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Annual report 2013

Grocery trade

K-food retailers, with whom Kesko Food applies the efficient chain business model, are responsible for customer satisfaction at more than 900 K-food stores in Finland. Kespro is the leading wholesaler in the Finnish HoReCa sector. In 2014, online sales of food and the supply of other e-services to customers increased. At the beginning of 2015, the non-food business of K-citymarkets was integrated into Kesko Food. The new entity, Kesko’s grocery trade, offers a more uniform customer experience.

Every day, around 900,000 customers visit K-food stores with high expectations for comprehensive product selections, ease of shopping, favourable prices and responsibility.

Kesko Food's main functions include centralised sourcing, selection management, logistics, and the development of chain concepts and the store site network. Cooperation between Kesko Food and K-food retailers is based on the chain operations defined in the chain agreement, which ensure the customer-orientation of operations, efficiency and the achievement of competitive advantages. The competitiveness of K-food stores and Kesko Food is reinforced by efficient practices and long-term cooperation models with selected partners.

Local K-retailers are responsible for customer service and wide product selections, competence of personnel, product quality and profitability of business in their own stores. Listening to the wishes of local customers and making use of customer data, the K-retailers build a selection of products and services that meet customers' needs. K-food retailers complement the chain's common product selection, for example, with local food from local producers.

Electronic retail services developed together by Kesko Food and K-food retailers offer K-food store customers easier ways to shop. K-food stores’ network of online stores continues to grow and new electronic services complement the overall package. K-food retailers have several click&collect online stores across Finland.

Read more: Case Click&collect

Competitive advantages in the grocery trade
    • The best fresh food departments and widest selections
    • K-retailer entrepreneurship guarantees customer-driven and efficient operations
    • Low-priced and high-quality Pirkka and K-Menu products
    • Finnish origins and responsibility
    • A wide selection of e-services that make customers’ daily lives easier
Strategic emphases
Strategic objective Achieved in 2014 What next
K-food stores have superior fresh food departments, including the best selections of bread, fruit and vegetables, and service counters. Fresh food departments were refurbished in nearly all K-food stores during the year. Stores will continue refurbishing their fresh food departments.
Customers are offered a competitive, reliable and permanently low price level. The prices of hundreds of products in Kesko Food’s selections were cut. The low-priced K-Menu product range was launched. Maintenance of competitive prices and reaction to changes in the market. Increasing the K-Menu product range.
K-food stores’ e-services are developed in order to offer a multi-channel customer experience that exceeds expectations. K-food stores’ web pages were revised in April. Contents were combined under the K-ruoka.fi service, which provides more than 5,770 Pirkka recipes. The shopping list and meal planning services help customers plan their shopping. The amount of personalised content for customers will increase. Targeted benefits and services in accordance with their shopping history and interests will be offered to identified customers.
Online food shopping services are expanded to serve an increasing number of customers across Finland. The network of online K-food stores was expanded in various parts of Finland. The click&collect e-commerce concept was launched. K-citymarket’s online store expanded to cover all of Greater Helsinki. K-food stores’ click&collect service will expand to highly trafficked junction areas across Finland.

Grocery trade chains

K-citymarket

K-citymarkets offer their customers the widest selections of groceries and home and speciality goods. Their special strengths include diversified service counters for meat, fish and meals.

K-supermarket

K-supermarkets are better than average food stores. Their strengths include excellent service and wide selections, particularly in the fruit and vegetable departments.

K-market

K-markets are reliable, service-oriented, local neighbourhood stores located near customers. The aim is to offer customers a good selection of everyday food and local services.

K-extra

K-extras are neighbourhood stores which focus on personal service and provide customers with daily essentials.

K-ruoka, Russia

The competitive advantages of the K-ruoka chain, which operates in Russia, include fresh, high-quality and extensive selections.

Kespro

Kespro is the leading wholesaler in the Finnish hotel, restaurant and catering (HoReCa) business and acts as a partner for its customer companies and municipalities in Finland. Kespro provides its customers with diverse sourcing solutions as well as delivery and cash&carry services.

Own brands in 2014

Number of Pirkka products: 2,324
Number of Pirkka Organic products: 116
Number of new Pirkka products launched: 232
Number of K-Menu products: 99

Pirkka greatly expanded the selection of baby foods and supplies, in-store bakery products and gourmet products. The selection of cooking utensils also increased. K-Menu, the K-food stores’ new own brand of low-priced foods, was launched in the spring of 2014.

 

 

Did you know?

  • More than 900 K-food stores provide a comprehensive network for their customers. Approximately half of the Finnish population live within a kilometre of a K-food store.
  • K-Menu is K-food stores’ new own brand range, which focuses on low prices. The products in the range are good-quality daily essentials. The first products were introduced to K-stores in April 2014.
  • Around 80% of the products sold at K-food stores are manufactured in Finland.
 

