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Grocery trade

"K Group’s position in the Finnish grocery trade market is strong. We have the widest network of food stores in the country with the most extensive coverage, and the work to transform the store network will continue in 2018. We offer the most inspiring food stores in Finland, tailored to the needs and wishes of our customers. We are constantly developing our digital services to ensure effortless shopping for our customers also online.”

Ari Akseli, Executive Vice President, grocery trade

­Our K-food retailers listen to the wishes of their customers in the stores as well in digital channels, and tailor their stores according to local customer needs. K-food stores are also shaped by global megatrends affecting consumer behaviour.

Some 1.2 million customers visit K-food stores every day. Customer satisfaction is guaranteed by K-food retailers, and we operate with them under the chain business model. The K-food store chains are K-Citymarket, K-Supermarket, K-Market and Neste K service stations. On the Global 100 Most Sustainable Corporations in the World list, Kesko ranks 31st, being the most responsible trading sector company in the world. Our strengths include versatile high-quality selections, strong emphasis on Finnish products, skilfully constructed fresh food departments, and professional service.

The trend of hybrid consumption is shaping store selections and making them more diverse.

Consumer habits in the grocery trade are changing. Purely price-conscious consumption has given way to hybrid consumption, i.e. consumers who accept only the alternative that is of the highest quality or the most ethical in certain product groups, yet are extremely price conscious about other products. Nearly half of all Finns can already be considered hybrid consumers. K-food stores are responding to the changes in consumer behaviour by offering quality products that have been produced responsibly, while ensuring their selection is also competitively priced.

Most extensive network of neighbourhood stores in Finland

K Group is the second biggest operator in the Finnish grocery trade with a market share of approximately 37.2% (Kesko's own estimate after the acquisition of Suomen Lähikauppa). At the end of 2017, around 6,700 people worked in Kesko's grocery trade.

The most extensive and comprehensive store network in Finland with redesigned food stores.

Following the acquisition of Suomen Lähikauppa in 2016, we now offer the most extensive network of neighbourhood stores in Finland with over 800 K-Markets. The last remaining Siwa and Valintatalo stores were restyled into new K-Markets in the spring of 2017. All of the acquired stores will be run by K-retailer entrepreneurs by summer 2018.

K-food stores are changing

We are redesigning our entire hypermarket concept and nearly all K-Citymarkets by the end of 2018. Our aim is to create individual K-Citymarkets whose product selections and services reflect their respective customer bases. The work began in 2015 and so far 35 K-Citymarkets have undergone a transformation. We have also made changes to our home and speciality goods selections, where the focus is now especially on cosmetics, home textiles, clothing and footwear.

In 2017, we also began the redesign of the K-Supermarket chain stores. Over the next few years, we will change the appearance and marketing of all K-Supermarkets to conform to the new concept. The redesign of Neste K service stations to fit their new concept will continue until the end of 2018.

Kespro is the market leader in Foodservice wholesale

Kespro is the leading wholesale company serving the Finnish hotel, restaurant and catering sector. Kespro is increasingly recognised as a restaurant trend expert that offers its customers tailored, versatile purchasing solutions. Kespro’s look was also updated in 2017, and the new look better supports Kespro’s leading position in Foodservice. Kespro’s strong development is underpinned by the robustly growing trend of eating out.

K-food retailers guarantee quality

The selections and services of K-food stores are shaped by various factors such as the increased demand for vegetarian food, population ageing, the growing number of single-person households, urbanisation and multiculturalism.

K-food retailers independently look after the selections, customer service, staff competence, product quality, and business profitability of their stores. They tailor their product selections and services according to the needs of local customers by listening to customer wishes and making use of customer data obtained from the Plussa customer loyalty programme. They complement chain selections in their stores with, for example, food by local producers.

Digital services make shopping easier

Consumers are increasingly doing their shopping online. We offer digital services that make life easier for our customers and also provide increasingly personalised benefits. Our customers receive local, store-specific offers via the K-ruoka mobile app, for example. We offer our customer an easy-to-use digital channel for feedback, Hymy. Some one million customer contacts happen through Hymy each year. In 2017, we launched the K-Plussa student benefit to make shopping more affordable for students.

