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Building and technical trade

”We are seeking strong growth in the building and technical trade in Northern Europe, and we offer our customers the best multichannel customer experience”

Jorma Rauhala, Deputy to Kesko’s President and CEO, Executive Vice President, building and technical trade

We are a leading operator in the Northern European building and home improvement trade markets. We seek growth both organically as well as through acquisitions. At the core of our strategy is developing a multichannel customer experience. 

In addition to products for building and home improvement and technical trade, we offer comprehensive multichannel services for building, renovation and building services engineering to both business customers and consumers.

We serve our customers under the K-Rauta, Onninen, Byggmakker, K-Senukai and OMA brands and operate in eight countries: Finland, Sweden, Norway, Estonia, Latvia, Lithuania, Poland and Belarus.

Of our net sales of €4.5 billion, 51% come from outside Finland. B2B trade accounts for 68% of retail sales. 

Focus on growing our core business

In 2017, we streamlined and focused our building and technical trade operations by divesting the K-maatalous agricultural business, the Asko and Sotka furniture business, and a considerable portion of the Konekesko machinery business. On 16 February 2018 we announced that we are to discontinue the building and home improvement trade operations in Russia. The ownership of the properties will transfer to the buyer during the first half of the year 2018.  

We combined the K-Rauta and Rautia chains to form a new K-Rauta chain.

In spring 2017, we combined the K-Rauta and Rautia chains to form a new K-Rauta chain, which is the market leader in Finland with the most comprehensive network of stores. We expanded the Onninen Express store network in Finland to Loimaa, Iisalmi, Varkaus and Viikki, Helsinki. Currently, we are testing joint stores for K-Rauta and Onninen Express in Loimaa, Finland and Jönköping, Sweden.

In the Baltic region, we are remodelling the store network in line with the K-Senukai concept.

The work to create sector-best digital services continued in three Centers of Excellence in Stockholm, Vilnius and Vantaa, and we opened new online stores for Onninen and K-Rauta in Finland.  

Building and renovation are increasingly left to professionals

Global megatrends guide our strategy: as building and renovation become more technical and regulated, consumers increasingly outsource them to professionals.

The trend is further underpinned by the rise in the standard of living, urbanisation and population ageing. Online stores and digital services are a natural part of all operations in the trading sector.

"More time for work" for our business customers

The best multichannel customer experience is at the core of our strategy. We promise our business customers they will have ”more time for work”. For consumers, we promise to make renovation, building and shopping ”surprisingly easy”.

We want to help make work more productive for our business customers through deeper collaboration with our partners and by offering solutions that best suit their needs in e.g. logistics and selections. We are improving the service for joint customers of Onninen and our building and home improvement store chains via efficient common functions, so our customers get more with less effort. The majority of our business customers are building and technical contractors, but Onninen’s customers also include industry, infrastructure construction and retail dealers.

More comprehensive solutions for consumers

For consumers, we offer increasingly comprehensive solutions, such as renovation projects with start-to-finish planning and execution, and implementation support via sector-best digital services. We want to create an ecosystem where we can bring together our consumer customers with renovation needs and our business customers offering renovation services.

Leisure goods trade

Leisure goods trade is included in the building and technical trade division. Our leisure trade chains are Intersport, Budget Sport, The Athlete’s Foot and Kookenkä.

Machinery trade

Konekesko imports and markets agricultural and environmental machinery in Finland, and agricultural, construction and forestry machinery in the Baltic countries. In 2017, Kesko sold a 45% interest in the Baltic subsidiaries of machinery trade to Danish Agro group, and agreed on the option of expanding the holding to include Konekesko's agricultural machinery business in Finland.

 

Megatrends and strategic focus areas

Megatrends support our strategy

  • Building and renovation are becoming more technical and regulated
  • Consumers are increasingly outsourcing building to professionals
  • Growing need for renovation building
  • Higher standard of living leads to increased use of services
  • Stronger emphasis on a multichannel customer experience

Strategic objective

What we are doing

  • We strengthen our position in the Northern European markets by offering the best customer experience
  • We continue to focus on our core business and its profitable growth in the stable and growing Northern European markets both organically and through acquisitions.
  • We offer our B2B customers a winning customer experience and unique partnership – “more time for work”

  • Serving joint customers of Onninen and our building and home improvement chains through increasingly efficient logistics, extensive store network, and productised services.

  • We focus strongly on a multichannel customer experience through investments in online stores, our store network, and the skills of our sales staff.

