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Axfood: The Swedish Challenger That Conquered Discount Grocery
I. Introduction: The Challenger's Playbook
Picture the Swedish grocery market as a chessboard. For decades, one dominant player—ICA—commanded the center squares, capturing roughly half of every krona spent on groceries. Coop held its cooperative corner. And then there was Axfood, the family-backed challenger that refused to accept second place as a permanent position.
Axfood has steadily increased its position in the Swedish grocery market, reaching 25.4% in the first half of 2025 compared to just 17.6% a decade ago. That's not incremental creep—that's a strategic offensive executed over two generations of patient, aggressive expansion.
The market is mature, and the three largest players—ICA, Axfood and Coop—together account for approximately 90% of sales. In markets this consolidated, gaining share usually means someone else is bleeding. The question investors should be asking: What playbook allows a #2 challenger to steadily close the gap on a #1 incumbent that has 50%+ share?
The answer lies in a century-and-a-half family dynasty, a revolutionary discount format called Willys, and a logistics infrastructure that rivals Amazon's ambitions in Europe.
In 2024, Axfood AB's revenue was 84.06 billion SEK, an increase of 3.63% compared to the previous year's 81.11 billion. Earnings were 2.19 billion, a decrease of -7.00%. But those headline numbers obscure the strategic repositioning underway—a CEO transition, a transformational acquisition, and a logistics bet that's just beginning to pay dividends.
This is the story of how a saddler's son's trading company evolved into Sweden's most dynamic grocery challenger, and what the next chapter might hold.
II. The Axel Johnson Dynasty: 150 Years of Swedish Capitalism
In 1873, a 29-year-old named Axel Johnson opened a modest trading office in Stockholm. It was in 1873 when the 29-year-old son of a saddlemaker, Axel Johnson, started his first independent trading office. The export of iron and import of coal laid the foundation for Axel Johnson's expansion.
To understand Axfood, you must understand the family behind it. The Ax:son Johnson family represents one of Europe's most remarkable examples of multigenerational business stewardship—a dynasty that has reinvented itself roughly every 30-40 years while maintaining core values across five generations.
The Ax:son Johnson family is a prominent Swedish business family, controlling the Axel Johnson Group and Nordstjernan. In 1873, Axel Johnson founded the trading company A. Johnson & Co., the predecessor of today's Axel Johnson AB.
The founder's story contains echoes of classic entrepreneurial ambition. He managed to break the international coffee monopoly, known as the "coffee conference", a strictly controlled pricing cartel for the transportation of coffee to Europe. This willingness to challenge established powers—to disrupt comfortable incumbents—would become embedded in the family's commercial DNA.
The coal business took the company into shipping and Rederiaktiebolaget Nordstjernan was founded in 1890. From trading to shipping to manufacturing—the family built a vertically integrated empire in the classic late-19th century mold.
When Axel Johnson died in 1910, he left his oldest son, Axel Ax:son Johnson, then 35 years old, a substantial business with interests that included a trading house, a shipping line and ironworks. Under Axel Ax:son Johnson's leadership, the business expanded substantially. He is credited with establishing the first completely diesel-powered ocean fleet, as well as Scandinavia's first oil refinery.
The second generation didn't merely preserve—they transformed. The Consul General, as he was known, exemplified the industrial visionary, connecting disparate businesses into integrated value chains. When he died in 1958, he left behind 100 companies with 22,000 employees.
But the fourth generation brought perhaps the most radical transformation of all.
The fourth generation saw the first female head of the family business when Antonia Ax:son Johnson succeeded her father as Chairman of A. Johnson & Co. in 1982.
Born in New York City in 1943, Antonia Ax:son Johnson was raised in a family steeped in entrepreneurial tradition. Antonia inherited a strong sense of duty and vision from her predecessors and was groomed to take over the reins of the family business from a young age. She pursued her education both in the United States and Sweden, attending Radcliffe College at Harvard and later earning a Master's degree in Psychology and Economics from Stockholm University.
