in order to make
price comparisons vis-a-vis competitors.

3\) Locating an experienced distributor or independent reliable agent
with strategic distribution channels to advise on import duties,
sanitary regulations, and labeling requirements. It is advisable to
initiate personal contact in order to discuss marketing matters such as
funding for advertising, slotting allowance, in-store promotions and
tasting events. Suppliers may also want to consider trade fair
participation to raise awareness of their products.

4\) Exploration of the purchasing arrangements of the larger retail
chains.

5\) Consider using USDA's Supplier Credit Guarantee Program to made
credit terms more attractive to importers.

###### Market Structure 

The Swedish and Finnish retail food industry has long been characterized
by stability and a low degree of internationalization. However, this
picture began to change in 1999 when the Dutch retail food giant Ahold
took over a 50% interest in Sweden's leading retailer ICA. Subsequently,
there has been a wave of consolidations among retailers in the region
resulting in a Nordic, rather than domestic, focus to marketing.

Looming international competition has increased the role of volume
dynamics in the Nordic food retail sector. All major players are seeking
to minimize costs by coordinating central purchasing and taking
advantage of economies of scale. Also, Nordic retailers are aggressively
promoting the development of private label product lines.

The general trend remains unchanged in Sweden and Finland, with
hypermarkets and large supermarkets increasing sales volumes, while
small and medium-sized stores lag behind. The number of retail outlets
continues to decline, although at a somewhat slower pace. Discount
stores continue to gain market share in both Sweden and Finland.
Although their share is still modest at around 10-13%, the sector has
grown about 200% over the last ten years. Discount stores have not been
developed as extensively in Finland as in Sweden. However, this scenario
has been changing with the market entry of German hard discounter, Lidl,
into Finland in 2002. The expansion has been rapid: two years after
launch, Lidl has about 55 outlets and has grabbed a 2.7% market share in
Finland. Lidl has had a considerable effect on the Finnish food retail
market. According to a recent study by the Ministry of Trade and
Industry, the arrival of Lidl has boosted competition and pushed down
prices in the trade. The low price products have appealed to the Finnish
consumers and Finnish retailers have not been prepared for the price
competition that Lidl kicked off. As a result, retailers are opening up
their own discount units and increasing the number of products sold
under their own label \-- which provides better margins. Finland's major
retailer, Kesko, is testing a low price supermarket concept, having
opened ten stores across the country in 2004. Kesko has also expanded
its discount chain in the Baltics.

While Swedish consumers tend to be brand conscious, they also look for
branded, and other, products at discount. In September 2003, Lidl
established a presence in Sweden by simultaneously opening up 11 stores.
Sweden's major retailer, ICA, and leading Danish retailer, Dansk
Supermarked, combined forces in a 50/50 joint venture to operate Netto
discount stores in Sweden and Norway. So far, 46 Netto stores have
opened in Sweden. Axfood, the main player in the discount sector in
Sweden, has integrated several chains into the \"Willys" group, a
Swedish version of Lidl's outlets.

### 

# A. Super stores, supermarkets, hyper markets, discount stores 

###### Sweden - Company Profiles 

The Swedish wholesale and retail food market is dominated by three
nationwide groups - ICA (37.3%), Coop (18.3%) and Axfood (18.2%) --
while a fourth, Bergendahlsgruppen (2.6%), is mainly active in Southern
Sweden. Together they account for almost 80 percent of the commodity
retail market. Each group has developed a tight integration of
purchasing, importing, wholesaling, distribution and retailing. Imports
of foods are either handled by the chains themselves or through
specialized importers and agents. In the process of restructuring, these
groups have moved to centralized purchasing and are also engaged in
joint Nordic buying groups.

Nordic expansion has been high on the agenda for the three major Swedish
food retailers. The formation of Coop Norden in 2002 was the Swedish
cooperative movement's first step toward working on a pan-Nordic basis.
ICA, in turn, extended its Nordic cooperation by entering into a joint
venture with Dansk Supermarked. Axfood strengthened its ownership in
Spar Finland in 2002.

The **ICA** **Group** is one of the Nordic region's leading grocery
retail groups with stores in Scandinavia and the Baltic countries. The
ICA Group is 30% owned by ICA Forbundet Invest AB, 20% by Canica AS of
Norway and 50% by Royal Ahold of the Netherlands. In 2001, a joint
venture between ICA and the leading Danish retailer Dansk Supermarked
was formed. The 50-50 venture operates discount stores and hyper-markets
in Sweden and Norway. In 2004, ICA Baltic AB, a subsidiary of the ICA
Group, entered into a buying agreement with Finland's largest retailer
Kesko to form a 50/50 joint venture in respect of the Baltic convenience
goods market. The companies will combine operations in Estonia, Latvia
and Lithuania and expect the joint venture to be up and running in
January 2005. ICA stores accounted for 37.3% of Sweden's retail food
sales in 2003.

