Strategy

The core of our strategy is profitable growth in three strategic areas: the grocery trade, the building and technical trade, and the car trade. We differentiate ourselves from our competitors by emphazising quality and our strong customer orientation.

The customer and quality – in everything we do

Kesko and K-stores are increasingly working to become a strongly unified K Group that is able to offer our customers even better services and operate efficiently. Our strategic objective is to strengthen the customer experience we offer consumers and companies both in our stores and our digital channels. We are modernising our chain concepts, building the finest digital services in the trading sector and improving our K-Plussa customer loyalty scheme.

In the grocery trade, our strategic objective is to achieve good profitability and attain a stronger market share in Finland. We want to offer the most inspiring food stores and digital services on the market. The growth strategy is underpinned by the acquisition of Suomen Lähikauppa, completed in early 2016. As a consequence of the acquisition, more than 400 Valintatalo and Siwa stores were modernised and turned into K-Markets by spring 2017. In addition, the current approximately 400 K-Market chain stores and 60 Neste K stations will be modernised by the end of 2017. The modernisation of the K-Citymarket chain will continue until the end of 2018 and create 81 different stores that have product selections and offer services which reflect their customer bases. We are refining the K-Supermarket concept and expanding the network with new store sites. In addition, we are strengthening our digital approach and improving the level of quality and service in K-food stores, whilst also renewing the marketing model. We disposed of our assets in the Russian grocery trade towards the end of 2016. 

Kesko operates in the building and technical trade in nine countries and is the fifth largest operator in the European building and home improvement trade market. The strategic objective is growth and a stronger position in Europe. The acquisition of Onninen, a company specialising in HEPAC and electrical products, in the first half of 2016 will significantly support this. The combination of Onninen and Kesko's building and home improvement trade has enabled us to create a unique B2B trade entity on the market. We are also making major developments in the digital services and e-commerce options available to our clients. In Finland, K-Rauta and Rautia stores were combined under the revamped K-Rauta brand, however that process will be phased in the other countries we operate in. 

In the car trade, we are the market leader in Finland, and our objective is to increase our market share in the car trade, particularly in Finland. To that end, we are actively developing new business models and improving the multi-channel customer experience we offer. Towards the end of 2016, we acquired the rights to represent and import Porsche vehicles in Finland.

Additionally, we continue to develop Kesko's other businesses, - furniture trade, the sports trade, the machinery trade and the shoe trade - with the aim of increasing their value.

To ensure competitiveness and improve profitability, we have realised savings of €50 million in fixed costs. We estimate that the acquisitions we have made will generate over €30 million in synergies at the EBITDA level from 2018 onwards and over €60 million from 2020 onwards.

In 2015 and 2016, we had a capital expenditure of €500 million in business operations, excluding acquisitions. As of 2018, we estimate that annual capital expenditure will be less than €200 million.
 

Strategic objectives

 

  • Growth in grocery trade
  • Growth and expansion of the building and technical trade in Europe
  • Growth of the car trade, particularly in Finland
  • The best customer experience in the trading sector irrespective of the channel
  • A single, unified Kesko, seeking synergies and efficiently shared functions

Financial targets and capital expenditure

Indicator

Target

Return on capital employed*

14%

Return on equity*

12%

Interest-bearing net liabilities / EBITDA

<2.5

Capital expenditure in 2015-2017

c. €750 million**

*  Excluding non-recurring items.
** Excluding possible acquisitions.

Value

Customer and quality – in everything we do

Vision

To be preferred choice of customers and the quality leader in the European trading sector

Mission

To create welfare responsibly - for all our stakeholders and for all society

 

Strategy review by the President and CEO Mikko Helander

 

 

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