Our operations are founded on professional and committed personnel throughout the value chain, a strong K brand, efficient logistics operations and information systems, and stable finances. We create value to all our stakeholders: customers, personnel, shareholders, retailers, product and service suppliers, municipalities and states.
Key areas of value creation for our stakeholders are customer value, shareholder value, and social value.
We operate the retailer business model when it provides a competitive advantage. K-retailer entrepreneurs are responsible for customer satisfaction, product selections, pricing, personnel and business profitability in their stores. They tailor their product selections and services around the needs and wishes of local customers.
In 2017, the retailer business model produced 43% of Kesko's net sales. There are more than 1,100 K-retailer entrepreneurs in Finland. The majority of them, some 850, are K-food retailers, while some 150 operate building and home improvement stores. There are approximately 100 specialty retailers.
The number of K-food retailers increased in 2017, and will continue to do so in 2018, as at least 400 K-Markets that were previously Siwa or Valintatalo stores are or will be taken over by retailer entrepreneurs.
As building and renovation become more technical and regulated, consumers increasingly outsource them to professionals. The rise in the standard of living, urbanisation and population ageing underpin the trend.
In addition to products for building and home improvement and technical trade, Kesko’s building and technical trade offers comprehensive multichannel services for building, renovation and building services engineering for both business customers and consumers. We offer consumers more comprehensive solutions, such as renovation projects with start-to-finish planning and execution.
The K brand is increasingly present in the everyday lives of our customers through our operations and chains. Our objective is to make everyday life good. The chain brands of K-Rauta, K-Citymarket, K-Supermarket and K-Market operate under the main K brand. During 2017, these chain brands were harnessed to offer our customers even more personalised services at all stages of life, and to provide inspiration and solutions to increasingly differing customer needs.
The K brand is more present, more vocal on issues, and a more active member of communities and society. The K brand wants to be a meaningful part of the everyday lives of our customers - For shopping to be fun.
K-Plussa is the most versatile customer loyalty programme in Finland. Some 3.6 million Finns, representing 2.3 million households, carry a Plussa card.
Customer data has reinforced our view that all stores, regions, competitive situations and customers are different. That is why every K-store is different, and tailored to the demands and profiles of local customers.
For our customers, the utilisation of customer data will result in personal, interactive, multi-channel service. Our popular K-Ruoka mobile application now features product information and enables food purchases via the online store.
Listening to our customers and utilising feedback are key factors in Kesko’s strategy when it comes to improving customer experience. The amount of digitally obtained customer feedback has grown 50-fold within the past two years in the grocery trade division. By autumn 2017, the amount of feedback requiring a response had grown by 35% compared to the year before, while response times had decreased to one-third. The Hymy system for customer feedback enables efficient, modern, multichannel customer dialogue and the development of operations at various organisational levels.
Our own brand products are a key part of K-stores' diverse product selection. They enable us to offer more affordable shopping baskets and high-quality products that suit various life situations.
The Pirkka product range comprises nearly 2,250 products that combine high quality with affordability. When products are selected for the Pirkka range, priority is always given to the Finnish alternative, provided that it meets the quality and price criteria.
K-Menu consists of quality everyday food products where price is the most important criterion for consumers. The K-Menu range comprised around 300 products.
The own brands of the building and home improvement trade offer customers reliable and affordable home and garden products and building and renovation tools. Onninen's own brands offer electrical, HEPAC and refrigeration products for B2B customers.
The Product Research Unit's laboratory monitors the product safety and quality of the private labels and own imports in the grocery trade. All of our food product operations have a self-control plan in place.
Kesko’s financial position is very strong. In 2017 our net sales increased by 1.8% in comparable terms, our comparable operating profit totalled €297 million and the return on capital employed rose to 12.2%. At the end of the year, we had liquid assets of €398 million and a balance sheet total of €4.5 billion. Our strong and stable profit and financial position enable investments in growth and long-term business development. The acquisitions carried out will enable us to obtain significant synergies.
We distribute at least 50% of our comparable earnings per share as dividends, taking into account, however, our financial position and operating strategy. A dividend of €2.20 per share is proposed to be paid for 2017, which would represent 96.6% of the comparable earnings per share. We have paid dividends every year but one (1967) since the company was listed in 1960. In 2017, the price of a Kesko B share was down by 4.7%, with the closing price at €45.25.
Responsible business operations are crucial for the achievement of good and sustainable financial results. Besides financial factors, investors are increasingly taking into account aspects related to the environment, social responsibility, and corporate governance (ESG) when making investment decisions. Our long-term inclusion in sustainability indices provides impartial evidence of our responsible operations and facilitates investment decisions. Kesko is included in prestigious global sustainability indices, such as the DJSI World and DJSI Europe. Kesko ranked 31st (2017: 25th) on the 2018 Global 100 Most Sustainable Corporations in the World listing, and was the most sustainable company in the trading sector.