**COOP** **Norden** is the result of a merger of three Scandinavian
cooperatives; Coop Sweden, Danish FDB and Coop Norway in 2002. The
increase in competition from large international chains and the pace of
changes in the industry prompted this merger of cooperatives. Through
the merger, the three cooperatives can better face these challenges by
benefiting from larger buying volumes, efficiencies in distribution, a
common business development strategy and lower costs for information
technology. Coop Norden owns the biggest share of NAF International, a
buying company located in Denmark, which represents retail cooperatives
in the Nordic countries and other European countries. In Sweden, Coop
operates about 879 outlets and accounted for 18.3% of Sweden's retail
food sales in 2003.

**Axfood AB** was formed in November 1999 through the merger of Hemkop
and D&D Dagligvaror and the subsequent acquisitions of Spar Sverige,
SparInn Snabbgross and a 60% of the share capital in Spar Finland. The
organization became one of the largest food retail operations in the
Nordic countries. Axfood has 890 stores in Sweden (Hemkop, Willys,
Willys Hemma, Spar, Tempo, Vivo) and 293 stores in Finland (Spar,
EuroSpar). In 2003, Axfood had a market share of 18.2 percent and 8
percent in these countries, respectively.

# BergendahlsGruppen AB is a regional group with a strong base in the Southern part of Sweden where the market share is about 20%. Bergendahls has a total of 139 outlets (food retail, discount, supermarkets) and a market share of 2.6%. In 2002, BergendahlsGruppen entered the Stockholm market with two outlets, Eko Lanna and City Gross. The City Gross outlets have, in general, a sales area of 7,000-12,000 square meters. Bergendahls operates totally five City Gross outlets of which one of them is Sweden's largest food store. 

#  

## SWEDEN -- MAJOR FOOD RETAIL PROFILE

+-----------------+---------+-------+-------+--------+-----+---------+
| **Retailer/Type | **      | **    | **No. | **Loca | *   | **P     |
| of Outlet**     | Owner** | Sales | of**  | tion** | *Mk | urch/** |
|                 |         | C     |       |        | t** |         |
|                 | *       | Y03** | *     |        |     | **Agent |
|                 | *ship** |       | *Outl |        | **S | Type**  |
|                 |         | **(\$ | ets** |        | har |         |
|                 |         | Mi    |       |        | e** |         |
|                 |         | ll)** |       |        |     |         |
+-----------------+---------+-------+-------+--------+-----+---------+
| ICA AB          | S       | 9,260 | 1,791 | Sweden | 3   | Direct/ |
|                 | wedish/ |       |       |        | 7.3 |         |
| -food retail    |         |       |       | Norway |     | im      |
|                 | Nor     |       |       |        |     | porter/ |
| -supermarkets   | wegian/ |       |       | D      |     |         |
|                 |         |       |       | enmark |     | who     |
| -hyper-markets  | Dutch   |       |       |        |     | lesaler |
|                 |         |       |       | E      |     |         |
| -gas            |         |       |       | stonia |     |         |
| ma              |         |       |       |        |     |         |
| rts/convenience |         |       |       | Latvia |     |         |
|                 |         |       |       |        |     |         |
| -discount       |         |       |       | Lit    |     |         |
| (joint)         |         |       |       | huania |     |         |
+-----------------+---------+-------+-------+--------+-----+---------+
| Coop            | Swedish | 4,538 | 879   | Sweden | 1   | Direct/ |
|                 |         |       |       |        | 8.3 |         |
| -food retail    | No      |       |       | Norway |     | im      |
|                 | rwegian |       |       |        |     | porter/ |
| -gas            |         |       |       | D      |     |         |
| ma              | Danish  |       |       | enmark |     | who     |
| rts/convenience |         |       |       |        |     | lesaler |
|                 |         |       |       |        |     |         |
| -supermarkets   |         |       |       |        |     |         |
|                 |         |       |       |        |     |         |
| -hyper-markets  |         |       |       |        |     |         |
|                 |         |       |       |        |     |         |
| -department     |         |       |       |        |     |         |
| stores          |         |       |       |        |     |         |
+-----------------+---------+-------+-------+--------+-----+---------+
| Axfood          | S       | 4,519 | 890   | Sweden | 1   | Direct/ |
|                 | wedish/ |       |       |        | 8.2 |         |
| -food retail    |         |       |       | F      |     | im      |
|                 | Finnish |       |       | inland |     | porter/ |
| -convenience    |         |       |       |        |     |         |
|                 |         |       |       | Norway |     | who     |
| -discount       |         |       |       |        |     | lesaler |
| stores          |         |       |       | D      |     |         |
|                 |         |       |       | enmark |     |         |
| -supermarkets   |         |       |       |        |     |         |
|                 |         |       |       |        |     |         |
| -gas            |         |       |       |        |     |         |
| ma              |         |       |       |        |     |         |
| rts/convenience |         |       |       |        |     |         |
+-----------------+---------+-------+-------+--------+-----+---------+
| Ber             | Swedish | 656   | 129   | So     | 2.6 | Direct/ |
| gendahlsGruppen |         |       |       | uthern |     |         |
|                 |         |       |       |        |     | im      |
| -food retail    |         |       |       | Sweden |     | porter/ |
|                 |         |       |       |        |     |         |
| -discount       |         |       |       | St     |     | who     |
| stores          |         |       |       | ockhlm |     | lesaler |
|                 |         |       |       |        |     |         |
| -supermarkets   |         |       |       |        |     |         |
+-----------------+---------+-------+-------+--------+-----+---------+
| Netto           | Danish/ | 87    | 28    | D      | 0.3 | Direct/ |
|                 |         |       |       | enmark |     |         |
| -discount       | Swedish | (     |       | Sweden |     | im      |
| stores          |         | est.) |       |        |     | porter/ |
|                 |         |       |       |        |     |         |
|                 |         |       |       |        |     | who     |
|                 |         |       |       |        |     | lesaler |
+-----------------+---------+-------+-------+--------+-----+---------+
| Lidl            | German  | 33    | 28    | Sweden | 0.1 | Direct/ |
|                 |         |       |       |        |     |         |
| -hard discount  |         | (     |       | F      |     | im      |
| stores          |         | est.) |       | inland |     | porter/ |
|                 |         |       |       |        |     |         |
|                 |         |       |       | Norway |     | who     |
|                 |         |       |       |        |     | lesaler |
+-----------------+---------+-------+-------+--------+-----+---------+