Antonia's leadership marked a pivot point. Antonia Ax:son Johnson succeeded her father in 1982 as Board Chair of Johnson & Co. At the end of the '80s, a structural transformation meant all trade and distribution of oil, ore, metals and steel was discontinued, while a new core business was built up within Swedish retail and grocery. With the acquisition of the Saba Group in 1988, names such as Dagab, Hemköp and Åhléns became part of the company.
This wasn't portfolio pruning—it was wholesale reinvention. The family exited heavy industry entirely, betting their future on consumer-facing retail businesses. For the first time, the emphasis was shifted to consumer goods.
With a history of 150 years, Axel Johnson is currently led by the fifth generation. The key to our success has always been innovation. That's why we set a clear target in 2015—in ten years, 50 percent of what we do should be things that we don't do today, and with 50 percent lower climate impact.
This "10/50/50" target reveals the family's philosophy: long-term ownership doesn't mean stasis. It means having the patient capital to make transformational bets that public market investors might reject as too risky or too long-duration.
The Axel Johnson Group is owned by Antonia Ax:son Johnson (great-granddaughter of company founder Axel Johnson) and her family. Today, One of her children, Caroline Berg, currently serves as the Chair of the Axel Johnson Group.
For investors evaluating Axfood, the family ownership structure matters enormously. Axel Johnson AB is the principal owner with 50.1 percent of the shares. This controlling stake provides strategic stability while the public listing creates liquidity and governance discipline. The family can think in decades while the market provides real-time feedback.
III. The Birth of Axfood: Consolidation Play (2000)
May 11, 2000. The tech bubble was inflating toward its peak. Dot-com grocers like Webvan were valued in the billions. And in Stockholm, a group of traditional grocery businesses were being merged into something the Swedish market had never quite seen before.
It was formed in May 2000 through a merger between the Swedish grocery store chains Hemköp, D&D Dagligvaror, Spar Sverige, and Spar Inn Snabbgross.
The strategic logic was elegant: Sweden's grocery market was fragmenting into subscale pieces while ICA maintained dominant share. The only way to compete with a coordinated franchise system of 1,300+ stores was to create a unified challenger with real scale.
Axfood is formed through mergers of the Hemköp chain, Dagab, and the D Group. Willys begins its expansion and becomes a nationwide chain that has since been the fastest-growing player in the Swedish grocery market.
The component pieces each brought distinct capabilities:
Hemköp provided a traditional supermarket format with strong brand recognition and a focus on quality. Dagab offered wholesale and logistics infrastructure—the unsexy plumbing that makes grocery supply chains function. Willys (via the D Group) contributed a discount format that would prove to be the company's crown jewel. Spar Inn Snabbgross added foodservice wholesale capabilities.
The newly formed Axfood wasn't just bigger—it was architecturally different from ICA. Where ICA operated as a franchise system with independently owned stores, Axfood pursued a hybrid model: group-owned stores combined with retailer agreements, all supported by centralized logistics.
The Group's retail operations are conducted through the Willys, Hemköp, and Axfood Snabbgross chains, comprising 300 group-owned stores in all. In addition, Axfood collaborates with a large number of proprietor-run stores that are tied to Axfood through agreements. These include stores within the Hemköp chain as well as stores run under the Handlar'n, Direkten and Tempo profiles. In all, Axfood collaborates with some 840 proprietor-run stores.
This multi-format strategy would prove crucial. Rather than betting everything on a single concept, Axfood could address different customer segments with differentiated offerings while capturing economies of scale in procurement and logistics.
Axfood has been listed on Nasdaq Stockholm since 1997, and the principal owner is Axel Johnson AB. The listing predated the formal Axfood formation—the corporate shell was essentially repurposed for the consolidation play.
The first years were about integration: combining IT systems, rationalizing supplier relationships, optimizing the store network. But the real strategic breakthrough was yet to come—the recognition that Willys wasn't just another format, but a potential weapon capable of reshaping the entire market.
IV. Understanding the Swedish Grocery Battlefield
Before diving into Axfood's strategic playbook, investors need to understand the competitive terrain. The Swedish grocery market operates under dynamics quite different from U.S. or even continental European markets.
Sweden's food retail sector is a mature market. The three largest retailers—ICA, Axfood and Coop—together account for nearly 90% of the market.