In 2017, we began a collaboration in China with the global online store operator Alibaba to export Finnish food brands and our own Pirkka products to the growing Chinese market. The collaboration gives us an opportunity to learn from a global e-commerce pioneer and consequently develop our own online store. Our locally-operated online food stores and click & collect services mean customers can access our wide selections online across Finland. Self-service checkouts are available for customers in a hurry at hundreds of K-food stores.

In November 2017, we announced Pirkka products would return to Russia. Some 80 processed food and home and personal care products, including biscuits, muesli, jam, vitamins and household cleaning products, will be exported to Russia at this stage. K Group’s own brand products are available exclusively from Lenta, at first in 38 hypermarkets and 18 supermarkets in St. Petersburg, Petrozavodsk and Murmansk.

New wellbeing chain Hehku begins operations

In 2017, we began work to build a new health and wellbeing store chain, Hehku, together with the pharmaceutical distributor Oriola. Our goal is to establish a chain of 100 Hehku stores and an online store. The first Hehku stores opened early in 2018. If legislation changes, we will expand the business to also include the sale of pharmaceuticals.

 

Megatrends and strategic focus areas

Megatrends support our strategy

  • Urbanisation, increase in the number of single-person households, population ageing
  • Individualisation of consumption habits
  • Quality expectations and price consciousness
  • Corporate responsibility
  • Digitalisation

 

Strategic objective

What we are doing

  • Most customer-oriented and inspiring stores on the market
  • We are strengthening customer dialogue and constantly striving to improve customer satisfaction.
  • We focus on our strengths: versatile high-quality selections, Finnish and local products, and first class fresh food departments and service.
  • We have established a project to create common operating models for the grocery trade, to ensure marketing and selection planning are always customer driven.
  • Most extensive and comprehensive store network in Finland
  • We are redesigning our hypermarket concept and nearly all K-Citymarkets by the end of 2018.
  • We are expanding the K-Supermarket chain, and changing the appearance of the stores and their marketing to conform to the new chain concept in upcoming years.
  • We offer the most comprehensive network of neighbourhood stores in Finland, with over 800 K-Markets.
  • During 2018, we will update Neste K service stations to reflect their new concept.
  • Best digital solutions in the trading sector and extensive online food sales
  • We offer digital services to make life easier for our customers and offer more personalised benefits utilising data.
  • We focus on food online sales: the number of stores offering online sales is growing and we are constantly improving the usability of the service.
  • We offer our customers the easy-to-use digital feedback channel Hymy, where we annually have some one million customer contacts.
  • Quality and customer focus guaranteed by K-retailer entrepreneurs – selection and services tailored to meet local customer demand
  • K-food retailers tailor their product selections and services to suit the needs of local customers, using their customer insight and data obtained from the Plussa customer loyalty programme.
  • At store locations, we offer versatile services together with partners such as Posti, DHL and Starbucks.
  • We ensure that retailer entrepreneurship continues to be profitable and attractive. We offer retailers the chance to run more than one store.

 

Grocery trade in figures

Grocery trade in figures
Number Sales (pro forma) (VAT 0%)*,
€ million
Retail sales and number of stores 2017 2016 2017 2016
K-Citymarket, food 81 80 1,556 1,503
K-Citymarket, home and speciality goods 81 80 587 575
K-Supermarket 235 228 1,822 1,764
K-Market*** 656 433 1,332 1,102
Neste K 71 70 118 112
K-Market, own retail trade*** 157 545 459 768
Others** 82 92 42 57
Grocery trade, retail sales 5,916 5,880
Kespro - - 830 789
Grocery trade, total 1,282 1,448 6,745 6,670
*The pro forma comparatives have been calculated to illustrate a situation in which the 2016 acquisition (Suomen Lähikauppa) and divestments (grocery trade operations in Russia) would have been completed on 1 January 2016.
** Incl. online sales
*** Number of Suomen Lähikauppa's stores was 400 (563)
Grocery trade, key figures 2017 2016
Net sales € million 5,282 5,236
Operating profit € million 181.3 93.0
Comparable, operating profit € million 203.4 175.9
Comparable operating profit as percentage of net sales % 3.9 3.4
Capital expenditure € million 224 238
Capital employed, average € million 791 828
Comparable return on capital employed % 25.7 21.3
Personnel average 6,733 8,200
Properties 2017 2016
Owned properties, capital € million 649 524
Owned properties, area 1,000 m2 420 377
Leased properties, lease liabilities € million 2,007 2,101
Leased properties, area 1,000 m2 1,594 1,684

