Grocery trade strategy

The 2020 was a year of strong growth was Kesko's grocery trade. Our effective strategy yielded results also during an exceptional year. Our retailer business model enabled an agile response to the changing market situation, while also ensuring safe work and shopping at the stores. Demand rose forcefully in the food trade, while demand in the foodservice business decreased. During the year, we managed to improve customer satisfaction, our market share and our profitability.

Our strategy works – further gains in market shares

Our strategy in the grocery trade division is to increase sales and profitability in a changing market with a customer-oriented approach. Year 2020 proved that this strategy works also under very exceptional circumstances, as we continued to gain market share in both grocery trade and foodservice. We successfully ensured safe shopping conditions, positive customer experiences, and selections that met expectations.

K Group is the second biggest grocery trade operator in Finland, with a market share of 36.8%* (2019:  36.7%). In 2020, we gained market share in all grocery store chains. We opened two K-Supermarket stores, and eight K-Market stores, four of which were replacement new buildings. We invested €110 million in our store network, focusing on the redesign and renovation of existing stores.

Customer experience at the core of our strategy

We utilise customer data to introduce new products and services that best suit the needs of the customers of each K Group grocery store. We focus on responsible, high-quality selections that enable differentiation, on convenience and individuality, not forgetting prices. Products sold exclusively at K Group stores enable differentiation, support store-specific business ideas, and result in higher average purchases. New products and product ranges linked to well-known restaurant brands have been very popular among our customers. Inspiring digital services that make life easier have also helped to improve customer experience.

The strategic choices we have made have proven correct, as indicated by the good development of sales and customer satisfaction in all our grocery store chains and online. The NPS for all K Group grocery stores places customer satisfaction at 65.1; the NPS for online grocery sales is a staggering 83.0. In total, sales for the grocery trade division grew by 9.4% in 2020, thus exceeding the market growth.

K-Ruoka is the biggest food media in Finland: the K-Ruoka.fi website and the K-Ruoka mobile app had 2.8 million visits in 2020. The app has over 215,000 active users weekly.

The strategy for the grocery trade division is to increase sales and profitability in a changing market with a customer-oriented approach

Business environment 

  • Digital is a basic requirement 
  • Hybrid and polarised consumption set to grow stronger 
  • Significant demographic changes 
  • Emphasised importance of climate change and environmental awareness
  • Operations and concepts must be responsible and sustainable

 

STRATEGIC OBJECTIVE

WHAT WE ARE DOING

The most customer-oriented and inspiring food stores with store-specific business ideas

  • Further sharpening store-specific business ideas
  • Differentiation through selections and even better food solutions
  • Developing digital solutions and services

Profitable development and redesign of the store network

  • Remodelling the stores, new concepts

A seamless omni-channel customer experience 

  • Expanding the online sales network and increasing sales
  • Updating the K-Ruoka mobile application
  • Implementing personalised customer communications

Good price competitiveness

  • Developing selections
  • Utilising synergies
  • Own brands

Developing retailer entrepreneurship as a competitive advantage 

  • Enforcing the good reputation of K-retailership as a career
  • More extensive implementation of store-specific business ideas
  • Developing tools for management by information

Significant growth in the foodservice business 

  • Increasing sales and profitability
  • Developing services and concepts

Grocery trade net sales and operating profit 1-12/2020 

The grocery trade strategy review can be read in Kesko's 2020 Annual Report.

Information on the impacts of the epidemic on Kesko’s businesses can be found under the Operating environment section.

 

 

In 2020, the Finnish grocery retail market totalled some €20.2 billion (incl. VAT),
representing an increase of some 8.6% (Kesko’s own estimate). People working from home and restrictions imposed on restaurants, events and travel due to the Covid-19 pandemic impacted total market growth from mid-March onwards. Retail market growth was also affected by continued good consumer purchasing power and a rise in prices, nearly onethird of which was attributable to alcohol and tobacco tax increases. Price competition in the Finnish grocery market continued to be tight, but consumers also increasingly value local food, sustainability, healthiness and quality. The Covid-19 pandemic significantly accelerated online sales growth.

MARKET SHARES

Food trade
The market share in Finland was 36.8% ((Kesko’s estimate based on Nielsen’s comparison
group, which includes discount stores and service stations as well as grocery stores).

 

Competitors: Prisma, S-market, Alepa/Sale and Food Market Herkku (S Group), ABC, Lidl, Tokmanni, Minimani, Halpa-Halli, R-kioski and M chain stores.

 

K-Citymarket’s home and speciality goods
Market share cannot be reliably calculated.

Competitors: hypermarkets, department stores, discounters, specialist chains and online
stores.

Foodservice Kespro
Working from home and pandemic-related restrictions on restaurants and events negatively impacted the foodservice business. Kespro’s market share is estimated to have grown to 42.5% (in the Finnish Grocery Trade Association’s foodservice wholesale peer group).

Competitors: Meira Nova, Metro-tukku, Heinon Tukku, Suomen Palvelutukkurit.

 K Group's grocery trade Number of stores Retail and BtoB sales, VAT 0%,
€ million
  2020   2020 Change, %
K-Citymarket, food 81   1,934.5 13.0
K-Citymarket, non-food 81   587.7 0.2
K-Supermarket 241   2,235.2 9.0
K-Market 769   2,001.0 7.4
Neste K 72   114.6 -12.4
Others 78   46.3 6.2
Total 1,236   6,919.2 8.3
Kespro  -    783.9 -17.0
Grocery trade, total 1,236   7,703.1 5.1
In addition, some 470 K-food stores offer e-commerce services to their customers (31.12.2020). 
Kespro has 14 cash & carry outlets and an online outlet.
 
Key figures   2020 2019
Net sales, € million   5,732.0 5,531.2
Operating profit, comparable, € million    375.2 327.9
Operating margin, comparable   6.5 5.9
Return on capital employed, comparable, %, rolling 12 months   16.9 14.5
Capital expenditure, € million   125.4 180.8
Personnel, average   6,197 6,063
         
Properties   2020 2019
Owned properties, capital, € million   792 763
Owned properties, area, 1,000 m²   527 516
Leased properties, area, 1,000 m²   1,478 1,520
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