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Annual report 2013

Retail stores as local operators

K-retailers are the K-Group’s competitive assets, providing a local approach. Retailer entrepreneurs build their selections flexibly according to the needs of the local community and customers. The common selection of the chain is complemented with food bought from local producers. In many localities, retail stores also take care of many services for the public good.

District operations in Finland are headed by Kesko’s District Directors, whose most important duties include planning and executing all of the divisions’ regional store site projects. Starting from the beginning of 2015, Kesko is strengthening its regional and local operations. Kesko’s influence in regions will increase as it strengthens the role of retail store chains.

The retailer business model is flexible

The K-Group’s principal business model in Finland is the chain business model, in which independent K-retailers run retail stores in Kesko’s store chains. Competitive edge is gained by combining systematic chain operations with K-retailer operations, which are based on entrepreneurship.

In the retailer business model, Kesko’s chain operations provide a first-class setting for its retailer entrepreneurs to provide the best possible service to their customers. The K-retailer entrepreneur implements the chain concept and is responsible for store management, customer satisfaction, personnel and business profitability.

The strength of the retailer business model is that the retailers are able to operate flexibly according to the needs of their local customers. The business model has proved agile in difficult economic conditions because, as entrepreneurs, retailers can react quickly and efficiently if the situation so requires.

Many retailers are major shareholders in Kesko and so also take responsibility for Kesko’s success in a broader sense. Kesko’s Board of Directors has three retailer members, one of whom chairs the Board.


At the beginning of 2015:

  • Number of K-retailers in Finland: 1,154
  • Number of new K-retailers: 48 (30 men and 18 women)
  • K-retailers’ average age: 46 years (the youngest is 25, while the oldest is 91)
 

The retailer is present in the local community

All of the K-Group’s food, building and home improvement, and agricultural stores in Finland are run by K-retailer entrepreneurs. Most of the K-stores are family businesses, run by a retailer couple.

The network of over 900 K-food stores is comprehensive. Nearly half of the Finnish population lives within one kilometre of a K-food store. The services provided by K-food stores cover nearly all Finnish municipalities and they are visited daily by around 900,000 customers.

K-retailers have local influence: they work in organisations, give lectures at schools and colleges, and organise customer panels and evenings.

Local selections tailored to customers’ wishes

Retailers are present in their customers’ daily lives, building selections and providing services by listening to customers’ wishes.

Local needs are taken into account individually; the product selection in a K-supermarket in an eastern Helsinki suburb with many immigrants can differ significantly from that in a K-supermarket in the countryside of Finland, visited mostly by summer residents.

Finnish products and the Blue and White Footprint campaign were highly visible in K-food stores and Anttila and Kodin1 department stores over the course of 2014.

Around 80% of the products sold at K-food stores are manufactured in Finland. Branded products made by domestic manufacturers are widely available in K-food stores.

There are more than 1,000 Finnish products in the Pirkka range, 400 of which can be identified from the label of origin on the package. Nearly 100% of all fresh products, meat and processed meat, milks and creams in the Pirkka range are of Finnish origin.

In the Pirkka range, there are:

  • 238 Hyvää Suomesta (Produce of Finland) products bearing the Swan label
  • 47 products with the Seed Leaf label
  • 86 Key Flag products

Pirkka products are manufactured by nearly 160 companies across Finland. Their manufacture provides many regional companies with an opportunity to expand their market to cover the entire nation.

Retailers complement the chain’s common selection with food bought from local producers. These products include vegetables, root crops and bread. K-retailers’ direct purchases from Finnish regions totalled €567 million in 2014.

Village stores as partners for municipalities

Outside growth centres, retail stores can provide several services for the public good that might otherwise be unavailable.

Over the course of 2014, Kesko Food developed postal and parcel service concepts and network in cooperation the Post of Finland and Matkahuolto, a company specializing in bus and coach services, with the aim to serve customers better.

In 2014, K-food stores had:

  • 160 postal service outlets and 137 automated parcel terminals
  • 17 pharmacy service points
  • 8 Matkahuolto service outlets and 4 parcel desks
  • more than 700 stores provided cashback service

The municipal development project implemented in 2013–2015 involved 12 village stores and municipalities. Great potential is seen for village stores acting as a partner in providing social and home care services to the ageing population. For example, the store may offer nursing services, renovation services and food services for senior citizens.

Support for local sports clubs

Sponsorship by Kesko and K-stores mainly focuses on providing support for children and young people.

K-Plussa’s sponsorship service encourages and supports retailers in their local charity and sponsorship work. In 2014, K-retailers supported 332 sports clubs or teams in Finland.

At the end of 2014, K-food stores and the Finnish Basketball Association signed a cooperation agreement. The Finnish Basketball Association, basketball clubs and local K-food stores organise basketball events and training courses for primary pupils across Finland during 2015. The aim is to promote the wellbeing of children, young people and families and encourage young people to be physically active.


CASE: LOCAL FOOD DATES CONNECT PEOPLE

 



Finnish origin was one of the main themes of K-food stores in 2014. The aim of the Blue and White Footprint campaign was to promote sales of Finnish products in K-food stores.

With the help of Local Food Dates (Lähiruokatreffit) events organised by Kesko Food and Ruokatieto, an association that promotes Finnish food culture, the supply of local products in K-food stores was increased, which also meant increased support for Finnish work. At the events, local K-food retailers and food entrepreneurs had a chance to meet, network and negotiate with each other about cooperation. Local Food Dates were set up in the towns of Naantali, Oulu, Kuopio, Seinäjoki, Vantaa and Tampere in the summer.

”I got to know several new producers and interesting products. Excellent organic flakes and flours by Riihipuoti from Riihikoski sparked my interest and I will consider including them in our product selection,” said Sami Toivonen, retailer of K-supermarket Ukko-Pekka in Naantali. Riihipuoti products were included in the selection of K-supermarket Ukko-Pekka after the event.

K-retailers’ direct purchases from Finnish regions totalled €567 million in 2014.

Local Food Dates will continue with six events to be organised across Finland in spring 2015.

 

 

CASE: LET’S CREATE MORE WORK FOR FINLAND − TOGETHER

 

If every Finn spent 10 euros more per month on Finnish products and services, 10,000 more jobs would be created in Finland in a year.

An extensive campaign in support of Finnish work, entitled the Blue and White Footprint, was launched at the beginning of 2014. The participants are the Association for Finnish Work, K-Group stores (K-citymarkets, K-supermarkets, K-markets, K-extras, Anttila and Kodin1 department stores) and a large number of Finnish food and home and speciality goods manufacturers.

During the first year, the Blue and White Footprint campaign strengthened the importance of Finnish origins when everyday selections are made.

“Finnish consumers have clearly started to consider the origins of the products they buy and are very interested in domestic origins. The phenomenon is particularly visible in groceries: according to a survey conducted in December 2014 as many as 71% of Finns said that they always or in most cases choose a domestic product. When the campaign started in March 2014, the figure was 62%,” says Tero Lausala, CEO of the Association for Finnish Work.

The Blue and White Footprint campaign will continue in 2015 and expand to include K-rauta and Rautia stores in addition to K-food stores.

The objective of Kesko Food is to make the Blue and White Footprint seen, felt and heard in all K-food stores over the course of the year.

“Finnish food is increasingly important to our customers, just as the survey results of the Association for Finnish Work show. Nearly 80% of all retail sales of K-food stores consist of Finnish products, which means that customers make their first choice to support Finnish work when they enter a K-store,” says Ari Akseli, Kesko Food’s Vice President for Commerce.