Competitive advantages

  • Quality and customer focus are guaranteed by K-retailer entrepreneurs – services tailored to meet local customer demand
  • Skilfully constructed fresh food departments and widest selections – also for local food
  • A wide range of digital services to make customers' everyday lives easier and a comprehensive network of online food stores
  • Own brands 
  • Finnish products
  • Sustainability

 

Own brands in 2017

  • Retail sales of own brands some €1 bn, share of grocery trade retail sales approximately 17%
  • A total of 2,520 Pirkka products, with some 260 new product launches
    • Nearly 200 Pirkka Parhaat products
    • A total of 116 Pirkka Organic products
  • A total of some 300 K-Menu products, with some 70 new product launches

Chains

K-Citymarket

K-Citymarket is a modern and affordable hypermarket that offers its customers diverse, extensive selections of food and home and speciality goods. Our service counters offer the best food expertise in Finland. The K-Citymarket chain comprises 81 stores.

K-Supermarket

K-Supermarket’s mission is to inspire Finns to eat better, and be the number one choice for customers who are passionate about food. K-Supermarket’s strengths lie in quality, providing new food ideas, an extensive and current selection, local products, and customer service. There are 235 K-Supermarkets.

K-Market

K-Markets are personal, service-oriented, genuinely local neighbourhood stores – the village stores for the modern age. K-Markets offer their customers diverse selections of food and local services to conveniently suit their everyday lives. The K-Market chain has more than 800 stores and the most extensive network of neighbourhood stores in Finland.

Neste K

The extensive network of Neste K service stations offers customers restaurant quality food and personalised high-quality services quickly and conveniently. The network currently comprises 71 service stations. Our goal is to establish a network of one-hundred new type of Neste K service stations by the end of 2020.

Kespro

Kespro is the leading Foodservice (previously HoReCa) provider and wholesale company in Finland. Kespro acts as a partner to its customer companies and municipalities in Finland and offers its customers a diverse range of food procurement solutions, as well as delivery and collection services. The selection includes fresh foods, processed foods, specialty goods, wine and alcohol.

Markets and market shares

Markets

In 2017, the Finnish grocery trade market was worth approximately €16.9 billion (incl. VAT), representing an increase of approximately 1.7% (Kesko's own estimate). The growth of the overall market was affected by, among other things, the deregulation of store opening hours and improved consumer purchase power. Price competition in the Finnish grocery market has continued to be tight. However, consumers also increasingly value food that is produced in Finland and is healthy and flavourful.

Market shares
Food trade

The market share in Finland is approximately 37.2% (Kesko's own estimate).

Competitors: Prisma, S-market and Alepa/Sale (S Group), Lidl, Stockmann, Tokmanni, Halpa-Halli and M-chain shops.

K-Citymarket's home and speciality goods

Market share cannot be reliably calculated.

Competitors: department stores, hypermarkets, discounters, specialist chains and online stores.

Foodservice
Kespro, Finland

The market share is estimated to have strengthened to approximately 41% (Kesko's own estimate, based on new peer group and the Finnish Grocery Trade Association’s Foodservice wholesale market size as of the start of 2017).

Competitors: Meira Nova, Metro-tukku, Heinon Tukku, Suomen Palvelutukkurit.