###### 

###### Finland - Company Profiles

A few central wholesalers (K-Group, S-Group, Tradeka/Elanto, Spar Group)
together dominate the food industry with an aggregate market share of
nearly 80%. These chains have closely knit wholesale and retail
arrangements comprising a compact and efficient goods delivery system
and a nationwide network of retail shops as well as department stores
and supermarkets. They also have hotel and restaurant chains and
catering services. The centralized system makes distribution economical;
purchases from abroad can be made in viable quantities considering the
relatively small size of the market. Almost one-third of the total
wholesale trade in Finland is transacted through these wholesale
organizations.

The year 2003 was characterized by increasingly intensifying competition
in the Finnish food retail market as the Finnish retail chains responded
to the entry of international competitors. At the same time, private
label products increased their share in all retail chains. Retail prices
have fallen as inflation remains low.

Retailers have reacted to the price competitive market and to the German
hard discounter Lidl's rapid expansion in Finland by lowering prices of
their private label brands and by offering services such as bakeries,
cafeterias, fresh meat and fish service points that aren't offered by
discounters such as Lidl.

**KESKO** is the leading trading company in Finland. It consists of the
parent company Kesko Ltd. and its four subsidiaries of which Kesko Food
Ltd. is the largest. The key businesses of Kesko Food Ltd. are the chain
operations of the K-Food stores in Finland, Kespro's catering sales to
HRI customers and wholesaling and retailing in the Baltic countries. The
K-food stores are privately owned and buy most of their products from
the Kesko wholesale organization. Centralized purchasing provides a
competitive advantage by creating volume and synergy benefits. Also,
Kesko works in cooperation with major European food chains in AMS
(Associated Marketing Service). Total sales of the Kesko-affiliated
retailers accounted for 35.8% of retail food sales in Finland in 2003
via about 1,110 outlets. Kesko continues to expand its operations in the
Nordic and Baltic countries. In the Baltic food trade, Kesko recently
combined the present operations with the Swedish ICA AB and the joint
venture will start operations in 2005.

**S-GROUP**

The S-Group and Tradeka/Elanto Group represent the cooperative movement
in Finland. The S-Group consists of member-owned regional cooperative
societies and their subsidiaries and the Finnish Cooperative Wholesale
Society (SOK). The S-Group operates Citysokos department stores,
S-Market supermarkets, Prisma hypermarkets, Sale and Alepa grocery
stores, ABC service stations, hotels and restaurants, hardware and
agricultural stores as well as several specialty stores. The S-Group's
grocery store chains, Prisma, S-market and Sale/Alepa have, during
recent years, been extremely successful. This success can be measured by
a market share increase from 15.9% in 1990 to 31.1% in 2003. Through its
subsidiaries and associated companies, the S-Group also conducts food
trade in the Baltic countries.

