Kesko Food and ICA planning joint food trade operations in the Baltics

Kesko Food Ltd, a Kesko Group company, and the Swedish ICA AB have today signed a letter of intent to establish a joint venture for the Baltic food market. The aim is to combine the parties’ current operations in Estonia, Latvia and Lithuania. Kesko Food and ICA would both have a 50% ownership in the joint venture.

The planned arrangement supports Kesko Food’s and ICA’s strategies for a strong growth and profitability in the Baltic countries. According to the letter of intent, the joint venture aims at reaching the market leader position in the Baltic food market and a 25% market share in three years. The objective is to expand the store network in all Baltic countries, which means wider product selections and more affordable prices for customers. The joint venture is expected to gain synergy benefits in purchasing, store network development and logistics.

In 2003, the combined net sales of the parties’ Baltic operations amount to about 550 million euros and their market share is about 15%. In 2003, the total value of the Baltic food market is about 4.7 billion euros, representing growth of over 5% on the previous year.

The strongest market area of Kesko Food in the Baltic countries is currently Estonia, where the company holds a 23% share of the market. ICA has a strong presence in Latvia with a 17% market share. At the present the parties operate a total of about 140 food stores under hypermarket, supermarket and discounter concepts in Estonia, Latvia and Lithuania, as well as logistics centres.

In the year 2003, Kesko Food has six Citymarkets in Estonia. The company also owns Säästumarket, Estonia’s biggest discounter chain, which includes 45 stores. In addition, Kesko Food has a SuperNetto cash and carry outlet and a logistics centre in Tallinn. In Latvia, Kesko Food has five Citymarkets and 11 SuperNetto discount stores. The total number of Kesko Food personnel in Estonia and Latvia is about 2,400.

In the year 2003, ICA has five RIMI supermarkets in Estonia. In Latvia, the company has 33 RIMI supermarkets and four RIMI hypermarkets as well as a logistics centre in Riga. In Lithuania, ICA has a total of 32 supermarkets and hypermarkets, most of which operate under the RIMI logo. In Vilnius the company has a logistics centre. The total number of ICA personnel in the Baltic countries is about 5 100.

After the parties have completed a due diligence procedure they intend to sign the final agreements and to obtain necessary permissions so that the joint venture could start operating in summer 2004. The arrangement will not influence the operations of Kesko’s other business divisions in the Baltic countries.

If the intentions outlined in the letter of intent are fulfilled, Kesko Food and ICA plan to appoint Antonio Soares as CEO of the joint venture and Seppo Hämäläinen as Deputy CEO. Today, Antonio Soares is the CEO of ICA Baltic AB and Seppo Hämäläinen is the Vice President of Kesko Food, Baltic Operations.

Further information:
Kalervo Haapaniemi, President of Kesko Food, tel. +358 1053 22204
Seppo Hämäläinen, Vice President, Baltic Operations, Kesko Food, tel. +371 6557 083

Kesko Corporation
Corporate Communications

Erkki Heikkinen
Senior Vice President

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