The market is characterised by a high pace of change and fierce competition. In Sweden, a limited number of traditional actors have a high total market share, but competition for customers is fierce.
The Incumbent: ICA Gruppen
ICA Gruppen AB, founded as Inköpscentralernas aktiebolag ('the Purchasing Centres' Corporation'), is a Swedish retailer franchise with a focus on food and health. The group also owns a bank, real estate division and a pharmacy chain. The company was started in 1938, based on a business model which was introduced by Hakonbolagen in 1917.
With some 1,300 stores and a market share of approximately 36%, ICA Sweden is the leading grocery retailer in Sweden. ICA's franchise model creates deep local ownership—each store is run by an independent retailer who knows their community. This produces exceptional customer loyalty but can create coordination challenges.
As of 2022, ICA Gruppen AB had, based on sales, a market share of about 50 percent in Sweden. It was ahead of Axfood, Coop, Lidl and City Gross.
The Cooperative: Coop
Coop is the second-largest grocery store brand in Sweden, with a market share of around 20%. The company operates a chain of Coop and Coop Forum stores nationwide.
Coop's cooperative ownership structure—owned by its customer-members—creates different incentives than shareholder-owned competitors. The model provides loyalty but has historically struggled with operational efficiency.
The German Challenger: Lidl
Lidl is a German discount supermarket chain that has gained popularity in Sweden in recent years, with a market share of around 6%. The company operates a network of Lidl stores across the country.
In the most recent fiscal year, which ended in February, the chain had a turnover of 10.8 billion SEK which give Lidl a market share of approximately 5.5 percent.
Lidl represents the "hard discount" model—narrow assortment (typically 1,500-2,000 SKUs), heavy private label, ruthless cost focus. While Willys holds its position with nearly 250 stores nationwide, Lidl CEO Jakob Josefsson has announced plans to expand the chain from currently 207 to approximately 300 stores in the long-term.
The Market's Structural Characteristics
The food retail market is relatively unaffected by economic swings and growth is driven largely by population growth and inflation. Annual market growth has historically been between 2% and 3%.
This defensive characteristic makes grocery retail attractive during economic uncertainty, but it also means organic growth requires taking share from competitors.
In 2024, the Swedish food retail market grew by 4.1%, and sales excluding VAT amounted to approximately SEK 301 billion.
The Swedish market exhibits one crucial dynamic that has worked in Axfood's favor: During the years 2018–2023, average annual growth for the discount segment is estimated at around 11%. This is compared with the market's average annual growth of approximately 5%.
This means the discount segment—where Willys competes—has been growing at more than double the overall market rate. Axfood's strategic bet on discount was effectively a bet on market structure evolution.
V. The Willys Revolution: Winning Through Discount
If there's a single strategic insight that explains Axfood's market share gains, it's this: they recognized that "soft discount" could be more than a format—it could be a platform for reshaping customer expectations across an entire market.
Willys was founded in 1986, but its transformation into a market-changing force happened under Axfood's ownership. Willys is the country's leading discount grocery chain, offering a broad range of products in both Group-owned stores and online. With the ambition to offer Sweden's cheapest bag of groceries, Willys aspires to lead and develop the discount segment of food retail. By combining quality and sustainability with simplicity and low prices, Willys strives to make it easy for more people to eat good food.
The Soft Discount Concept
What distinguishes Willys from traditional hard discounters like Lidl is the breadth of offering. "There aren't that many players that Willys can compare itself with in Europe. The combination that we have with the broad assortment to some 10,000 articles and also, at the same time, kind of a tough aggressive pricing."
This is the "soft discount" positioning: discount prices with a near-supermarket assortment. Customers don't have to sacrifice selection to save money.
The soft discount model of Willy's differentiates quite significantly from Lidl. One of the biggest competitive advantages of Lidl is its narrow assortment. The assortment in Willy's is significantly bigger than in Lidl. Still, Willy's keeps the assortment low enough to get efficiency gains compared to the traditional competitors, which carry two to three times the assortment.
"We look at hypermarkets and we try to be as close as possible to Lidl and we're trying to be cheaper than the other hypermarkets so that consumers feel that it's better to shop with us."