  • We offer B2C customers the easiest shopping experience and most comprehensive multichannel services – “surprisingly easy”

  • We establish a competitive advantage by offering services that make shopping in building and home improvement stores easier and by creating an ecosystem where our business customers help implement renovation projects for our consumer customers through our Remonttipalvelu service concept.
  • We invest in the training of store staff and in new sales operating models and tools.
  • We strengthen our product offering especially with own brand products.
  • Strong development of online stores and digital services
  • Onninen’s new online store was launched in Finland and Sweden in 2017, and will be launched in other countries in 2018.
  • Online stores are being developed internationally at three Centers of Excellence in Sweden, Finland and Lithuania.
  • We make digital shopping easier with e.g. the Remonttimestari renovation app launched in 2017, and the OnniApp for Onninen Express shoppers, to be launched spring 2018.
  • Improving profitability and ensuring synergies in all operating countries
  • The division’s new common commerce unit is responsible for purchasing, selections and supply chain management for both Onninen and the building and home improvement chains internationally.
  • Other common functions also support local companies in our operating countries, and we see synergies especially in purchasing, logistics, store sites and ICT solutions.
  • Ongoing programmes in Sweden and Poland focus especially on profitability improvement.

 

Building and technical trade in figures

Building and technical trade in figures
Number Sales (pro forma) (VAT 0%)*,
€ million
Retail sales and number of stores 2017 2016 2017 2016
K-Rauta and Rautia 136 139 1,033 1,006
Rautakesko B2B Service - - 248 225
Onninen, Finland 53 50 829 780
Intersport** 56 58 188 192
Budget Sport** 11 11 45 48
The Athlete’s Foot** 7 3 4 1
Kookenkä** 37 38 32 32
Konekesko, Finland - - 95 144
Others 35 34 17 18
Finland, total 335 333 2,491 2,445
K-Rauta, Sweden 17 20 200 217
Onninen, Sweden 18 17 201 234
Byggmakker, Norway 82 80 642 659
Onninen, Norway 25 26 291 284
Other Nordic countries, total 142 143 1,334 1,394
K-Senukai, Lithuania 22 22 369 350
K-Rauta and K-Senukai, Estonia 8 8 88 92
K-Rauta and K-Senukai, Latvia 9 8 55 48
Onninen, Baltic countries 15 15 69 60
Konekesko, Estonia - - 44 46
Konekesko, Latvia - - 46 35
Konekesko, Lithuania - - 45 50
Baltic countries, total 54 53 717 682
K-Rauta, Russia*** 14 13 184 174
OMA, Belarus 17 16 120 101
Onninen, Poland 35 36 218 190
Russia, Belarus and Poland total 66 65 522 465
Building and technical trade, outside Finland, total 262 261 2,573 2,541
Building and technical trade, total 597 594 5,063 4,986
*The pro forma comparatives have been calculated to illustrate a situation in which the 2016 acquisition (Onninen) and the 2016 and 2017 divestments (Intersport Russia, K-maatalous operations, Asko and Sotka furniture trade) would have been completed on 1 January 2016.
** Incl. online sales. In addition, the building and home improvement stores offer e-commerce services to their customers.
*** On 16 February 2018 we announced that we are to discontinue the building and home improvement operations in Russia.
Building and technical trade, key figures 2017 2016
Net sales € million 4,486 4,100
Operating profit € million 154.7 60.8
Comparable operating profit € million 95.8 97.9
Comparable operating profit as percentage of net sales % 2.1 2.4
Capital expenditure € million 80 452
Capital employed, average € million 1,129 1,000
Comparable return on capital employed % 8.5 9.8
Personnel average 13,662 12,743
Properties 2017 2016
Owned properties, capital € million 329 342
Owned properties, area 1,000 m2 393 421
Leased properties, lease liabilities € million 786 791
Leased properties, area 1,000 m2 1,115 1,251

Competitive advantages

  • Chain concepts and service combinations that are based on customer needs
  • One store network can serve different customer groups
  • Effective joint use of online stores, electronic services and extensive store network
  • Professional customer service in-store and in electronic channels
  • Well known and reliable operators, store chains, and product brands
  • Efficient procurement and logistics

 

Own brands in 2017

The building and technical trade division offers a total of some 26,600 own brand products, the biggest of which are:

  • Cello, some 6,100 products, also Cello kitchens in Finland
  • PROF, some 5,500 products
  • FXA, some 2,900 products
  • Onnline, some 8,600 products

Building and technical trade chains

K-Rauta

K-Rauta wants to make building, renovation and shopping at building and home improvement stores surprisingly easy, leaving professionals with more time for work. K-Rauta offers products and services for building, renovation, yard and garden, interior decoration and home furnishing to consumers and business customers. In Finland, all K-Rauta stores are run by retailer entrepreneurs. K-Rauta has 136 stores in Finland and 17 stores in Sweden.

Byggmakker

Byggmakker is one of the leading operators in the building and home improvement trade in Norway. It offers a store network covering the entire country and very strong B2B expertise. Nearly all Byggmakker stores operate under the retailer business model. Byggmakker has 82 stores.

K-Senukai

K-Senukai's stores offer extensive non-food product selections to customers in the Baltics, with a focus on products related to building and living. There are a total of 39 stores in the K-Senukai network of stores.

OMA

OMA is the largest building and home improvement store chain in Belarus with 17 stores.

