Search

Our strategy

The core of Kesko's strategy is profitable growth in three strategic areas: the grocery trade, the building and technical trade, and the car trade. We differentiate ourselves from the competition with quality and customer orientation.

Kesko and K-stores are working increasingly strongly as a unified K Group, so we can offer our customers even better services and operate efficiently. Our strategic objective is to strengthen the customer experience for consumers and companies both in stores and in digital channels. We modernise the chain concepts, build the best digital services in the trading sector and reform the K-Plussa customer loyalty system.

Our strategic objective is to strengthen the customer experience for consumers and companies both in stores and in digital channels.

In the grocery trade, our strategic objective is good profitability and a stronger market share in Finland. We want to offer the most inspiring food stores and digital services in the market. The growth strategy is underpinned by the acquisition of Suomen Lähikauppa completed in early 2016. In consequence of the acquisition, at least 400 Valintatalo and Siwa stores will be renewed into K-Markets by spring 2017. In addition, the current approximately 400 K-Market chain stores and 60 Neste K stations will be modernised by the end of 2017. We will carry out a modernisation of the K-Citymarket chain by the end of 2018 and create 81 different stores with product selections and services that reflect their customer bases. We are refining the K-Supermarket concept and expanding the network with new store sites. In addition, we are strengthening our digital approach and improving the level of quality and service in K-food stores, and renewing the marketing model. We disposed of the Russian grocery trade towards the end of 2016. 

Kesko operates in the building and technical trade in nine countries and is the fifth largest operator in the European building and home improvement trade market. The strategic objective is growth and a stronger position in Europe. The acquisition of Onninen, a company specialising in HEPAC and electrical products, in the first half of 2016 will significantly support this. The combination of Onninen and Kesko's building and home improvement trade has enabled us to create a unique B2B trade entity on the market. We are making major developments in digital services and e-commerce. In Finland, K-Rauta and Rautia stores will be combined under the renewed K-Rauta brand. The brand renewal in other operating countries will take place in phases.

Kesko operates in the building and technical trade in nine countries and is the fifth largest operator in the European building and home improvement trade market.

In the car trade, Kesko is the market leader in Finland, and our objective is to increase our market share in the car trade, particularly in Finland. We are actively developing new business models and improving the multi-channel customer experience. Towards the end of the year, we acquired the rights to represent and import Porsche vehicles in Finland.

In addition, we are developing Kesko's other businesses, which include the furniture trade, the sports trade, the agricultural trade, the machinery trade and the shoe trade, with the aim of increasing their value.

To ensure competitiveness and improve profitability, we have realised savings of €50 million in fixed costs. We estimate that the acquisitions will generate over €30 million in synergies at the EBITDA level from 2018 onwards and over €60 million from 2020 onwards.

In 2015 and 2016, we made capital expenditure of €500 million in business operations, excluding acquisitions. As of 2018, we estimate that the annual capital expenditure will be less than €200 million.

Strategy implementation is progressing
#

Our strategic objectives

  • Growth in grocery trade
  • Growth and expansion of the building and technical trade in Europe
  • Growth of the car trade, particularly in Finland
  • The best customer experience in the trading sector in all channels
  • A single, unified Kesko, seeking synergies and efficient common functions

Our financial objectives

Return on capital employed, target: 14%

We will reach this target by focusing on strategic growth areas, growing cost-efficiently and by improving capital efficiency.

Return on equity, target: 12%

We will allocate capital so as to realise the best possible return and increase shareholder value.

Interest-bearing net debt/EBITDA, target: less than 2.5

We will maintain a strong financial position as well as safeguard our dividend capacity and the opportunities to implement strategic projects.

Return on capital employed*

* Comparable

Return on equity*

* Comparable

Financial objectives
Objectives Target level Realisation in 2016 Realisation in 2015 Realisation in 2014
Return on capital employed* 14% 11.9% 11.7% 9.9%
Return on equity* 12% 9.8% 8.2% 7.6%
Interest-bearing net debt/EBITDA < 2,5 0.4 -1.4 -0.3
* Comparable
Kesko's dividend policy: Kesko Corporation distributes at least 50% of its comparable earnings per share as dividends, taking into account, however, the Company's financial position and operating strategy.

The foundation of our operations

Value
Vision
Mission

Value

The customer and quality - in everything we do

Vision

We are the customer's choice and the quality leader in the European trading sector

Mission

We create welfare responsibly for all our stakeholders and the whole society

Operating principles

I operate directly, openly and honestly
I'm all in
I create trust
I show the path
I operate directly, openly and honestly

Honest and open operation is the starting point for everything. Responsibility is a success factor for the K Group, proof of which is customers' confidence in the K Group's operating principles and products.

I'm all in

In the K Group, personnel put themselves into play every day in order to offer their customers a diversified selection, quality products and first class services that enable daily life to go smoothly.

I create trust

Trust in other people is, above all, based on our own operations. In the K Group, people respect each other and listen to customers' needs.

I show the path

Through constant development and renewal, the K Group gains a clear direction in serving customers ever better. In the K Group, everyone knows their role and has the agility to respond to changing conditions.