**TRADEKA** is a national retail company that co-operated with the
Elanto Group in the greater Helsinki area until the end of 2003. As a
result of Elanto Group's withdrawal from its co-operation with Tradeka,
Elanto handed over its 44 Siwa outlets and three Valintatalo stores to
Tradeka. As of the beginning of 2004, Tradeka's store brands consist of
Siwa, Valintatalo and Euromarket with a total of 560 shops. Tradeka had
a market share of 9.7% in 2003.

**SPAR Finland** is a subsidiary of the Swedish food retail company
Axfood AB. The Spar Group is a nationwide chain of food retail stores
comprising 282 Spar and 11 Eurospar stores, of which 84 are owned by
Spar Finland. Due to the fierce competition in the Finnish food retail
market in 2003, Spar Finland's market share dropped to 7.4% compared to
8.1% in 2002. Like most other Finnish food retailers, Spar Finland has
considered establishing a hard-discounter concept, after converting the
soft-discounter Rabatti stores into Spar stores. Also, Spar Finland is
increasing their cooperation with Axfood in areas of joint purchasing
and private label products.

**LIDL,** the German hard discounter, entered the Finnish market by
simultaneously opening up ten outlets around the country in August 2002.
At the beginning of 2004, Lidl had 55 outlets throughout Finland and an
estimated market share of 2.7%. Lidl's entry into the Finnish market has
undoubtedly increased competition in the Finnish food retail sector. The
low-priced products appeal to the Finnish consumer; Finnish retailers
were not prepared for the price competition set off by Lidl. According
to a market survey, Lidl's products are priced at about 10-15% below the
average Finnish food prices and about 80% are private label products.

**[FINLAND -- MAJOR FOOD RETAIL PROFILE]{.underline}**

+---------------+--------+--------+-------+---------+-----+-----------+
| **            | **O    | *      | **No. | **Loc   | *   | **Purc    |
| Retailer/Type | wner** | *Sales | of**  | ation** | *Mk | hasing/** |
| of Outlet**   |        | CY03** |       |         | t** |           |
|               | **     |        | *     |         |     | **Agent   |
|               | ship** | (\$    | *Outl |         | **S | Type**    |
|               |        | Mill.) | ets** |         | har |           |
|               |        |        |       |         | e** |           |
+---------------+--------+--------+-------+---------+-----+-----------+
| Kesko         | F      | 4,638  | **1,  | Finland | 3   | Direct/   |
| (K-Group)     | innish |        | 094** |         | 5.8 |           |
|               |        |        |       | Sweden  |     | importer/ |
| \-            |        |        |       |         |     |           |
| hyper-markets |        |        |       | (ha     |     | w         |
|               |        |        |       | rdware) |     | holesaler |
| \- dept       |        |        |       |         |     |           |
| stores        |        |        |       | Estonia |     | (Ru       |
|               |        |        |       |         |     | okakesko) |
| \-            |        |        |       | Latvia  |     |           |
| supermarkets  |        |        |       |         |     |           |
|               |        |        |       | Li      |     |           |
| \-            |        |        |       | thuania |     |           |
| self-service  |        |        |       |         |     |           |
|               |        |        |       |         |     |           |
| \- small      |        |        |       |         |     |           |
| shops         |        |        |       |         |     |           |
|               |        |        |       |         |     |           |
| \- discount   |        |        |       |         |     |           |
| stores        |        |        |       |         |     |           |
+---------------+--------+--------+-------+---------+-----+-----------+
| S-Group       | F      | 4,034  | **    | Finland | 3   | Importer/ |
|               | innish |        | 668** |         | 1.1 |           |
| \-            |        |        |       | Estonia |     | w         |
| hyper-markets |        |        |       |         |     | holesaler |
|               |        |        |       | Latvia  |     |           |
| \- dept       |        |        |       |         |     | (Inex)    |
| stores        |        |        |       | Li      |     |           |
|               |        |        |       | thuania |     |           |
| \-            |        |        |       |         |     |           |
| supermarkets  |        |        |       |         |     |           |
|               |        |        |       |         |     |           |
| \-            |        |        |       |         |     |           |
| self-service  |        |        |       |         |     |           |
|               |        |        |       |         |     |           |
| \- small      |        |        |       |         |     |           |
| shops         |        |        |       |         |     |           |
|               |        |        |       |         |     |           |
| \- discount   |        |        |       |         |     |           |
| stores        |        |        |       |         |     |           |
+---------------+--------+--------+-------+---------+-----+-----------+
| Tradeka       | F      | 1,623  | **    | Finland | 1   | Importer/ |
|               | innish |        | 602** |         | 2.7 |           |
| \-            |        |        |       | Estonia |     | w         |
| hyper-markets |        |        |       |         |     | holesaler |
|               |        |        |       | Latvia  |     |           |
| \- dept       |        |        |       |         |     | (Inex)    |
| stores        |        |        |       | Li      |     |           |
|               |        |        |       | thuania |     |           |
| \-            |        |        |       |         |     |           |
| supermarkets  |        |        |       |         |     |           |
|               |        |        |       |         |     |           |
| \-            |        |        |       |         |     |           |
| self-service  |        |        |       |         |     |           |
|               |        |        |       |         |     |           |
| \- small      |        |        |       |         |     |           |
| shops         |        |        |       |         |     |           |
+---------------+--------+--------+-------+---------+-----+-----------+
| Spar Group    | S      | 957    | **    | Finland | 7.4 | Importer/ |
|               | wedish |        | 293** |         |     |           |
| \- dept       |        |        |       | Sweden  |     | w         |
| stores        | F      |        |       |         |     | holesaler |
|               | innish |        |       |         |     |           |
| \-            |        |        |       |         |     | (Tuko     |
| supermarkets  |        |        |       |         |     | L         |
|               |        |        |       |         |     | ogistics) |
| \-            |        |        |       |         |     |           |
| self-service  |        |        |       |         |     |           |
|               |        |        |       |         |     |           |
| \- small      |        |        |       |         |     |           |
| shops         |        |        |       |         |     |           |
+---------------+--------+--------+-------+---------+-----+-----------+
| Wihuri        | F      | 622    | **    | Finland | 4.8 | Importer/ |
|               | innish |        | 558** |         |     |           |
| \-            |        |        |       |         |     | w         |
| supermarkets  |        |        |       |         |     | holesaler |
|               |        |        |       |         |     |           |
| \-            |        |        |       |         |     | (Tuko     |
| hypermarkets  |        |        |       |         |     | L         |
|               |        |        |       |         |     | ogistics) |
| \- small      |        |        |       |         |     |           |
| shops         |        |        |       |         |     |           |
+---------------+--------+--------+-------+---------+-----+-----------+
| Stockmann     | F      | 191    | **6** | Finland | 1.5 | Importer/ |
|               | innish |        |       |         |     |           |
| \- dept       |        |        |       | Baltics |     | W         |
| stores        |        |        |       | Russia  |     | holesaler |
|               |        |        |       |         |     |           |
|               |        |        |       |         |     | (Tuko     |
|               |        |        |       |         |     |           |
|               |        |        |       |         |     | L         |
|               |        |        |       |         |     | ogistics) |
+---------------+--------+--------+-------+---------+-----+-----------+
| Lidl          | German | 233    | *     | Finland | 1.8 | Importer/ |
|               |        |        | *50** |         |     |           |
| \- hard       |        |        |       | Sweden  |     | w         |
| discount      |        |        |       |         |     | holesaler |
|               |        |        |       | Norway  |     |           |
+---------------+--------+--------+-------+---------+-----+-----------+

