The newspaper Uusi Suomi writes about the establishment of Kesko
in the fall of 1940.
The 1940s - Establishment of Kesko
The new Kesko company started operating at the beginning of 1941. The need to purchase goods for the shareholder-retailers and to support their business operations and start cooperation among them resulted in the forming of the K-retailer group. The active building of the K-store network was started and joint advertising was launched. The K-emblem was introduced as the new group's symbol.
By the end of the 1940s, Kesko's sales amounted to about 15 billion old Finnish markkas (equivalent to EUR 580 million in 2010), which was about 12% of the overall sales of the central companies operating in the Finnish trading sector. The number of personnel was about 2,000.
The name 'Kesko' was invented by Managing Director E.J. Railo. The word in itself does not mean anything in Finnish,
but phonetically it resembles the Finnish verb for concentration (keskittyminen), which in this case referred to the concentration of four regional wholesalers into one nationwide Kesko.
The common K-logo is fixed simultaneously on the windows of 2500 shops in March 1947.
The 1950s - Period of growth
The rationing of goods and regulation of imports retarded the growth of trade during the first years of the 1950s. Towards the end of the 1950s, when restrictions were removed, the building of speciality store networks was started to complement the general stores. Kesko played a significant role in developing the store formats. At first, the main emphasis was on establishing a hardware store network and a warehousing system for the hardware products offered by Kesko. In addition, big efforts were made to develop the trade in agricultural supplies and machinery.
During the 1950s Kesko also developed its own, strong industrial operations. They included the milling, bread, meat, margarine and clothing industries, and a coffee roastery. Furthermore, the network of branch offices expanded. By the turn of the decade, Kesko had established 40 service outlets - the maximum number in its history - of which 23 were actual offices.
At the end of the 1950s, Kesko's sales totalled about 80 billion old Finnish markkas (equivalent to EUR 1.8 billion in 2010), accounting for about 20% of the total sales of Finland's central trading companies. The number of personnel had increased to about 5,000.
The 1960s - A new course
The retail trade in foodstuffs underwent great changes during the 1960's. As Finnish people became less self-reliant in terms of their daily grocery needs, fresh foods were added to stores' selections, and the trend was for general stores to evolve into food stores.
In the middle of the decade, the self-service concept revolutionised this field. The number of stores in the countryside decreased. Kesko set up its central warehouse at Hakkila, in Vantaa. The introduction of automatic data processing and interchange allowed the development of centralised distribution operations. Kesko began to divest its industrial operations.
Kesko's ownership base was broadened, and the company was listed on the Helsinki Stock Exchange in 1960. During the decade, sales increased from about 80 billion old markkas to 2.1 billion markkas (equivalent to an increase from EUR 1.8 billion to EUR 2.8 billion in 2010 values). By the end of the 1960s, Kesko accounted for about one fifth of the total sales of Finland's central trading companies. The personnel numbered about 5,700.
The 1970s - Information technology spurs growth
In the 1970s Kesko continued to grow steadily, in the foodstuffs trade in particular. A new store format - the supermarket - was successfully launched. Further steps were taken to strengthen the speciality store network. The responsibility for developing store formats was transferred to the commercial divisions. Kesko and the K-retailers entered the retail trade in the fields of home and speciality goods and hardware products. The Kesport chain was established. The first Citymarket hypermarket was opened in Lahti in 1971.
Significant advances were made in logistical operations, thanks to the introduction of automatic data processing. Kesko became one of the Finnish pioneers in data processing and interchange. Due to improvements in information technology, telephone connections and the transport fleet, the number of Kesko's branch offices started to decrease. Training became increasingly important for both Kesko and the K-stores, and Kesko purchased a training centre, naming it the K-institute.
During this decade Kesko's sales grew from 2.3 billion markkas to about 11 billion markkas (equivalent to an increase from EUR 3 billion to EUR 5.5 billion in 2010 values), and its share of the total sales of Finland's central trading companies rose from one quarter to one third. At the end of the decade, the number of personnel was about 6,000.
