Operating environment

This page contains information on the impacts of the covid-19 pandemic on Kesko’s businesses and about our responses in managing the exceptional situation. The page also contains megatrends affecting trading sector and opportunities and risks in our operating environment.

Covid-19 pandemic and our responses in managing the exceptional situation

The Covid-19 pandemic began to impact our operations from mid-March 2020 onwards. Impacts varied between divisions: in the grocery trade, retail sales grew, and in the building and technical trade, the market remained good in both B2C and B2B. Meanwhile, the foodservice and car trade businesses were hit the most.

Covid-19 impacts on our operations in 2020:

  • Due to global economic uncertainty, we issued a profit warning on 18 March 2020.
  • Positive profit warnings were issued on 10 July and 17 September. The guidance upgrades were based on better than anticipated sales development in all divisions, improved cost efficiency, and a more positive outlook for the remainder of the year. 
  • Thanks to successful growth strategy execution, we were able to achieve our financial targets sooner than anticipated at the end of September. 
  • We posted record results for each quarter of 2020. The Covid-19 pandemic and related changes in consumer behaviour had a positive impact on our profit: we estimate that less than half of our profit improvement in 2020 was attributable to the pandemic.

Our key responses to the pandemic:

  • Ensuring the safety of customers and personnel. 
  • Ensuring functioning purchasing and supply chains under all circumstances. 
  • Quickly increasing our online sales services. 
  • Postponing development projects while focusing on handling with the situation. 
  • Securing cash flow: 
    • Cutting personnel cost and other fixed costs.
    • Cutting cash flow from investing activities (excluding corporate arrangements) below €200 million in 2020.
    • Efficient management of credit risk and amounts due from customers.
  • Ensuring the availability and sufficiency of financing. 
  • Continuing the execution of our growth strategy.

Our agility, fast response, and retailer business model enabled us to quickly establish new services to ensure safer shopping:

  • Installing protective shields at checkouts. Ensuring ample supply of hand sanitiser and instructions on safe shopping.
  • Dedicated shopping hours at the stores for at-risk groups.
  • A new telephone service for the elderly, helping them to e.g. order groceries online.
  • Significantly increasing our online grocery sales capacity.
  • Local services, such as postal services at the stores, increasingly important.

 

The impacts of the covid-19 pandemic varied between months and divisions

Grocery trade 

Building and technical trade 

Car trade 

Business impact

  • Demand grew forcefully in the food trade as people spent more time at home.
  • Demand for the K-Ruoka online store grew rapidly.
  • Demand decreased in the foodservice business due to restrictions imposed on restaurants and events and people working from home.

Response

  • Fast response from K-retailers, ensuring safe shopping and working conditions.
  • New customer-oriented services such as a helpline for the elderly and selling restaurant food from grocery stores.
  • Quickly expanding online grocery services: 470 K-food stores now offer online services, online sales growth nearly 400%.
  • Ensuring product availability and deliveries to stores under all circumstances.
  • Keeping Kespro in profit with fast actions and adjustment measures.

Business impact

  • In Finland, sales to consumers in particular grew better than anticipated, thanks to a DIY building and renovation boom.
  • B2B sales continued strong in both building and home improvement stores and Onninen.
  • Activity on construction sites continued without major disruptions.
  • Sales and profitability improved in Sweden and Norway.
  • Sales and profitability in the Baltics recovered fast from the issues caused by the situation. With the exception of Lithuania, stores remained open without interruptions.

Response

  • Ensuring safe shopping and working conditions.
  • Determined strategy execution, acquisitions carried out.
  • Strengthening Onninen’s store network and expanding selections.
  • Extended opening hours.
  • Strong growth in the updated K-Rauta.fi online store supported sales in physical stores.

 

Business impact

  • Availability issues with cars in H1 because of temporary factory closures due to the pandemic.
  • New car sales and orders below normal levels, sales improved in H2.
  • Demand for car leasing grew.
  • Sales of servicing and spare parts remained at a good level.
  • Used car sales grew markedly. Interest towards all-electric cars growing

Response

  • Business operations adjusted. Car availability improved towards the end of the year.
  • A range that meets changes in demand: new all-electric cars, rechargeable hybrids, gas cars and internal combustion engine models.
  • Our own leasing fleet grew to over 3,000 cars.
  • We expanded pickup and return services in car servicing.


Megatrends affecting trading sector 

The trading sector is affected by various global megatrends. By identifying the trends that affect K Group’s operations, we strive to anticipate future challenges and opportunities. 

Globalisation

  • Urbanisation
  • Global supply
  • Intensifying price competition

 
 
 
 
  

Digital trade and services

  • Automating operations utilising artificial intelligence 
  • Growth in international and Finnish online trade
  • Seamless multichannel customer experience
  • Customer services that utilise customer data and artificial intelligence 
  • Targeted marketing

 

Increasingly individual customer behaviour

  • Customers value convenience, quality and safety
  • Changes in purchase habits, individualisation
  • Customers looking to optimise their consumption choices 

Increased customer knowledge and power

  • Customers seek information as the basis for their choices
  • Customers want to impact selections
  • Peer experiences have a big impact on choices

Climate change and biodiversity

  • Sustainable lifestyles: the carbon footprint of food, living and mobility, and impact on biodiversity 
  • Carbon neutrality, reducing emissions, and renewable energy 
  • Sustainability policies guiding our sourcing 
  • Minimising food waste

Sustainability and concientious consumption

  • Responsible operating principles 
  • Open dialogue with stakeholders
  • Transparency of purchasing chains 
  • Strong brands 
  • Responsible investment  

 

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