Frontpage 
Divisions Food trade
Kesko Food is a strong operator in the Finnish grocery trade. K-retailers are responsible for customer satisfaction at the more than 1,000 K-food stores. Kesko Food manages K-citymarket’s food trade and the K-supermarket, K-market and K-extra chains. Kesko Food’s main functions include the centralised purchasing of products, selection management, logistics, and the development of chain concepts and the store site network. Chain operations ensure the efficiency and competitiveness of business. Kesko Food’s subsidiary Kespro Ltd is the leading wholesaler in the Finnish HoReCa business. It offers the best sourcing solutions in the sector for its customers.
A K-food store is a quality store, which provides customers with the best food ideas and meal solutions at favourable prices. K-food stores operate efficiently and offer the widest and most exciting selections, and have the best fresh produce departments. Every K-food store stocks a wide range of Pirkka products, which are valued by customers, of high quality and sold at permanently low prices. The K-Plussa customer loyalty programme rewards customers for centralising their purchases and the K-Plussa card also provides versatile benefits. Customer programmes help cater for loyal K-Plussa customers on an individual basis. The main purpose of the customer programmes is to locally offer the exact selections and services needed by particular customers.
The Finnish grocery market totalled some €14.7 billion in 2009, representing a growth of 3–4% from 2008 (own estimate). The increase was biggest in the hypermarkets in the largest size category (over 2,500 m2).
In addition to K-food stores, primary operators in the market include Prisma, S-market and Alepa/Sale (S Group), Valintatalo, Siwa and Euromarket (Suomen Lähikauppa Oy), and Lidl. The estimated market share of the K-food stores is 34% (own estimate).
In 2009, the HoReCa market’s (hotels, restaurants and catering) purchases in Finland totalled about €2.4 billion (own estimate). Kesko Food’s subsidiary Kespro Ltd is the leading wholesaler in the Finnish HoReCa business. Kespro’s main competitors are Meiranova Oy, Metro Chain and Heinon Tukku Oy. Kespro strengthened its position in 2009 and achieved its best-ever customer satisfaction rate.
K-food stores are visited by nearly 900,000 customers every day. Successful customer encounters every time are a prerequisite of overall success and are ensured with:
Favourable prices are a prerequisite for growth and customer satisfaction. The basis for favourable prices is built with the help of the selection that is available throughout the chain, permanently low-priced Pirkka products, the chain’s campaigns and store-specific activities. Permanently low prices are reinforced by efficient practices all the way from customer to supplier, chain operations and long-term cooperation models with selected partners.
Considerable benefits are obtained both in Finland and internationally by combining purchasing volumes. Kesko Food is a member of the international sourcing alliance, Associated Marketing Services (AMS), that has rapidly expanded. Other major members of AMS include Ahold, Dansk SG, ICA, Migros and Système U.
Local K-retailers are responsible for the customer service, competence of personnel, quality, and profitability of business. Making use of customer data, the retailer builds a selection and service that meets customer needs, offering, for example, food from local producers to complement joint selections of the chain.
In order to ensure high quality, K-food stores have their own quality system. Its objective is to ensure continuous development of the operations of the store and the whole chain to best serve the customers. The system includes measuring customer satisfaction and the store’s condition, and assessing price control and management. The best retailing competence is maintained with the help of constant training in cooperation with the K-instituutti, the K-Group’s training centre.
Efficient cooperation between Kesko Food and the K-food retailer is based on the chain operations defined in the chain agreement. Chain operations ensure customer-orientation, operational efficiency, competitiveness and the attainment of competitive advantages.
Pirkka products combine quality and low prices. The total number of Pirkka products reached 1,826 by the end of the year. According to consumer studies, customers feel that Pirkka products are an easy and safe choice because of their high quality and low price.
The Pirkka range also includes Pirkka Organic and Pirkka Fairtrade products. There are now more than 40 Pirkka Organic and nearly 30 Pirkka Fairtrade products.
The quality of Pirkka products is assured by Kesko Food’s own Pirkka Product Research Unit, which carefully analyses all new Pirkka products. The research unit’s laboratory has the ISO 17025 accreditation, an international recognition of competence. It is the only ISO 17025 accredited laboratory in Finland responsible for the quality assurance of own-brand products in the trading sector.