The 1980s - New investments and new owners
The 1980s represented a period of heavy investment for Kesko. Building projects included new business premises for the branch offices in Turku and Oulu, a new central warehouse and several large retail stores. The share capital was increased by 700 million markkas to finance these investments. The number of shareholders grew by 20,000.
The divestment of Kesko's industrial operations was continued by selling the clothing factory and the bicycle factory. The number of branch offices dropped from 16 to 9. Pirkka label products (Kesko's own label) were introduced to the market.
In terms of markkas, net sales doubled from 13.6 billion markkas to 29.5 billion markkas (equivalent to a real increase from EUR 6.1 billion to EUR 7.4 billion in current values), and Kesko's share of the total net sales of Finland's central trading companies rose from 30% to 40%. At the end of the decade, the number of personnel was about 7,700.
The 1990s - Chain operations start
Kesko was changed significantly by the establishment of new grocery store formats and the transfer to chain operations. Centralisation continued. The number of district units dropped to five, and they mainly engaged in the grocery trade. The forming of chain units and profit groups, and the incorporation of operations, created a more customer-oriented, profit-targeted operating model.
Other key elements of the model were the integrated EDI system of the retail stores, and chain marketing focused on customer loyalty schemes. During the 1990s, Kesko acquired Kaukomarkkinat Oy and Anttila Oy, and divested Keskometalli Oy. New growth was sought from markets in neighbouring countries, as well. The Plussa customer loyalty marketing system reached the limit of 2.5 million customers in a short time.
Kesko's net sales grew from EUR 5 billion to EUR 6.2 billion (equivalent to a real increase from EUR 7.1 billion to EUR 7.3 billion in 2010 values), representing about half of the total net sales of the central companies operating in the Finnish trading sector. At the end of the decade, the average number of personnel was 11,000.
The 2000s - A time for internationalisation
K-market store
Entry into the Swedish and Baltic markets that had started in the mid-1990s gained momentum at the turn of the millennium. Major spearheads in the internationalisation process were the retailing of hardware and builders' supplies and the K-rauta format. Kesko also expanded its agricultural business to all Baltic countries, becoming a market leader in the area in a very short time.
Progress in food retailing was mainly made through two store types: hypermarkets and hard discounters. Kesko Food and the Swedish ICA combined their food trade operations in the Baltic countries. In 2006, Kesko Food sold its 50% shareholding in Rimi Baltic AB to ICA Baltic.
A network of hardware and builders' supplies stores was created in Sweden by building K-rauta outlets one by one, as K-rauta turned out to be "a successful export product", which was something new to the Swedish market. In the Baltic countries progress was made in the hardware and builders' supplies sector, both through business acquisitions and by establishing new outlets. An important acquisition in Lithuania (Senukai) made Rautakesko the market leader in the Baltic countries in 2004.
In 2005, Rautakesko expanded into Norway and Russia by acquiring Byggmakker, the best-known hardware and building materials chain in Norway, and Stroymaster, a St Petersburg DIY store chain. In July 2007, Senukai acquired the majority of voting rights in the Lithuanian UAB Romos Holdingas, which owns OMA, a Belarussian DIY operator.
Byggmakker is the best-known hardware and building materials chain in Norway.
The first store operating in line with the K-rauta concept was opened in St. Petersburg in September 2006. The stores of the Stroymaster chain have operated under the K-rauta name since 2006. There were ten K-rauta stores in Russia in 2009.
In terms of its chains' retail sales, Rautakesko is one of the five largest companies in the European building and home improvement market. Rautakesko will significantly expand and modernise the present store network in every operating country, particularly in Russia, during the next three years. The target is to achieve market leadership in all operating countries.
Kesko's net sales grew from EUR 6.2 billion to EUR 8.4 billion. At the end of the decade, the average number of personnel was 19,000.