CEO's message

2022 was a turbulent year, to say the least. When the pandemic restrictions were lifted early in the year, we saw customer traffic increase again as people returned to their offices and physical stores. Cafés and restaurants recovered, and customers resumed cross-border shopping as the restrictions on travel from Norway to Sweden were lifted.

In late February, Ukraine was invaded by Russia, which added to the wave of challenges after the pandemic, including a shortage of raw materials, higher energy and fuel prices, supply chain restrictions, and major difficulties in securing a stable product supply – all of these factors contributed to a sharp increase in food price inflation, which soared to unprecedented levels. As a result of higher household expenses, consumer purchasing patterns changed. Value for money became increasingly important, and it was clear that many people were searching for low price and campaign products. Unfortunately, we also noted that consumers increasingly chose not to purchase sustainability-labelled products, which often have a higher price since they are generally more expensive to produce. As a result of this new customer behaviour and the new conditions that emerged during the year, we worked to continue developing our offering and to be become even more flexible in how we respond to changes in demand.

A successful year of powerful growth

Over the past year, Axfood grew more than twice as much as the overall market. I consider this gratifying evidence that our customers appreciate our concepts and our offering. Operating profit improved as a result of sharp growth in like-for-like sales, while profitability declined slightly. The frequent price increases announced by our suppliers during the year have not been fully reflected in prices for consumers, which – along with growing customer demand for campaign products and higher logistics costs – had a negative impact on the operating margin.

Axfood family strengthens position

The Axfood Group consists of a number of distinctive concepts working in collaboration. It is thanks to the differences between our concepts that we can make a difference and leverage the opportunities that arise from consumers’ increasingly disparate needs. During the last year, all of our concepts performed well and strengthened their market positions.

Willys, the leading player in the discount segment, delivered an excellent performance, with exceptionally high growth. A growing number of consumers have come to appreciate Willys’ offering, and Willys’ loyalty programme now has more than three million members. This success is the result of many years of development with a focus on establishing clarity, optimising operations and maintaining a high pace in modernising stores.

As pandemic-related travel restrictions were lifted and cross-border shopping recovered, Eurocash benefited from recent investments in its stores and concepts, and exceeded its pre-pandemic sales figures during the second half of the year. In the traditional grocery segment, Hemköp captured market share, and the rate of investment in the business was accelerated in order to continue strengthening the concept, primarily by modernising the store base. The Snabbgross wholesale business delivered another strong year of powerful growth, and Snabbgross Club was expanded, making this unique, member-based concept even more available to private customers.

Our development companies also made important progress Apohem grew at an impressive rate and continued to capture market share in the online pharmacy market. Middagsfrid, which offers meal kits online, developed a new and more flexible customer offering, and the Urban Deli restaurant chain recovered after the pandemic. Overall, our development companies represent exciting growth opportunities with the potential to contribute innovative approaches to other operations in the Axfood Group.

Our purchasing and logistics company Dagab maintained a very high activity rate during the year and, while also navigating challenges related
CEO’S MESSAGEto the supply chain and assortment, made major strides when it came to further strengthening the offering of affordable, good and sustainable food. Development is carried out continually based on the positioning of each brand in order to create a distinctive, efficient and sustainable assortment that also paves the way for healthier food habits. During the year, Dagab launched many new and exciting products that gave consumers even more reason to shop with us, with a focus on meal solutions and innovative protein sources.

Pace of change remains high

During 2022, while simultaneously managing the current market situation and higher customer traffic, we also continued to maintain a high tempo in our investments in the future. We develop innovative solutions to ensure efficiency and create value for us and our customers, with the ambition to be a leader in the development of the simplest and best food experiences.

Within the Group, we are currently working on numerous Group-wide development projects. We are optimising our way of working in our stores, introducing new systems that simplify and enhance the efficiency of store operations. We are making investments to create a more attractive customer offering by establishing better conditions for planning and optimising prices, campaigns and the assortment. And we are further developing the digital customer meeting to make it more relevant and to inspire customers to shop with us.

To strengthen our position in the pure-play online retail segment, we became the second largest owner of Mathem, with a shareholding of 16.5%, in conjunction with the divestment of Mat.se to Mathem in exchange for newly issued shares in Mathem. This transaction creates synergies and scale, and should be regarded as a complement to our other e-commerce offerings, mainly through Willys and Hemköp.

However, the largest investments we are currently making are focused on becoming more competitive in our underlying logistics operations. Over the past year, we officially opened our new, larger nationwide fruit and vegetable warehouse in Landskrona as a step in further streamlining our logistics operations and accommodating future volume growth. We also reached a milestone in the establishment of our new, highly automated logistics centre in Bålsta, which serves both our stores and online sales, when the first deliveries from suppliers were received. I visited the logistics centre earlier this winter to see the first pallets being loaded in the warehouse, and I must say that it was fantastic to see that we are now starting to gradually implement automation after several years of investments and great efforts within the Group. Just recently, we passed yet another milestone when it was time for the first deliveries of the dry assortment to stores after thorough testing of all flows.

In parallel with making important progress in our extensive development projects, we also integrated Axfood’s largest ever acquisition. When we announced the acquisition of Bergendahls Food and partnership with City Gross in 2021, we made food retail history. During 2022, we integrated the operations with Dagab, and converted all City Gross stores to Axfood’s systems and processes. We can now start to benefit from this transaction, and it is clear that it will make us and City Gross significantly more competitive.

Taking the lead in promoting a sustainable food system

Sustainability issues are an important part of all areas of our Group. We are challengers, leading the way when it comes to reducing the environmental impact of food in the value chain that we are part of, and our aim is to become the strongest driving force for sustainable food in Sweden.

Over the past year, we continued working to reduce our impact on the climate and biodiversity, offering consumers sustainable and healthy products, and minimising food waste. We also made major strides in our work related to gender equality, inclusion and diversity. We increased the pace of our efforts to reduce our electricity consumption and become more energy efficient, continued to invest in rooftop solar panels on our stores and warehouses, and increased our share of fossil-free transports.

With a year like this, changes in consumer purchasing behaviour had an adverse impact on sustainable consumption and our sales of sustainable products. This development concerns me. Transitioning to a more sustainable future is a high priority for Axfood, and we will continue maintain a high level of ambition.

Attractive and improved prospects

Looking back over 2022, I can humbly state that we have left another very strong year behind us. In a challenging time for households, more and more customers have come to appreciate our offering, and all our concepts strengthened their market positions. We are identifying change, adapting to change and initiating change ourselves, and by doing so we are creating opportunities for growth. At the same time, we are making progress in our own operations and in the development of the food system that we are part of, and we have continued to make investments and work toward strengthening our long-term competitiveness.

I'm proud of how we navigated this market together, with a sense of responsibility and with our sights set on ensuring high accessibility of affordable, good and sustainable food, to create a better quality of life for everyone. I would therefore like to take this opportunity to thank all of the Group’s employees for their commitment and important efforts. Together we are strong, and we show this time and time again.

 

Stockholm, February 2023

Klas Balkow
President and CEO