Market

The Finnish grocery trade market was worth about €16.7 billion (incl. VAT) in 2014, representing an estimated increase of about 0.5%–1.0% (VAT 0%, Kesko's own estimate). The HoReCa market was worth about €1.9 billion (incl. VAT) in 2014, representing an estimated decrease of about 0.9% (VAT 0%, Finnish Grocery Trade Association).

Market shares

Food trade

Market share in Finland: 33% (Kesko’s own estimate)
Competitors: Prisma, S-market and Alepa/Sale (S Group), Valintatalo, Siwa and Euromarket (Suomen Lähikauppa Oy), Lidl and M chain stores

K-citymarket’s home and speciality goods

The market share cannot be reliably calculated.
Competitors: department stores, hypermarkets, speciality store chains and online stores

HoReCa

Kespro, Finland
Market share in Finland: 24% (Kesko’s own estimate)
Competitors: Meiranova, Metro-tukku, Heinon Tukku, Suomen Palvelutukkurit


Grocery trade in figures
 

Number

Sales (VAT 0%),

€ million

Retail sales and number of stores

2014

2013

2014

2013

K-citymarket, food

81

80

1,505

1,540

K-citymarket, home and speciality goods*

82

81

581

613

K-supermarket

218

218

1,725

1,723

K-market (incl. service station stores)

444

442

1,216

1,269

K-ruoka, Russia

5

4

103

70

Others*

164

176

161

182

Grocery trade, retail sales

   

5,292

5,396

Kespro

   

780

795

Grocery trade, total

913

921

6,072

6,191

* incl. online sales

 
         

Grocery trade, key figures

   

2014

2013

Net sales

 

€ million

4,754

4,859

Operating profit

 

€ million

216.2

235.6

Operating profit excl. non-recurring items

 

€ million

223.2

230.9

Operating profit excl. non-recurring items as % of net sales

 

%

4.7

4.8

Capital expenditure

 

€ million

98

101

Capital employed

 

€ million

1,007

1,069

Return on capital employed excl. non-recurring items

 

%

22.2

21.6

Personnel average

   

6,176

5,950

         
         

Properties

   

2014

2013

Owned properties, capital

 

€ million

880

849

Owned properties, area

 

1,000 m²

586

556

Leased properties, lease liabilities

 

€ million

1,503

1,514

Leased properties, area

 

1,000 m²

1,279

1,281

         
         

CASE: SALAD BARS ARE POPULAR

 

Salad bars gained more popularity in K-food stores over the course of 2014. More than 200 K-food stores already have a salad bar.

Salad bars have challenged traditional lunch options. Customers can combine various ingredients as they choose, creating an easy and healthy lunch or snack.

Special attention has been paid to the quality and freshness of the ingredients. K-food retailers can also order ingredients from local producers.

”The ingredients at the salad bars are mostly Finnish. We aim to use seasonal produce: there may be, for example, asparagus in the spring and strawberries in the summer,” says Marjut Marjakangas, Sales Manager from Kesko Food, who has been developing the concept.

“All of the salad bars are unique to the K-retailer and the stores will develop the product selection according to their customers’ wishes. If there is not yet a salad bar in your local K-store, you can contact the retailer and request one.”

 

 

CASE: DONATING FOOD REDUCES WASTAGE

 

One of the objectives of Kesko’s responsibility programme is to reduce the food wastage generated by K-food stores by ten per cent by 2020.

As a member of the Finnish Grocery Trade Association (PTY), Kesko Food is committed to a project with the Ministry of the Environment, the Ministry of Employment and the Economy, and Motiva to find ways to further reduce the amount of food and packaging waste generated by retail stores. In 2014, K-food stores again participated in a Wastage Week campaign organised by the Consumers' Union of Finland with the aim of reducing wastage.

A retail store’s average wastage in euros is about 1% of net sales.

“We reduce food wastage in K-food stores by using electronic forecasting and order systems, efficient logistics, employee training, markdowns of products approaching their use-by dates and optimising package properties,” lists Timo Jäske, Kesko’s Sustainability Manager.

Several K-retailers also donate food to charities that work with low-income people. For more than fifteen years, retailer Heimo Välinen of K-supermarket Seilori in Espoo has given groceries approaching their sell-by dates to volunteers from the parishes of Espoo for further distribution.

“It would seem foolish to throw away usable food when there are people who need it. There are pensioners, low-income, homeless and unemployed people in food queues. There is naturally also the human side to these issues: people are simply hungry. We must all have something to eat,” Välinen says.