Strategy and objectives

In line with its strategy, Kesko is an increasingly focused company that concentrates on growth and improving its profitability in three strategic areas: the grocery trade, the building and technical trade, and the car trade. Quality and customer orientation are increasingly important as the focal points of our strategy.

Our strategy established in 2015 aims for profitable growth through stronger focus and transformation. Concentration enables the efficient allocation of capital to increase shareholder value. The rapid transformation of the trading sector presents us with great opportunities. Our businesses are the grocery trade, building and technical trade and car trade. These are areas where we have strong market positions and the best capabilities, and they offer the best potential for long-term development. We use quality and customer orientation to differentiate ourselves from the competition, from service in stores to digital services.

Consistent progress in the execution of our growth strategy

In the grocery trade, we aim for continued profitable growth in Finland. We want to offer the most inspiring and customer-oriented food stores and the best digital solutions on the market. K-retail entrepreneurs ensure customer focus and quality in our store network, which is the most extensive in Finland. In recent years, we have successfully remodelled K-food stores and Neste K service stations, and all store redesigns are to be completed in 2019.

We completed the acquisition of Suomen Lähikauppa, and our share of the neighbourhood market is now nearly 60%.  Megatrends such as urbanisation, population ageing and increasingly individual customer behaviour support strengthening neighbourhood services. The acquisition doubled our store network with almost 400 new stores. After the conversion and transfer of the stores to retailers, our sales are up and continue to grow. We obtained the targeted synergies of €30 million sooner than anticipated.

In 2018, we began to forcefully grow K Group’s network of stores offering online grocery sales, and the service is now available to three million Finns. The growth in online grocery sales is accelerating fast, and we aim for 100% growth with net sales of over €40 million in 2019. Online grocery sales do not erode the sales of our traditional stores, but rather the two support each other.

Growing Kespro’s foodservice business is another strategic focus area, supported by the trend of eating out. To support the business, we acquired two top companies in the field, Kalatukku E. Eriksson and Reinin Liha, in summer 2018.

In the building and technical trade, we aim for an even stronger position in Northern Europe. We updated the division’s organisation and strategy in spring 2018, and redefined its customer segments. We now aim to offer added value to technical professionals, professional builders and consumers. We serve each customer segment according to its specific needs. The strategy also has a stronger country-specific focus that enables us to better take into account local customer needs. We seek synergies both within and between the operating countries. Growth is sought organically and through selected acquisitions.

B2B trade already accounts for some 70% of the division’s sales, but we see further growth potential. Building and renovation are becoming more technical and increasingly outsourced to professionals. The need for renovation building is also growing in Northern Europe. The acquisition of Onninen strengthened our position in the growing B2B segment and extended our offering.

New digital services and online sales are a significant part of the customer journey and more efficient operations. Consumers increasingly seek information and compare products online, although still often come to the store to get them. In B2B trade, online sales and digital services have gained a strong foothold.

In spring 2018, Kesko discontinued its building and technical trade operations in Russia by selling most of its building and home improvement store properties to the French Leroy Merlin. All building and home improvement trade operations in Russia were discontinued during the first half of 2018. The divestment clearly improves the division’s return on capital employed.

In the car trade, our objective is to grow our market leading position in Finland through tight cooperation with the Volkswagen Group. We expect the sales of electric cars to grow in upcoming years, and support the trend by expanding our K Charge network. Our objective is to improve profitability in imports, retail and after-sales. K-Caara develops service concepts and alternatives to owning a car, for example, car sharing paid by use.

One unified K is an important part of our strategy. We want to establish a strong reliable K Brand and provide even better service to our customers. In addition to a common strategy, One unified K means seamless cooperation with retailers and across divisions. In recent years, we have successfully executed our strategy and focused operations via various acquisitions and divestments, while also making investments to accelerate growth and improve profitability.

Increased focus on customers in our corporate responsibility work

Kesko has been ranked the most sustainable trading sector company in the world multiple times. This obliges us to ensure even more thoroughly the sustainability and responsibility of the products we sell and their purchasing, and care for the environment. We want to become an even more active member of society and engage in public discussion.

Our sustainability strategy, established in spring 2018, focuses our responsibility efforts increasingly on our customers. We want to enable a sustainable lifestyle for our customers in terms of food, mobility and living. Customers must be able to trust that K-stores enable them to make responsible choices. For example, in our updated plastics policy, we set even tighter objectives for plastics recycling and for reducing and avoiding the use of plastics.

We were the first Finnish company to set emission targets approved by the Science Based Targets initiative in line with the Paris Climate Agreement. We are reducing emissions through the use of renewable energy, energy efficiency at our stores, and efficient logistics. All electricity purchased by Kesko in Finland is generated with renewable energy, and we are the biggest producer of solar power in the country.

As a sign of our long-term commitment to corporate responsibility, Kesko has been included in the prestigious Dow Jones Sustainability Indices of the world’s most responsible companies, the DJSI World and the DJSI Europe. Kesko ranked 88th on the Global 100 Most Sustainable Corporations in the World list published in January 2019.

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