The Numbers Tell the Story
The discount segment—accounting for over 20% of the market—is the sector's most dynamic force. Willys and other discounters have grown at an 11% annual rate since 2018, outpacing the overall market's 5% growth.
In 2012, Willys' net revenue amounted to roughly 19 billion Swedish kronor. Over the following years, it grew and reached a net revenue of approximately 32.4 billion Swedish kronor in 2021.
Axfood achieved turnover of SEK 78 billion (EUR 7.35 billion), capturing an estimated 23% of Sweden's FMCG market, up from 20% in 2021. Willys accounted for SEK 45.8 billion (EUR 4.05 billion), or 54.4% of group sales—securing roughly 12.5% of the national grocery market.
Part of Axfood's growth stemmed from the acquisition of 42 City Gross hypermarkets in southern Sweden, but Willys remains the group's main growth engine. Over the past five years, the soft discounter has increased its revenue by nearly 60%.
Value Perception Leadership
Axfood, for instance, now holds a 25% market share, bolstered by its Willys discount brand, which leads in value perception with a 33.1 net Value score.
Willys doesn't just offer low prices—customers perceive it as the best value. This distinction matters because it drives customer acquisition and retention independent of promotional activity.
The store has strengthened its brand in recent years and is Sweden's most recommended store concept in the food retail industry. The growth rate of new customers has accelerated and the Willys Plus loyalty club now has over 3.5 million members.
In a country of 10 million people, 3.5 million loyalty members represents extraordinary penetration.
E-Commerce Leadership in Discount
Willys has continuously strengthened its e-commerce offering over the years and established a position as the second largest player with a market share of approximately 25%, significantly higher than Willys' total share of the food retail market, which is approximately 14%.
"80% or so of e-commerce is click-and-collect." "If you (customer) start to do e-commerce, you will not stop completely with going to physical store, you will do less, but you will not stop going to the store, which is good because this means that we can, so to say, steal customers, and we can make our customers more profitable for us."
This insight—that e-commerce can be a customer acquisition tool rather than a margin-diluting necessity—reflects sophisticated strategic thinking about omnichannel retail.
VI. Key Inflection Points: Building the Moat (2016-2024)
Axfood's market share gains didn't happen by accident. They resulted from a series of deliberate strategic moves, each building on the last to create compounding advantages.
Inflection Point #1: Digital Transformation (2016-2017)
The pandemic would later accelerate grocery e-commerce globally, but Axfood made its digital bets years earlier.
Axfood's 28% online grocery share and 9.3% Q2 2025 sales growth post-City Gross acquisition highlight digital infrastructure's role in competing with traditional players like ICA and Coop.
E-commerce still accounts for a small share of the market, 4.1% in 2024. Sales within e-commerce are relatively evenly distributed between store pick-up and home delivery. Axfood's market share in e-commerce in 2024 is estimated at around 28% (28), the majority of which is attributable to Willys.
Inflection Point #2: The BĂĄlsta Logistics Center (2019-2023)
This is perhaps the most significant strategic investment in Axfood's recent history—a bet that logistics automation could become a durable competitive advantage.
For some time, construction has been under way of a new, highly automated logistics centre in BĂĄlsta, outside Stockholm. The logistics centre, which will be one of the largest and most modern in Europe for distribution of groceries, will be unique by handling order picking and deliveries to stores as well as directly to online customers, with automation in three temperature zones.
The logistics centre in BĂĄlsta is unique, spanning over 100,000 square metres and featuring Sweden's largest rooftop solar power facility.
The total contracted investment with Witron amounts to 240 MEUR during the period 2019-2023.
Four years ago, work began on the construction of Dagab's new, highly automated logistics centre, which will supply goods for stores and e-commerce in all of Axfood's store concepts. At that time, a goal was set to begin deliveries to stores in the week starting 6 February, 2023—a goal that has now been achieved. The highly automated logistics centre took four intensive years to complete, and an important milestone has now been reached. On 7 February, four Willys stores in Mälardalen region became the first stores to receive their deliveries from the new logistics centre in Bålsta.
