The food conglomerate Axfood, with Willys and Hemköp among its chains, is buying competitor Citygross.
Fewer players are a risk for worse competition, according to the Competition Authority, which has analysed the food market in the wake of soaring prices over the past year.
Axfood already owns 10 per cent of Citygross, but is now buying the entire company for two billion kronor, according to a press release.
Citygross is estimated to have a market share of around three per cent and has 42 stores, mainly in the southern parts of the country. The company is running at a loss, but Axfood aims to turn Citygross into a profitable business by 2026 at the latest.
The deal will now be scrutinised by the Competition Authority or its EU counterpart, but since the deal is largely a Swedish affair, it will likely be the Swedish authority that handles the case.
Risk Factor
The Competition Authority (KKV) can block the deal if it is deemed to worsen competition for customers or other stakeholders. While the authority cannot comment on the deal just yet, it says in general terms:
Large parts of the Swedish food chain are concentrated in relatively few players, which in itself is a risk factor, as we say, for competition to function poorly, says Martin Bäckström, unit manager at KKV.
Last year, KKV approved Coop's purchase of a number of Netto stores, mainly in southern Sweden, although there were question marks over certain locations where competition decreased significantly, according to Martin Bäckström.
Wants Stricter Rules
However, it was not enough to block the deal, as it did not affect a sufficiently large part of Sweden, as the law is written. The authority has put forward views on the need to revise the acquisition rules.
Axfood's purchase of Citygross's wholesale business a year ago also received the green light.
After these deals, the time came with increased inflation and soaring food prices, which highlighted the issue of competition in the entire food chain. KKV has therefore spent the past year examining the food industry, and a summary report will be released in a few weeks, but Martin Bäckström does not want to reveal the conclusions just yet.
Ica, 50.3 per cent
Axfood (mainly Willys and Hemköp), 20.5 per cent
Coop, 17.5 per cent
Lidl, 6.1 per cent
Citygross, 3.7 per cent
Matrebellerna, 1.0 per cent.
Source: The trade organisation DLF