One unified K

 
1. A strong brand and identity at the consumer interface
2. Efficient common functions
3. Customer relationships across divisional borders

in Action:
K Code of Conduct unites personnel in nine operating countries

Since October 2016, the K Code of Conduct has established itself as the name of the operating principles shared by all members of the Kesko personnel in Finland, Sweden, Norway, Estonia, Latvia, Lithuania, Poland, Russia and Belarus.

K-raudan HR:ssä Pietarissa Venäjällä työskentelevät Mariya Yakusheva, Svetlana Kononova ja Vadim Bezovchuk ovat tutustuneet venäjänkieliseen K Code of Conductiin.

Mariya Yakusheva, Svetlana Kononova and Vadim Bezovchuk, who work at the K-Rauta HR function in St. Petersburg, have familiarised themselves with the K Code of Conduct in Russian.

In 2016, we updated the former guide entitled Our Responsible Working Principles. An employee survey had revealed a need to clarify and update the guidelines and to prepare separate guidelines for business partners.

”It was important to bring the guidelines up to date also because during the year thousands of new employees have joined us as a result of the acquisitions of Suomen Lähikauppa and Onninen. With the update, we also wanted to emphasise management’s commitment to the shared K Code of Conduct and to improve the everyday presence of the guidelines. The K Code of Conduct includes a link to the SpeakUp reporting channel, which operates in nine languages and makes it easier to report suspected or actual violations of the shared operating principles confidentially,” says Kesko EVP, Group General Counsel, Anne Leppälä-Nilsson.

 

The K Code of Conduct contains 12 principles illustrated with clear examples.

Ambassadors convey the message

We have prepared an eLearning package for the entire personnel to facilitate the adoption of the K Code of Conduct. By the end of 2016, a total of 3,159 people had already completed the eLearning programme.

We appointed K Code of Conduct ambassadors from among the personnel in all divisions and operating countries to assist in the deployment.

”These roughly 20 ambassadors act as messengers, information channels and contacts both with respect to their own organisations and the K Code of Conduct steering group. It’s been great to see how eagerly they have embarked on their assignment to deliver the message,” says Leppälä-Nilsson.

 

Indoor Estonia was the first company in which the entire personnel completed the K Code of Conduct eLearning. To celebrate, coffee and cake was enjoyed at all Indoor Estonia offices.

Continuous monitoring ensures commitment

For the K Code of Conduct to be constantly upheld, we pay special attention to the monitoring in the following ways:

  • We monitor the completion rates of the K Code of Conduct eLearning programme and, if necessary, remind related target groups of the completion
  • We update all new and renewed employment contracts to include a clause about the requirement for personnel to familiarise themselves and comply with the K Code of Conduct
  • As of 2017, we oblige the entire personnel to annually acknowledge their compliance with the K Code of Conduct guidelines
  • We add a K Code of Conduct contract clause to agreements signed by Kesko Group companies under which the Group companies purchase products or services from parties outside the Group
  • We draw up an annual plan with quarterly actions promoting the awareness of the K Code of Conduct
  • The K Code of Conduct Steering Group convenes at least every six months and checks whether the guidelines are up to date, plans trainings, and monitors and reports the training completion rate

 

Read more

Stakeholder address:
The K Digital Trainee programme led to interesting career opportunities

Five skilled and keen trainees were selected to join the first K Digital Trainee programme. The six-month programme was a real success and the trainees now have permanent jobs developing digital services in different parts of K Group.

I started working as a digital trainee with Katri, Hilla, Hanna-Reeta and Joonas in May 2016. During the trainee period, we were placed in the K Digital unit and in all Kesko divisions, namely the grocery trade, the building and technical trade, and the car trade. We were not, however, confined by the boundaries of the designated unit and we often crossed them in our work. In our tasks, we got to know Kesko from the store floor to strategic work perspectives. We mostly worked on various development projects and also actively took part in the development of working practices and the company culture.

Besides skills, the characteristics that were valued in the selection of trainees to the K Digital Trainee programme were courage, self-initiative and open-mindedness. We were expected to question the current operating models and encourage everyone around us towards a new approach. We all were included in projects which recent graduates can typically only dream about. It was great to see that we were put in charge without hesitation, and as we met expectations, we were given more and more interesting and challenging tasks. In addition, the trainee programme included group coaching sessions, excursions to partner companies and the “Grande Finale”: a study trip to London.

Kesko HR was in charge of the trainee team and organising the programme. The K Digital Trainee Programme was part of the Finland's Mentors project, through which Kesko makes a contribution by employing recently graduated young people. We gained a good overall idea of K Group and got to create networks within and outside the organisation.

Besides the support from Kesko’s Chief Digital Officer Anni Ronkainen, our daily work was guided by personal tutors and mentors nominated to boost personal development.

The six-month period was a real success and fortunately for all parties, we got permanent jobs in different parts of the organisation. Now our boldness and open-mindedness are combined with the knowledge and skills gained during the trainee period. We have got off to a good start in our common journey towards the best digital services.

Niina Tuikka

 

Read more