This omnichannel solution will result in optimized efficiency in the underlying processes, reduced food waste, and higher delivery quality and service for stores as well as end customers. Once operational in 2023, the logistics centre in BĂĄlsta will handle 60% of Dagab's volumes.
As previously announced, the investment in the logistics centre in Bålsta is expected to result in SEK 200–300 m in annual efficiency improvements beginning in the second half of 2024, which will then increase to SEK 300–400 m at full capacity.
Inflection Point #3: Bergendahls Food Acquisition (2021)
In May 2021, Axfood announced what then-CEO Klas Balkow called "history in Swedish food retail."
Axfood today completed its acquisition of the wholesale business Bergendahls Food as well as of the minority position in City Gross which is part of a strategic partnership. The acquisition creates economies of scale and synergies, and through greater efficiency and improvements in the assortment and logistics also benefits wholesale customers and Swedish consumers.
The initial consideration amounts to SEK 1.8 bn on a cash and debt-free basis, and upon full exercise of the call option, the total consideration amounts to SEK 2.5 bn, of which SEK 1.5 bn pertains to Bergendahl Wholesale. The transaction is expected to create annual cost synergies of approximately SEK 200 m that are expected to be realized successively through 2025.
City Gross has 2,800 employees and a store network with 42 stores.
The deal wasn't just about wholesale volumes—it positioned Axfood for an eventual full acquisition of City Gross.
Inflection Point #4: City Gross Acquisition (2024)
Axfood acquires the store chain City Gross, in which Axfood already possess joint control through its minority shareholding. The acquisition creates conditions to strengthen City Gross' competitiveness and for growth in the hypermarket segment, which will challenge the market leaders and increase competition in this segment. The consideration amounts to SEK 2 billion.
The Swedish Competition Authority today cleared Axfood's acquisition of City Gross. The acquisition creates conditions to strengthen City Gross' competitiveness and for growth in the hypermarket segment, which will challenge the market leaders and increase competition in this segment.
On 1 November 2024, Axfood acquired the store chain City Gross. The acquisition creates conditions to strengthen City Gross' competitiveness and for growth in the hypermarket segment.
City Gross, which Axfood acquired on November 1, 2024, contributed SEK 2,319 million in net sales during the quarter.
Inflection Point #5: Leadership Transition (2024)
The Board of Directors of Axfood has today appointed Simone Margulies, currently Managing Director of Hemköpskedjan AB, as President and CEO of Axfood as of 15 August 2024. Simone Margulies will from 15 August 2024 succeed Klas Balkow as President and CEO of Axfood. Simone has been working in different roles within the Axfood Group during eight years and has been a member of Axfood's Executive Committee for four years. Currently, she is Managing Director of Hemköpskedjan AB, which consists of Hemköp and Tempo, and prior to that her role was Deputy CEO of Axfood's purchasing and logistics company Dagab. In total, Simone has more than 18 years of experience in food retail.
Klas Balkow served as CEO of Axfood from 2017 to 2024. He joined Axfood after nearly ten years as CEO of Clas Ohlson.
The transition from Balkow to Margulies represents continuity—an internal succession by an executive who deeply understands both the retail operations and the logistics engine.
VII. The Business Model Deep Dive
Axfood's business model combines several distinct revenue streams and competitive advantages into an integrated system.
Multi-Format Retail Strategy
It operates through five segments: Willys, Hemköp, City Gross, Snabbgross, and Dagab. The company sells groceries through Willys, HANDLAR'N, Hemköp, and Eurocash, City Gross, Tempo, and Tempo store chains. It is also involved in the e-commerce business; and provision of private label products. In addition, it operates Urban Deli, a combination of restaurant and market hall; Apohem, an online retail pharmacy; Matöppe, a personal grocery store and the retailer-owned mini-mart.
Willys (Discount): The growth engine. Low prices, broad assortment, modern stores. Targets value-conscious families.
Hemköp (Traditional): Higher-service format with sustainability focus. Competes in the traditional supermarket segment.
City Gross (Hypermarket): Large-format stores primarily in southern Sweden. Still being integrated and positioned for profitability improvement.