**INEX** **PARTNERS OY** is a joint venture owned on a fifty-fifty basis
by the S-Group and Tradeka/Elanto. Inex Partners OY specializes in the
sourcing of groceries and the provision of logistic services for the
retail chains operated by the S-Group, Tradeka and Elanto.

**TUKU LOGISTICS** is a purchasing and logistics company owned by
Wihuri, Spar Finland, Stockmann and Heinon Tukku.

**B. Convenience Stores, Gas Marts, Kiosks**

###### Entry Strategy

The convenience sector offers more limited opportunities for the U.S.
exporter, but certain products could sell well via such outlets. Most of
the convenience stores belong to established retail chains, and the same
large wholesalers/retailers are suppliers to the convenience sector. Gas
marts are either affiliated with gasoline companies or with the large
retail food distribution groups. New-to-market exporters should target
this sector in the same way as described under the entry strategy
section for supermarkets.

###### Market Structure

**Convenience stores** have been in a continued decline in Sweden and
Finland for the last couple of years, mostly due to tough competition
from gas marts and the fact that supermarkets have progressively
increased their opening hours to equal those of the convenience stores.
However, several of the large retail chains are starting a network of
convenience stores with a large range of ready-made-meals as a
complement to their larger outlets, and thus, can push prices down.
These stores are especially popular in larger cities, where
time-pressured lifestyles predominate. Another positive trend for
convenience stores is the increasing number of one-person households who
do most of their grocery shopping in smaller stores and consume more
ready-meals and other convenience foods. In Finland, opening hours for
stores of under 400 sqm were extended in 2001. This has prompted
somewhat of a renaissance for small convenience stores. In 2003, grocery
sales in convenience stores reached \$754 million in Sweden and \$201
million in Finland.