Rautakesko B2B Service

The customers of Rautakesko B2B Service are national and large regional building firms, property maintenance companies, the housing industry and other business customers. The strengths of B2B Service are the extensive selections of building and home improvement products and close collaboration with the K-Rauta store network, through which all of the warehouse deliveries take place.

Onninen

Onninen and Onninen Express stores serve business customers. Onninen delivers products and service packages to contractors, industry, infrastructure building and retail dealers. Customers can collect products for their daily needs from the Onninen Express stores' selection. There are around 150 Onninen Express stores and Onninen points of sale in Finland, Sweden, Norway, Estonia, Latvia, Lithuania and Poland.

The Elfin chain operations include around 220 independent electrical contractors with which Onninen collaborates across Finland.

The Hanakat chain is a retail network comprising around 80 independent HEPAC entrepreneurs in Finland.

The Elfag chain is one of Norway’s biggest electrical contractor chains including around 140 business members.

Konekesko

Konekesko imports and markets agricultural and environmental machinery in Finland, and agricultural, construction and forestry machinery in the Baltic countries. Konekesko has subsidiaries in Estonia, Latvia and Lithuania. 

 

Leisure goods trade chains

Intersport, Intersport.fi

Intersport is Finland's market leader in the sports trade. Together with retailer entrepreneurs, it employs almost 1,000 people in 55 stores and its online store. The chain's success is based on extensive selections of sports and leisure products, good service, high-quality products, diverse maintenance services and on providing an expert shopping experience, both in-store and online.

Budget Sport, Budgetsport.fi

There are ten Budget Sport stores across Finland. The stores strive to beat competition by making the shopping of sports trade products quicker, easier and less expensive. A diverse online store complements the customer experience.

The Athlete’s Foot, theathletesfoot.fi

The Athlete’s Foot is a retailer of sporty leisure footwear, trainers and clothing. The chain represents the world's best known sports goods brands and models, and it aims to promote its customers' passion for sport and bring a touch of style into their lives. The chain has six stores and an online store in Finland.

Kookenkä, Kookenka.fi

Kookenkä is Finland’s largest shoe store chain for the whole family. The chain's 36 stores and online store cover the whole country.

 

Markets and market shares

The building and home improvement trade market by country, along with the improvement from the previous year (retail trade, VAT 0%), market shares and main competitors 
Market area   Market size and change Market share Main competitors
Finland  €3.2 billion (+2.8%), (RaSi ry, Finnish Hardware Association, DIY) 41% (RaSi ry, Finnish Hardware Association, DIY) STARK, S Group, Bauhaus
Sweden €5.3 billion (+4.8%)* 4%* Byggmax, Bauhaus, XL Bygg, Woody, Beijer  
Norway €5.0 billion (+3.1%)* 13%* Optimera, Mestergruppen, Maxbo, Coop
Estonia €0.4 billion (+8.4%)* 23%* Bauhof, Ehitus ABC, Espak, Bauhaus
Latvia €0.5 billion (+11.3%)* 12%* Depo DIY, Kursi
Lithuania €0.6 billion (+6.5%)* 30%* Ermitazas, Moki-Vezi, Depo DIY
Belarus €1.1 billion  (+6%)* 11%* Mile, Materik, Praktik

 * Kesko's own estimate

The technical wholesale market by country, along with the improvement from the previous year (retail trade, VAT 0%), market shares and main competitors 
Market area   Market size and change Market share Main competitors
Finland €2.1 billion (+5.1%), (STK, LVI-TEK)

37% (STK, LVI-TEK)

Ahlsell, LVI Dahl, SLO, Rexel
Sweden €3.8 billion (+8.9%) (SEG, RGF) 5% (SEG, RGF) Ahlsell, Dahl, Elektroskandia
Norway €1.3 billion (+4.2%), (EFO, electrotechnical trade) 20% (EFO)  Ahlsell, Elektroskandia, Solar
Poland €4.7 billion (+5.0%)* 5%* Tadmar (Saint Gobain), BIMs (GC), Sonepar, W.E.G (Würth)
Estonia €0.3 billion (+10.4%)* 13%* FEB (Ahlsell), SLO, W.E.G (Würth)
Latvia €0.4 billion (+16.2%)* 4%* Sanistal, EVA-SAT, SLO
Lithuania €0.5 billion (+9.6%)* 3%* Sanistal, Dahlgera (Dahl) ja Elektrobalt (Würth), SLO

* Kesko's own estimate

The leisure goods market in Finland, along with the improvement from the previous year (retail trade, VAT 0%), market shares and main competitors 
Market area   Market size and change Market share Main competitors
The sports trade   Around €0.9 billion (+1.6%) (Statistics Finland) Intersport, Budget Sport, The Athlete's Foot and Kesport
28%* 
Stadium, XXL, Sportia, Top Sport
The shoe trade Around €0.3 billion (-1.2%), (Textile and Fashion Suppliers and Retailers Finland TMA and Kesko’s own estimate) Kookenkä and Kenkäexpertti 10%*  Other speciality stores, department stores, hypermarkets, sports stores and online stores

* Kesko's own estimate