Snabbgross (B2B): Supplies restaurants, cafés, and hotels. Provides diversification and different customer economics.
Dagab: The Logistics Engine
Dagab, the group's logistics and purchasing division, reported net sales growth of 7.9% and operating profit of SEK 298 million, with operating margin improving to 1.4%.
Dagab isn't just a cost center—it's a strategic asset. Centralized procurement provides purchasing power across all formats. The logistics network serves not just Axfood's own stores but external wholesale customers as well, creating additional scale economies.
Private Label Portfolio
Axfood's private labels consist of Willys, Hemköp, Axfood Snabbgross, Garant, Eldorado, Såklart, Prime patrol, Minstingen, Falkenberg Seafood and Fixa.
Private label represents a margin enhancement opportunity. European grocery retailers typically achieve 30-50% private label penetration; higher penetration correlates with better gross margins.
Financial Characteristics
Dividend payments have increased over the last 10 years and are covered by earnings with a payout ratio of 86.14%. Axfood is a dividend paying company with a current yield of 3.84% that is well covered by earnings.
Axfood AB has an annual dividend of 8.75 SEK per share, with a yield of 3.79%. The dividend is paid every six months.
The consistent dividend history—particularly important for the controlling family shareholder—reflects the stable cash generation characteristics of grocery retail.
VIII. Sustainability & Social Innovation
In an era when "ESG" often devolves into greenwashing, Axfood has pursued sustainability initiatives with measurable impact.
Matmissionen: The Nordic Social Supermarket Model
Matmissionen (The Food Mission, in Swedish) is the first social supermarket in any of the Nordic countries, and it opened in a southern suburb of Stockholm, RĂĄgsved, in December 2015.
Axfood was initiator and co-founder of Matmissionen in 2015. Since then, there are eight stores around the country—five in Stockholm County, two in Gothenburg, and one in Malmö.
The shop is not stocked like a regular supermarket, but sells donated surplus food from other stores. The foods in Matmissionen are near their expiration date, or for other reasons cannot be sold in regular stores. It may be due to minor injuries in the packaging or a surplus of supplies. Clearly, Matmissionen also contributes to reduced food waste. Hiring people outside the job market, Matmissionen creates opportunities for job training.
Matmissionen has 25,000 members nationwide.
This isn't charity—it's strategic sustainability that reduces food waste costs while building brand equity.
Food Waste Reduction
In 2024, through innovative solutions and collaboration, Axfood achieved its target of a 50% reduction in food waste at the Group's stores compared with the base year 2015.
Transport Emissions
In 2024, Axfood accelerated the transition to renewable fuels and electricity in its transports. This work resulted in a sharp decrease in the carbon footprint per tonne of products transported by 36% since the previous year and nearly 53% since 2021.
IX. Current Financial Performance & Recent Developments
2024 Full Year Results
Net sales amounted to SEK 84,057 m (81,111), an increase of 3.6%.
In 2024, Axfood AB's revenue was 84.06 billion, an increase of 3.63% compared to the previous year's 81.11 billion. Earnings were 2.19 billion, a decrease of -7.00%.
The earnings decline reflects several factors: integration costs from the City Gross acquisition, continued investment in price competitiveness, and the ramp-up costs associated with the BĂĄlsta logistics center.
Q2 2025 Performance
Swedish grocery retailer Axfood AB delivered a strong second quarter performance for 2025, significantly outperforming the broader food retail market. According to the company's Q2 2025 presentation released on July 11, Axfood continued to gain market share while driving growth across all business segments. The company's retail sales surged 22.9% year-over-year, with an 8.8% increase when excluding the recently acquired City Gross chain. This substantially outpaced the overall food retail market, which grew by 6.2% during the same period.
Willys, Axfood's discount grocery chain, delivered particularly strong results with net sales increasing by 10.2% and like-for-like sales up 8.3%. Operating profit for the segment reached SEK 565 million (509m), maintaining a stable operating margin of 4.5%. The total Willys store network expanded to 254 locations, up from 243 in the prior year.