**Gas marts** continue to gain market share in Sweden and Finland, but
at a somewhat lower pace. Sales through this channnel, which saw rapid
growth throughout the 1990s, have begun to slow down. The emergence of
discount outlets with long opening hours, low prices and locations close
to main roads has increased competition. Fast food is the fastest
growing section in gas marts. The major food retailers have recognized
this trend and have focused on expanding the range of products
available. In 2003, total sales of grocery products in gas marts in
Sweden amounted to USD 1.5 billion, or about 6% of total retail food
sales. In Finland, sales reached USD 102 million in 2003.

**Kiosks** offer limited items such as snacks, sweets, cigarettes and
magazines. The Rautakirja R-Kioski is Finland's leading kiosk chain and
convenience outlet concept, where kiosks still have 3.5% of total
grocery sales. In recent years, R-Kioski has moved to selling more
convenience products and enlarging the kiosks to fit changing customer
needs. The chain comprises a total of 713 R-Kiosks in Finland and 200 in
Estonia. Rautakirja's involvement in Latvia derives from its 50% holding
in Narvesen Baltija SIA. Narvesen Baltija is jointly owned by the
Norwegian Reitan Narvesen and operates around 500 kiosks in Latvia.

#### 

## SWEDEN - MAJOR GAS MARTS AND CONVENIENCE STORES

+-----------+-----------+----------+-----------+-----------+-----------+
| *         | **Ow      | 2003     | **No. of  | **L       | **P       |
| *Retailer | nership** | Grocery  | Outlets** | ocation** | urchasing |
| Name/     |           |          |           |           | Agent     |
| Outlet    |           | *        |           |           | Type**    |
| Type**    |           | *Sales** |           |           |           |
|           |           |          |           |           |           |
|           |           | **(US\$  |           |           |           |
|           |           | mi       |           |           |           |
|           |           | llion)** |           |           |           |
+-----------+-----------+----------+-----------+-----------+-----------+
| St        | St        | 569      | 517       | Sweden    | Wh        |
| atoil/ICA | atoil/ICA |          |           |           | olesaler/ |
| Express,  |           |          |           | Norway    |           |
| gas mart  | (N        |          |           |           | importer  |
|           | orwegian/ |          |           | Denmark   |           |
|           |           |          |           |           | (ICA)     |
|           | Swedish)  |          |           |           |           |
+-----------+-----------+----------+-----------+-----------+-----------+
| OK/Q8,    | Swedish/  | 383      | 573       | N         | Wh        |
| gas mart  |           |          |           | ationwide | olesaler/ |
|           | Kuwait    |          |           |           |           |
|           |           |          |           |           | importer  |
|           | Petroleum |          |           |           |           |
|           |           |          |           |           | (Axfood)  |
+-----------+-----------+----------+-----------+-----------+-----------+
| Select,   | Swedish   | 287      | 383       | N         | Wh        |
| gas mart  | Shell     |          |           | ationwide | olesaler/ |
|           |           |          |           |           |           |
|           | (Dutch/   |          |           |           | importer  |
|           |           |          |           |           |           |
|           | Swedish)  |          |           |           | (Axfood)  |
+-----------+-----------+----------+-----------+-----------+-----------+
| Preem,    | S         | 171      | 135       | N         | Wh        |
| gas mart  | audi/Swed |          |           | ationwide | olesaler/ |
|           |           |          |           |           |           |
|           |           |          |           |           | importer  |
|           |           |          |           |           |           |
|           |           |          |           |           | (Axfood)  |
+-----------+-----------+----------+-----------+-----------+-----------+
| Pr        | Reitan    | 266      | 329       | Sweden    | Wh        |
| essbyran, |           |          |           |           | olesaler/ |
|           | /Narvesen |          |           | Norway    |           |
| co        |           |          |           |           | importer  |
| nvenience | (N        |          |           | Latvia    |           |
|           | orwegian) |          |           |           | (ICA)     |
+-----------+-----------+----------+-----------+-----------+-----------+
| Handlarn, | Axfood    | 173      | 225       | N         | Wh        |
|           |           |          |           | ationwide | olesaler/ |
| co        | (Swedish) |          |           |           |           |
| nvenience |           |          |           |           | importer  |
|           |           |          |           |           |           |
|           |           |          |           |           | (Axfood)  |
+-----------+-----------+----------+-----------+-----------+-----------+
| 7-Eleven, | Reitan    | 73       | 74        | Sweden    | Wh        |
|           |           |          |           |           | olesaler/ |
| co        | /Narvesen |          |           | Norway    |           |
| nvenience |           |          |           |           | importer  |
|           | (N        |          |           | Denmark   |           |
|           | orwegian) |          |           |           | (ICA)     |
+-----------+-----------+----------+-----------+-----------+-----------+
| NaraDej,  | ICA       | 55       | 27        | N         | Wh        |
|           |           |          |           | ationwide | olesaler/ |
| co        | (Swedish) |          |           |           |           |
| nvenience |           |          |           |           | importer  |
|           |           |          |           |           |           |
|           |           |          |           |           | (ICA)     |
+-----------+-----------+----------+-----------+-----------+-----------+

Source: Supermarket 2004

In Finland, the four largest gas marts are Select (Shell), Snack & Shop
(Esso), Quick Shop (Neste) and Teboil. They accounted for over 80% of
total gas mart sales of grocery products in 2003.

