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Grocery trade

"Our strategic objective is to provide the most inspiring stores and digital services of the market. We strengthen the quality image of K-stores and renew our store concepts."

Jorma Rauhala, EVP, President of the grocery trade division

Every person is different. That is why every K-food store is different. K-food retailers listen to their customers' wishes and customise their stores' services according to local customer demand. The customer and quality are at the centre of everything that K-food stores do – our aim is to offer the most inspiring food stores in the market, along with supporting digital services.

Every day, approximately 1.2 million customers visit K Group's food stores. K-food retailers are responsible for customer satisfaction at K-food stores, and Kesko's grocery trade works with these retailers under the chain business model. The K-food store chains are K-Citymarket, K-Supermarket, K-Market and Neste K. K-food stores are the world's most sustainable companies in their sector. Further strengths include superior fresh food departments, professional service, diverse and high-quality selections, Finnish products and the own brand Pirkka.

K Group offers Finland's most comprehensive network of the most service-oriented neighbourhood stores.

The acquisition of Suomen Lähikauppa, completed in April 2016, enables K Group to offer Finland's most comprehensive network of the most service-oriented neighbourhood stores. All Siwas and Valintatalos will become K-Markets by spring 2017, and will gradually be transferred to K-retailers by the end of 2018.
The K-Supermarket chain will also expand. In 2016 and 2017, we will establish almost 30 entirely new stores, and more than 20 stores will be completely renewed.

We are updating our entire hypermarket concept and we will revamp all K-Citymarkets by the end of 2018. The aim is to create 81 different K-Citymarkets with product selections and services that reflect their customer bases. By the end of 2016, 23 stores had been updated.

In accordance with its strategy, Kesko is focusing on the Finnish grocery trade. The company sold its grocery trade businesses in Russia to Lenta, a Russian grocery trade operator, in November 2016.  

K-food retailers are tasked with tailoring their stores to take local customer needs into consideration to the maximum possible extent.

Kesko had 10,338 personnel working in the grocery trade at the end of 2016. K Group (Kesko and the K-retailers) is the second largest operator in Finland's grocery trade with a market share of approximately 37-38% (Kesko's own estimate after the acquisition of Suomen Lähikauppa).

Collaboration between Kesko's grocery trade and K-food retailers is based on chain operations, which ensures customer orientation, business efficiency and the achievement of competitive advantages. Kesko's key operations are centralised purchasing, selection management, logistics, and developing chain concepts and the store site network. Kesko also agrees upon long-term collaboration models with different partner companies. Centralised operations guarantee efficient competitiveness.

K-food retailers are tasked with tailoring their stores to take local customer needs into consideration to the maximum possible extent. K-retailers look after the selections, customer service, personnel competence, product quality and business profitability of their stores. K-retailers tailor their product selections and services according to the needs of local customers by listening to their wishes and making use of customer data obtained from the Plussa customer loyalty programme. K-food retailers complement the common product selection in their chains by adding products such as those available from local producers.

Digital services provide customers with more personalised benefits from K-food stores and local store-specific offers.

Digital services developed jointly by Kesko and K-food retailers offer customers ideas and inspiration for cooking, as well as easier ways to shop for food. Digital services provide customers with more personalised benefits from K-food stores and local store-specific offers. The K-food mobile app offers a smart shopping list that recommends products that the customer frequently buys. It also includes thousands of recipes.

Almost 100 K-food stores around Finland are offering online food stores that operate locally, as well as click and collect services. Customers have access to the extensive selection of products and inexpensive prices of the familiar store also online. Self-service checkouts have already been installed in dozens of K-food stores around Finland to make the daily lives of time-pressed customers easier.

Strategic focus areas

Strategic objective

What we are doing

  • K-food stores are modernising
  • Emphasis on freshness, Finnish origins, extensive selections and service
  • Every K-store has a K-retailer who tailors the store to meet the local customer needs
  • Capital expenditure in the network of neighbourhood stores. As a result of the acquisition of Suomen Lähikauppa, all Siwas and Valintatalos will be converted into K-Markets in spring 2017, and will gradually be transferred to retailers by the end of 2018
  • The almost 70 service stations run by Neste and Kesko will be renewed and become Neste K service stations by the end of 2017. The objective is to build up a network of approximately 100 Neste K stations
  • All of the stores in the K-Citymarket chain will be modernised by the end of 2018
  • New services and partners in connection with K-food stores, such as Starbucks, Posti, DHL, self-service checkouts, online food stores
  • The customer and quality – in everything we do
  • Strengthening customer dialogue
  • Improving customer satisfaction
  • Attractive, personalised offers
  • Digital customer experience
  • More effective utilisation of customer data
  • Mobile services that are valuable to customers and targeted marketing
  • Increasing online sales of food and making new solutions available to customers. Click and collect services expanded further to all parts of Finland
  • Renewed Plussa customer loyalty system: Personalised special offers based on shopping history
  • Retailers ensure quality
  • Ensuring that retailer entrepreneurship continues to be profitable and interesting. Retailers may run several stores in the future
  • Every K is different – building the selection according to local customer demand
  • Highlighting local food and products from small producers in selections
  • Increasing Kespro's business
  • Strengthening international cooperation and new partnerships
  • Further strengthening of market position
  • Close cooperation with K-food stores