2025 Outlook
For the full year 2025, Axfood maintained its outlook with planned capital expenditures of SEK 1,600-1,700 million and plans to establish 10-15 new Group-owned stores. The company expects items affecting comparability of approximately SEK 100 million.
The Board of Directors proposes that the Annual General Meeting approve an increased dividend of SEK 8.75 per share, to be paid out on two occasions.
X. Competitive Analysis: Porter's Five Forces & Helmer's 7 Powers
Porter's Five Forces Analysis
Threat of New Entrants: LOW-MEDIUM
The market is mature, and the three largest players—ICA, Axfood and Coop—together account for approximately 90% of sales.
Barriers include: massive logistics infrastructure requirements, established supplier relationships, real estate access (good locations are largely taken), and brand recognition that takes decades to build.
A Costco warehouse opened in October 2022 outside Stockholm at Saluvagen 5 in Täby. The store is a 130,000-square-foot quasi-big box (13,300 meters2), slightly smaller than the standard 140,000-square-foot U.S. design.
Costco's entry demonstrates that deep-pocketed international players can test the market, but one store doesn't make a competitive threat. The membership model limits addressable market, and scaling requires significant capital commitment.
Bargaining Power of Suppliers: LOW-MEDIUM
Axfood's scale—particularly with Dagab serving multiple formats—provides substantial purchasing power. Private label alternatives create negotiating leverage. However, major CPG brands retain some pricing power for must-stock items.
Bargaining Power of Buyers: MEDIUM
Swedish consumers are increasingly price-conscious and face low switching costs between chains. Willys and other discounters have grown at an 11% annual rate since 2018, outpacing the overall market's 5% growth. This reflects a broader consumer shift toward price-conscious shopping, accelerated by stagnant household purchasing power and rising cost-of-living pressures.
Loyalty programs (Willys Plus, Klubb Hemköp) partially mitigate switching risk.
Threat of Substitutes: LOW-MEDIUM
Grocery has some exposure to foodservice (restaurants, delivery) but the core "grocery shopping" activity is non-discretionary. E-commerce has shifted channels but not fundamentally disrupted the category.
Competitive Rivalry: HIGH
The market is characterised by a high pace of change and fierce competition. In Sweden, a limited number of traditional actors have a high total market share, but competition for customers is fierce.
ICA remains formidable. Most of its turnover comes from the concepts 'Maxi' and 'Kvantum' which are the largest stores. To meet consumer demand, ICA is investing around €100 million in 2024 to decrease prices for the consumer.
Lidl's loss of SEK 185 million is a consequence of investment, but the company is growing faster than the market and turnover is increasing by 11 per cent to SEK 18.6 billion.
Hamilton Helmer's 7 Powers Framework
Scale Economies: Dagab's logistics infrastructure serves multiple formats and external customers, creating unit cost advantages that smaller competitors cannot match. The BĂĄlsta investment amplifies this advantage.
Network Effects: Limited direct network effects, but the retailer-owned store network creates some coordination benefits.
Counter-Positioning: Willys' soft discount model is difficult for ICA to replicate without cannibalizing its premium positioning. ICA lacks a dedicated discount format—an unusual strategic gap.
Switching Costs: Loyalty programs create modest switching costs, but grocery retail generally exhibits low customer lock-in.
Branding: Willys has achieved exceptional brand strength in the value segment. The store has strengthened its brand in recent years and is Sweden's most recommended store concept in the food retail industry.
Cornered Resource: Family ownership with 50.1% control provides patient capital advantages, but this isn't a cornered resource in the traditional sense.
Process Power: The integration of automated logistics with multi-format retail may represent emerging process power—superior execution that competitors struggle to replicate.
XI. Bull Case vs. Bear Case
The Bull Case
1. Secular shift to discount continues: During the years 2018–2023, average annual growth for the discount segment is estimated at around 11%. This is compared with the market's average annual growth of approximately 5%. If this trend persists, Willys' dominant position in soft discount translates to structural market share gains.
2. Logistics investment begins paying off: The investment in the logistics centre in Bålsta is expected to result in SEK 200–300 m in annual efficiency improvements beginning in the second half of 2024, which will then increase to SEK 300–400 m at full capacity. As these savings materialize, margins should expand even while investing in price competitiveness.