####### 

####### Leading Gas Marts' Share of Food/Goods Sales in Finland in 2003:

+------------------------------------------+---------------------------+
| **Gas Marts**                            | **Market**                |
|                                          |                           |
| **Finland**                              | **Share**                 |
|                                          |                           |
|                                          | **%**                     |
+------------------------------------------+---------------------------+
| Neste                                    | 13.7                      |
+------------------------------------------+---------------------------+
| Shell                                    | 33.4                      |
+------------------------------------------+---------------------------+
| Teboil                                   | 8.5                       |
+------------------------------------------+---------------------------+
| Esso                                     | 30.8                      |
+------------------------------------------+---------------------------+
| Others                                   | 13.6                      |
+------------------------------------------+---------------------------+
| Total                                    | 100.0                     |
+------------------------------------------+---------------------------+

Source: Euromonitor

C. Traditional Markets - Small Independent Grocery Stores

The small \"gourmet food\" grocery stores offer limited possibilities
for U.S. exporters. These stores are usually located in larger cities
and sometimes carry a wide range of imported products, but they tend to
buy in very small quantities.

SECTION III. COMPETITION

European Union (EU) member states provide the main competition to U.S.
consumer-oriented food imports. EU-origin products have a natural
advantage in many product categories simply because they enter Sweden
and Finland duty free, while American exporters have to face the EU's
external duty/tariff structure as well as non-tariff barriers to trade
(e.g. beef hormone ban, sanitary restrictions on poultry and GMO
policies).

###### A. Sweden's Imports of Consumer-Oriented Agricultural Products in 2003

+----------------------+-----------+-----------+-----------+---------+
| **Country**          | **Import  | **Import  | **Import  | **M     |
|                      | 2001**    | 2002**    | 2003**    | arket** |
| **Sweden**           |           |           |           |         |
|                      | **(\      | **(\      | **(\      | **      |
|                      | $1,000)** | $1,000)** | $1,000)** | Share** |
|                      |           |           |           |         |
|                      |           |           |           | **%**   |
+----------------------+-----------+-----------+-----------+---------+
| Denmark              | 597,536   | 738,040   | 901,888   | 20      |
+----------------------+-----------+-----------+-----------+---------+
| Netherlands          | 633,425   | 629,321   | 767,653   | 17      |
+----------------------+-----------+-----------+-----------+---------+
| Germany              | 331,001   | 413,701   | 492,231   | 11      |
+----------------------+-----------+-----------+-----------+---------+
| Italy                | 190,881   | 226,162   | 281,446   | 6       |
+----------------------+-----------+-----------+-----------+---------+
| Spain                | 179,905   | 227,202   | 278,904   | 6       |
+----------------------+-----------+-----------+-----------+---------+
| France               | 192,152   | 211,078   | 251,851   | 6       |
+----------------------+-----------+-----------+-----------+---------+
| Finland              | 112,677   | 143,900   | 172,508   | 5       |
+----------------------+-----------+-----------+-----------+---------+
| Ireland              | 103,777   | 125,099   | 164,559   | 4       |
+----------------------+-----------+-----------+-----------+---------+
| Belgium              | 114,798   | 147,272   | 162,872   | 4       |
+----------------------+-----------+-----------+-----------+---------+
| United Kingdom       | 123,798   | 141,599   | 147,137   | 3       |
+----------------------+-----------+-----------+-----------+---------+
| Norway               | 61,020    | 81,446    | 81,522    | 2       |
+----------------------+-----------+-----------+-----------+---------+
| #                    | *         | *         | *         | **2**   |
|                      | *81,781** | *73,247** | *73,326** |         |
| # United States      |           |           |           |         |
+----------------------+-----------+-----------+-----------+---------+
| Poland               | 27,417    | 35,774    | 59,779    | 1       |
+----------------------+-----------+-----------+-----------+---------+
| Panama               | 27,390    | 57,391    | 51,540    | 1       |
+----------------------+-----------+-----------+-----------+---------+
| Austria              | 29,593    | 40,064    | 45,335    | 1       |
+----------------------+-----------+-----------+-----------+---------+
| Other                | 346,441   | 388,142   | 475,151   | 11      |
+----------------------+-----------+-----------+-----------+---------+
| World                | 3,062,007 | 3,679,515 | 4,406,854 | 100     |
+----------------------+-----------+-----------+-----------+---------+

Note: Imports from the U.S. are understated due to transit trade via
other EU countries such as the Netherlands and Germany.