 

Competitive advantages of the grocery trade

  • The most inspiring stores in the market
  • Tailoring every K-food store to meet local customer demand
  • Finland's most extensive network of neighbourhood store services and additional services
  • The best fresh food departments and widest selections – also in local food
  • K-retailer entrepreneurship guarantees quality and customer orientation
  • Affordable and high-quality Pirkka and K-Menu products
  • Finnish origin and responsibility – approximately 80% of the product selections are Finnish
  • A wide range of digital services to make customers' everyday lives easier and a comprehensive network of online food stores
  • Effective customer dialogue – feedback from up to a million customers every year

Chains

K-Citymarket

K-Citymarket is a modern hypermarket that offers its customers diverse, extensive selections of food, as well as home and speciality goods. K-Citymarket is well known for its best offers, wide selections and food expertise.

K-Supermarket

The mission of K-Supermarket undergoing modernisation is to inspire Finnish people to eat better - K-Supermarket is the number one choice for customers who are passionate about food. The strengths of K-Supermarket lie in quality, providing new food ideas, an extensive and up-to-date selection, local products, and superior customer service.

K-Market

K-Market is a personal, service-oriented, genuinely local neighbourhood store near its customers – a village store for the modern age. K-Market offers customers diverse selections of food and local services to conveniently suit their everyday lives.

Neste K

The Neste K stations will be revamped to become food oriented and welcoming service stations. Customers will be offered high-quality, personalised service station services quickly and conveniently.  The aim is to build a network of 100 revamped Neste K stations.

Kespro

Kespro is Finland's leading provider of Foodservice services (formerly known as HoReCa) and a wholesaler. Kespro acts as a partner for its customer companies and municipalities in Finland and offers its customers a diverse range of procurement solutions, as well as delivery and collection services.

 

Markets

In 2016, the Finnish grocery trade market was worth approximately €16.8 billion (incl. VAT), representing an estimated rise of approximately 1% (Kesko's own estimate). The market as a whole has experienced a cautious growth, influenced by factors such as the liberalisation of opening hours for food stores. In recent years, the Finnish grocery market has been characterised by fierce price competition. 

Market shares

Food trade

The market share in Finland is approximately 37-38% (Kesko's own estimate).
Competitors: Prisma, S-market and Alepa/Sale (S Group), Lidl, Stockmann, Tokmanni 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 43% (Kesko's own estimate).
Competitors: Meira Nova, Metro-tukku, Heinon Tukku, Suomen Palvelutukkurit.

in Action:
Kinkkutemppu put ham fat to good use

In the spirit of the circular economy, K-food store customers had the opportunity to donate the fat arising from their roasted Christmas hams to the Kinkkutemppu campaign.

In our responsibility programme, we are committed to reducing and recovering the waste from our operations. We take active measures aimed at enhancing recycling in order to identify new methods to adopt circular economy.

The fat that was collected was used for making renewable diesel, and the profits were donated to the Hope ry and IceHearts charities. There was a total of 42 collection points in 18 localities, mainly in connection with K-food stores.

Customers took the fat from their Christmas ham to a Kinkkutemppu collection point. An estimated 40,000 households took part in the campaign and some 12,000 kg of fat was collected. A car could drive about 150,000 km, or four times around the glober on the amount of diesel manufactured from it.

In addition to K Group, the Chemical Industry Federation of Finland, Neste, Lassila & Tikanoja, Finnish Packaging Recycling RINKI, the Finnish Water Utilities Association, Honkajoki, the Rural Women’s Advisory Organisation and Finnish Environmental Industries (YTP) were involved in the campaign.

Read more

in Action:
The ‘Thank the Producer’ operating model continues

Speaking on behalf of Finnish food production is of primary importance to us at K Group. The purpose of the operating model introduced in 2015 is to highlight Finnish food production and provoke discussions about the welfare of Finnish agriculture.

The operating model provides customers with an easy way to support Finnish food producers. K-food stores sell 12 Pirkka ’Thank the Producer’ products for which K Group pays extra support directly to producers. The extra support, ranging from 3 to 30 cents, i.e. some 5%, depending on the product, is included in the product price. In 2016, the product range expanded from Finnish meat products to also include milks.

"As a responsible operator, our duty is to take care of the welfare of the entire food chain. Finnish customers want to buy Finnish food. The ’Thank the Producer’ product initiative is one way to make sure that Finnish production remains vital", says Executive Vice President Jorma Rauhala, President of Kesko's grocery trade division.

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in Action:
We reduced the salt content of Pirkka Little Wolf oatmeal rolls

The panel of experts that selects Pirkka products always takes into account the nutritional characteristics of products. We pay special attention to the fat, sugar and salt content, as our own brand products are our way of pointing customers towards healthier choices. In spring 2017, we will launch Pirkka Little Wolf oatmeal rolls with a reduced salt content, as we did not want to make a high-sodium product for the target group, children and young people.

