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Kesko has completed its strategy review process and presented an updated strategy for 2024–2026. The main pillars of Kesko’s strategy remain unchanged, with focus on profitable growth in the three selected business divisions, namely grocery trade, building and technical trade, and car trade.

ach of the three divisions continues to offer good growth potential for Kesko. During the strategy review process, the objectives and competitive advantages of each division were thoroughly examined and refined to ensure success in the current operating environment, which is in many ways challenging. Kesko’s medium-term financial targets were kept unchanged.

Below is a summary of Kesko’s updated strategy and objectives:

Targeting sales growth and improved customer experience, profitability and efficiency

In all businesses, Kesko seeks to grow its sales, offer a better customer experience, and improve profitability and efficiency, aided by digital services and artificial intelligence. Although there are larger megatrends affecting the whole Group – such as urbanisation, digitalisation and the green transition – the situation and operating conditions for the divisions differ somewhat.

In the grocery trade division, the aim is to strengthen Kesko’s market position while maintaining good profitability, with an operating margin that stands clearly above 6%. Strategic focus is on relevant store-specific business ideas, the development of the grocery store network, opening of new stores especially in growth centres, and actions to improve price competitiveness. In the foodservice business, the focus is on ensuring continued good performance for Kespro.

The building and technical trade division will continue to seek profitable growth both organically and through acquisitions, with country-specific strategies. Key focus areas include securing profitability and generating cash flow. The long-term operating profit margin target is still 6-8%. In Finland, the goal is to continue growth and further strengthen market positions; in Sweden and Norway, to improve profitability for all businesses and complete the integration of acquired companies; in Denmark, to complete the integration of the first acquired company Davidsen, and to improve profitability through sales growth.

In the car trade division, the major transformation carried out in recent years means that there was no need for significant changes to the strategy this time around. The three car trade businesses – new cars, used cars, and services – form a balanced portfolio, and the objective is to outperform the market in each area. Being present in the whole value chain maximises lifecycle profitability and reduces the impact of business-specific negative market cycles.

At the investor strategy briefing, focus was on operating margins, the M&A market, and the use of AI  

To expand on the strategy and its focus areas, Kesko hosted an event for investors, analysts and the media on 4 June 2024. The agenda comprised presentations by the President and CEO, the CFO and the three division Presidents, as well as an extended Q&A session. As four of the five speakers had assumed a new role in Kesko’s Group Management this spring, the event also offered a good chance to present them to investors.

All five speakers had the chance to elaborate on their presentations and answer questions from investors in the Q&A section of the event (from the right: President and CEO Jorma Rauhala, grocery trade division President Ari Akseli, building and technical trade division President Sami Kiiski, car trade division President Johanna Ali, CFO Anu Hämäläinen, and head of investor relations Hanna Jaakkola)
 

Below are some highlights of the investor questions submitted and answers provided at the event:

• Q: How do you expect to improve your operating margin in grocery trade while also increasing your market share, investing in stores, and improving price competitiveness?
  
  A: We have made calculations on how much we can invest in new stores and price perception while still keeping the grocery trade margin at the targeted level. There will also be some new earnings sources related to data and media sales. Once the market improves, it offers more opportunities for a quality player such as Kesko.

• Q: Can building and technical trade reach its operating margin target of 6-8% during the 2024-2026 strategy period?
  

  A: It will likely take longer than that, but it might be possible to get close to the target level, depending on how the construction markets recover.

• Q: Has the M&A environment changed and are you still be able to make acquisitions at attractive multiples in building and technical trade?
  
  A: It’s a good time for finding suitable acquisition targets. At the moment there are great companies available at reasonable prices, and good companies at a better price. We are happy we did not make too many acquisitions in the peak times for construction. Right now, we do not need to compete with private equity buyers.
  

• Q: How do maximise benefits from data and AI in each division?
  
  A: In grocery trade, the cost of targeted advertising to individual customers has been reduced significantly, by as much as 90%, thanks to digital solutions. In building and technical trade, 80% of Onninen’s orders come from digital channels, and we have used machine learning and AI to improve those processes. In car trade, AI is used, for example, in establishing the right prices for used cars.  

• Q: Recent appointments to Kesko’s top management have come from within the company – are you not looking for external candidates and new ideas?
  
  A: Various great external candidates have been considered for each of the top level positions filled this year. However, we’ve had top quality internal candidates, and we’ve chosen the best person for each job. Choosing internal candidates also sends a message to all Kesko employees that the company can offer good career paths. (It is also worth noting that Ali, Hämäläinen and Kiiski are fairly new to the company, as Ali joined Kesko in 2021 and Hämäläinen and Kiiski in 2020).

Visit our dedicated event page to see a recording of the webcast and access all presentations

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