###### B. Finland's Imports of Consumer-Oriented Agricultural Products in 2003

+----------------------+-----------+-----------+-----------+---------+
| **Country**          | **Import  | **Import  | **Import  | **M     |
|                      | 2001**    | 2002**    | 2003**    | arket** |
| **Finland**          |           |           |           |         |
|                      | **(\      | **(\      | **(\      | **      |
|                      | $1,000)** | $1,000)** | $1,000)** | Share** |
|                      |           |           |           |         |
|                      |           |           |           | **%**   |
+----------------------+-----------+-----------+-----------+---------+
| Sweden               | 192,357   | 214,960   | 247,168   | 14      |
+----------------------+-----------+-----------+-----------+---------+
| Germany              | 117,501   | 37,735    | 233,694   | 13      |
+----------------------+-----------+-----------+-----------+---------+
| Netherlands          | 147,750   | 154,521   | 191,058   | 11      |
+----------------------+-----------+-----------+-----------+---------+
| Spain                | 114,563   | 126,506   | 154,215   | 9       |
+----------------------+-----------+-----------+-----------+---------+
| France               | 125,752   | 135,713   | 150,922   | 9       |
+----------------------+-----------+-----------+-----------+---------+
| Denmark              | 114,060   | 111,474   | 129,267   | 7       |
+----------------------+-----------+-----------+-----------+---------+
| Belgium              | 59,822    | 61,460    | 74,948    | 4       |
+----------------------+-----------+-----------+-----------+---------+
| Italy                | 57,809    | 61,452    | 74,413    | 4       |
+----------------------+-----------+-----------+-----------+---------+
| Costa Rica           | 27,891    | 43,518    | 57,059    | 3       |
+----------------------+-----------+-----------+-----------+---------+
| United Kingdom       | 43,260    | 48,432    | 51,216    | 3       |
+----------------------+-----------+-----------+-----------+---------+
| Ireland              | 29,612    | 38,436    | 49,221    | 3       |
+----------------------+-----------+-----------+-----------+---------+
| #                    | *         | *         | *         | **2**   |
|                      | *26,818** | *23,778** | *31,744** |         |
| # United States      |           |           |           |         |
+----------------------+-----------+-----------+-----------+---------+
| Brazil               | 24,829    | 25,678    | 30,567    | 2       |
+----------------------+-----------+-----------+-----------+---------+
| South Africa         | 13,037    | 18,027    | 27,352    | 2       |
+----------------------+-----------+-----------+-----------+---------+
| Chile                | 11,838    | 15,378    | 20,840    | 1       |
+----------------------+-----------+-----------+-----------+---------+
| Other                | 197,472   | 205,491   | 247,747   | 14      |
+----------------------+-----------+-----------+-----------+---------+
| World                | 1,309,258 | 1,424,325 | 1,771,493 | 100     |
+----------------------+-----------+-----------+-----------+---------+

Note: Imports from the U.S. are understated due to transit trade via
other EU countries such as the Netherlands and Germany.

SECTION IV. BEST PRODUCT PROSPECTS

**A. [Products Present in the Markets Which Have Good Sales
Potential]{.underline}**

Fish and Seafood

Tree Nuts

Dried Fruit

Wine

Beer

Fruit Juice

Processed Fruits & Vegetables

Sauces/Seasonings

Pancake/Cake Mixes

Rice (most U.S. rice currently packaged in other European countries)

Confectionery

B. Products Not Present in Significant Quantities but Which Have Good
Sales Potential

Fresh Fruits and Vegetables

Organic Food

Ethnic Food

Snack Food

Niche Market/Specialty Food Products

Frozen Food

Rice Mixes

Vegetarian Food

Ready-Made/Convenience Meals

Pet Food

Non-Hormone Treated Beef

###### C. Products Not Present Because they Face Significant Barriers

Hormone Treated Beef (EU hormone ban)

Poultry (sanitary restrictions)

######## SECTION V. POST CONTACT AND FURTHER INFORMATION

Foreign Agricultural Service

American Embassy

Dag Hammarskjolds Vag 31

S-115 89 STOCKHOLM, Sweden

Tel: (46-8) 783 5390

Fax: (46-8) 662 8495

Email: agstockholm@usda.gov

For further information on exporting U.S. agricultural products to
Sweden, please visit the FAS/Stockholm home page at:
[http://www.usemb.se/Agriculture]{.underline}.