"Pirkka Little Wolf oatmeal rolls are linked to our cooperation with the Finnish Basketball Association, and the target group is children and young people. That is why we decided to take this product back to the R&D team for an extra round of development, because a lot of salt is hidden in our food anyway. This is something that we can influence when we develop Pirkka products," says Kesko's Product Research Manager, Heta Rautpalo.

Products are usually assessed by a panel of product development experts but, in this case, the winners of K-Supermarket's Pirkka bread competition were invited round the table to evaluate the development samples of Pirkka Little Wolf oatmeal rolls.

The panellists evaluated the appearance of the presented candidates on the basis of patterning, the baked surface and colour. They also evaluated the structure in terms of the consistency, crispness and crumbliness, and – most importantly – they assessed the flavour.

However, when the nutritional information on the rolls was being reviewed, it came to light that the salt content of the winning product would surpass the threshold for being categorised as high in sodium. Although one of the biggest contributors to the flavour of bread is the salt content, there was no desire to deliberately make high-sodium products for children and young people. The panel decided to task the product manager with requesting that the manufacturer provide one more sample containing no more than 1.1% of salt.

The new samples of the Pirkka Little Wolf oatmeal rolls, which have a salt content below the threshold for high-sodium products, will undergo a sensory evaluation at the K-test kitchen before approval is granted for launch in the form of a pre-baked frozen product in spring 2017.

"The collaboration between the Finnish Basketball Association and K-food stores emphasises nutrition. Our Pirkka brand enables us to tell everyone in the country about the importance of the diet of active youngsters or about good lunches to pack in the training bag – the introduction of this roll is an effort in this direction," says Heta Rautpalo.    

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in Action
K-food stores introduced vegetarian display cabinets

The sales of vegetarian foods have seen a strong growth in K-food stores over the last few years. As the demand grows, K Group stores want to have vegetarian food products more easily and visibly on display. To that effect, they have introduced vegetarian cabinets that bring plant-based protein products together in one place.

By the end of 2016, more than 100 K-food stores had been fitted with vegetarian display cabinets and the number is growing. The cabinets have been very well received by customers. 

New vegetarian products are examined and actively included in K-food stores’ selections. A lot of new plant-based protein products have been introduced to the market. The areas of highest demand for vegetarian products are Helsinki, Turku and Tampere. The growth in the consumption of vegetarian products can be clearly seen also in student cities.

"The publicity raised by Pulled Oats has increased the popularity of other plant-based protein products too. The simultaneous health boom has clearly impacted their demand", says Vice President for Commerce Ari Akseli of Kesko’s grocery trade division. 

 

Read more

Did you know?

  • As Siwas and Valintatalos became K Group food stores, the network of K Group's neighbourhood stores became the most comprehensive and service oriented in Finland. The footfall and sales of the new K-Markets have increased significantly. The stores' price levels have fallen by over 20% in some cases.
  • The Pirkka product range celebrated its 30th anniversary in September 2016. Own brands account for a fifth of all retail sales in K-food stores. Especialy fruit and vegetables are popular Pirkka products. Customers have made special requests for products related to special dietary requirements to be included in the Pirkka range.
  • The K-Food Awards, launched in 2016, awarded prizes for the best innovations in the food world, the most interesting people and the most talked-about phenomena.
  • Kesko and the Swedish ICA began working together on procurement via ICA Global Sourcing (IGS) in Kesko's home and speciality goods trade. Customers of K-food stores will notice this collaboration in terms of a wider range of home and speciality goods, new international branded products and more affordable prices.

 

Own brands in 2016

  • Pirkka products: 2,593 (including Pirkka Parhaat)
    • Pirkka Parhaat products: 203
    • Pirkka Organic products: 118
    • New Pirkka products launched: 66
  • K-Menu products: 313

 

Grocery trade in figures
Number Sales (VAT 0%),
€ million
Retail sales and number of stores 2016 2015 2016 2015
K-Citymarket, food 80 81 1,503 1,505
K-Citymarket, home and speciality goods 80 81 575 575
K-Supermarket 228 219 1,764 1,716
K-Market** 638 412 1,208 1,071
Neste K 70 64 112 119
Valintatalo and Siwa** 340 - 453 -
K-ruoka, Russia - 9 104 106
Others* 92 109 59 122
Grocery trade, retail sales 5,777 5,214
Kespro - - 789 779
Grocery trade, total 1,448 893 6,566 5,993
* Incl. online sales
** Number of Suomen Lähikauppa's stores was 563
Grocery trade, key figures 2016 2015
Net sales € million 5,236 4,673
Operating profit € million 93.0 249.4
Comparable, operating profit € million 175.9 177.5
Comparable operating profit as percentage of net sales % 3.4 3.8
Capital expenditure € million 238 129
Capital employed, average € million 828 871
Comparable return on capital employed % 21.3 20.4
Personnel average 8,200 6,420
Properties 2016 2015
Owned properties, capital € million 524 639
Owned properties, area 1,000 m2 377 410
Leased properties, lease liabilities € million 2,101 1,906
Leased properties, area 1,000 m2 1,684 1,405