3. City Gross turnaround potential: At SEK 2 billion, the City Gross acquisition was relatively modest. If management can bring the hypermarket chain to profitability, it represents significant earnings upside. Axfood intends to pursue a number of improvement initiatives to strengthen the customer offering, implement chain management and make operations more efficient, all with the purpose to strengthen City Gross to reach profitability by 2026 the latest.
4. E-commerce leadership: Axfood's market share in e-commerce in 2024 is estimated at around 28%, the majority of which is attributable to Willys. Disproportionate e-commerce share could accelerate overall market share gains as online grocery penetration increases.
5. Family capitalism advantages: Long-term strategic planning, willingness to sacrifice short-term earnings for competitive positioning, and stability through management transitions.
The Bear Case
1. ICA's competitive response: ICA isn't standing still. To meet consumer demand, ICA is investing around €100 million in 2024 to decrease prices for the consumer. A price war could compress margins industry-wide.
2. Lidl expansion: Lidl CEO Jakob Josefsson has announced plans to expand the chain from currently 207 to approximately 300 stores in the long-term. An aggressive Lidl could pressure Willys from below on price.
3. City Gross integration risk: Turning around a struggling hypermarket chain while simultaneously completing logistics transitions is operationally complex. City Gross contributed SEK 2,319 million in net sales during the quarter. While the segment reported an operating loss of SEK 45 million.
4. Margin pressure from price investments: Adjusted operating profit fell, with an operating margin of 4.8%. Willys, an Axfood brand, reported a 3.8% sales increase but a profit decline due to price investments and cost inflation. Continuous price investment may prevent margin expansion.
5. E-commerce economics: While Axfood has strong e-commerce share, online grocery profitability remains challenging industry-wide. E-commerce still accounts for a small share of the market, 4.1% in 2024. If this share grows significantly, it could pressure blended margins.
XII. Key Performance Indicators to Track
For investors following Axfood's progress, two KPIs matter most:
1. Like-for-Like (Comparable Store) Sales Growth
This metric strips out new store openings to show the underlying health of existing operations. Strong like-for-like growth indicates: - Customer traffic is increasing - Basket sizes are stable or growing - Price and promotional strategies are working - Brand health is strong
Willys delivered particularly strong results with net sales increasing by 10.2% and like-for-like sales up 8.3%.
Target benchmark: Like-for-like growth exceeding food price inflation suggests real volume gains.
2. Operating Margin Progression
With the logistics investments now largely complete, the key question is whether efficiency gains translate to margin expansion while maintaining price competitiveness.
Current target: Axfood is therefore raising its profitability target to a long-term operating margin of at least 4.5%.
Investors should track whether margins are expanding toward this target, or whether competitive pressures consume efficiency gains.
XIII. Conclusion: The Challenger's Endgame
Axfood's story is ultimately about the power of patient capital, strategic clarity, and execution discipline. The Ax:son Johnson family has played a 150-year game, and Axfood represents their most significant bet on Swedish consumers.
Axfood has steadily increased its position in the Swedish grocery market, reaching 25.4% in the first half of 2025 compared to just 17.6% a decade ago.
That 7.8 percentage point market share gain over a decade—in a mature, oligopolistic market—represents one of the more remarkable competitive achievements in European retail.
The question facing investors now is whether Axfood can continue gaining share while also expanding margins. The BĂĄlsta logistics investment should provide a tailwind. City Gross integration will require management bandwidth. And competitive responses from ICA and Lidl bear watching.
For long-term oriented investors, Axfood offers a defensive business model (grocery), in an attractive market structure (consolidated, with discount as the growth segment), backed by patient ownership (the Ax:son Johnson family), and supported by investments in durable competitive advantages (logistics automation, brand strength).
The challenger isn't trying to become the leader overnight. They're playing for the next decade—and the decade after that. In Swedish grocery retail, the tortoise is gaining on the hare.
Risk Factors to Monitor: - City Gross path to profitability (2026 target) - Competitive pricing responses from ICA - Lidl store expansion pace in Sweden - Logistics center efficiency gains realization - E-commerce profitability trends
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