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Norgesgruppen Bets on Discount, Forecourt Stores and Online

Norgesgruppen’s Kiwi discount chain continued to be its star performer in 2016 and will be the main expansion banner going forward. This was disclosed in the Norwegian grocery leader’s annual report for 2016, which also showed an overall turnover increase of 5.17% to NOK76.22bn (EUR8.20bn). EBITDA amounted to NOK4.85bn (EUR522mn). Twenty five new stores are planned for the Kiwi banner this year, after which expansion is expected to slow down, according to the Chain Director, Jan Paul Bjørkøy.

Instead, forecourt stores and grocery e-commerce offer new future growth channels. The retailer introduced its Deli de Luca convenience store concept to 65 of the 107 Esso petrol stations where it acquired the rights to sell groceries last year. Both its Meny and Spar supermarkets launched e-commerce platforms last year and the plan is to achieve close to country-wide e-commerce reach through Meny this year.


Opinion

Good Choice of Growth Channels

As price remains a vital competitive factor in Norway and with Kiwi's like-for-like growth staying strong, it makes sense for Norgesgruppen to keep investing its discount chain. Seeing as it is already a very soft discount concept, it will require little from the retailer to progressively turn the stores into neighbourhood supermarkets, in line with changing shopper preferences.

Kiwi already has vast coverage within the country and Norgesgruppen clearly wants to avoid cannibalization, which explains its decision to slow down the chain’s expansion. The focus of competitors Coop Norge and Reitan (Rema 1000) on the discount channel has most likely also influenced its plans. The latter has shown tendencies of going in the opposite direction of the other two by delisting several large suppliers. In the long run this might present difficulties for Kiwi in its aim to remain a price challenger, given Reitan’s increased efficiencies and focused buying volumes.

In the grocery e-commerce field Norgesgruppen is up against several pureplayers focusing either on food-box subscriptions or bulk orders. According to LZ Retailytics figures the eight largest of these reached a turnover of around NOK1.4bn (EUR152.6mn) in 2016. Meny’s fresh grocery image and click & collect stations will likely allow it to fare well against the competition. In particular, the decision to allow shoppers to pick up their orders at several Deli de Luca/Esso forecourt stores makes the latter a convenient proposal.
Topics: Norgesgruppen