All Kesko Food’s own recipes have been developed and tested by the Pirkka test kitchen, which is part of the Pirkka Product Research. Diverse recipes are published in the Pirkka magazine, which is mailed to K-Group loyalty customers, in the online cookery book on Pirkka.fi, in the K-RuokaPirkka leaflet that is published monthly and available at all K-food stores, on the TV programme “What are we having today?”, and on Pirkka product packaging.
Strong chain concepts guarantee the high quality of K-food stores. Kesko Food’s chain operations provide K-retailers with a strong basis for purchasing, building selections, marketing and price competition.
K-citymarkets offer their customers the most diversified selections of groceries and home and speciality goods. Their special strengths include fresh bread, fruit and vegetables, a diversified supply of foods, and exiting departments with their displays. K-citymarkets provide their customers with a low-priced shopping basket and the best offers – every day.
There are 69 K-citymarkets in Finland in 51 towns. Five new K-citymarkets were opened in 2009.
The K-supermarkets’ strength is excellent service. In addition to the retailer and other staff, customers are also served by over 160 employees with a specialist food manager qualification. These meat and fish experts provide customers with cooking tips and advice. K-supermarkets are better than the average food stores and offer wide selections of food items at competitive prices.
The chain consists of 170 stores. In 2009, four new K-supermarkets were opened.
K-markets are reliable, service-oriented and local neighbourhood stores located near to customers. In addition to good basic selections, K-markets offer customers fresh bread straight from the store’s oven, fresh, high-quality fruit and vegetables, and the best local services.
The chain comprises 487 stores. 15 new K-markets were opened in 2009.
K-extras are neighbourhood stores which focus on personal service and provide customers with daily essentials. Additionally, as the name implies, many K-extras located in the countryside offer extra services, such as the sale of agricultural and builders’ supplies, fuel distribution, lottery and postal services.
The chain comprises 189 stores.
At the end of 2009, there were 1,030 K-food stores, catering for various consumer needs ranging from daily local services to the wide range of clothing and other home and speciality goods stocked by hypermarkets. The K-food store network is the most comprehensive in
Finland. 51% of Finns live less than a
kilometre away from a
Kesko Food develops the K-food store network by investing in stores of all sizes. The constant development of the network is required to meet the needs of ageing stores, expanding selections, new services and migration.
The food segment’s net sales totalled €3,798 million in 2009, an increase of 2.4%. The operating profit excluding non-recurring items amounted to €133.1 million, which is €10.5 million up on the previous year.
The value added tax on retail sales of food was reduced at the beginning of October. Kesko Food and K-food retailers undertook to implement the reduction in full on food prices. The price monitoring survey published by the National Consumer Research Centre in November verified that at K-food stores food prices decreased even more than the VAT cut. Due to the reduction, K-food stores changed more than 6 million prices. A family who spent about €5,000 on food per year before the VAT decrease will now save €215 a year.
The Act to extend retail store opening hours came into force at the beginning of December. The amendment meant that another 400 K-food stores would be able to benefit from extended Sunday opening hours. The total number of K-food stores is 1,030. For customers, this means much better accessibility to retail services. The fact that the stores no longer have to stay closed one day a week also improves efficiency and reduces waste, because total demand is easier to predict.
During the year, five new K-citymarkets, four K-supermarkets, and 15 K-markets were opened. A total of 25 new food stores were opened, one of which replaced an existing store. Several K-food stores were also extended and renovated in 2009.
Kesko Food’s key objective is to increase market share. The implementation of Kesko Food’s strategy aims at growth faster than the market, increased customer satisfaction and competitiveness. Kesko Food’s opportunities for internationalisation are also being actively investigated, particularly in Russia.
Kesko Food’s key strategic focuses include increasing the efficiency of operations and enhancing electronic customer communications. Automated processes play a central role in increasing the efficiency of operations. In addition to more targeted information on the products and services available at K-food stores, electronic customer communications also provide customers with new methods of handling their customer relationship matters online. Opportunities for food retailing online are also being explored. The premise is that the retailing sector and electronic transactions should support customer needs and make shopping easier.
Customer information and understanding provide the basis for Kesko Food’s business development. Leveraging of customer information relies on information produced by K-Plus Oy that is collected locally both at the customer and product group levels. Store- and chain-specific programmes as well as those available across the entire network are developed on the basis of the information to ensure that selections are as suitable and the service experience as good as possible for the customers. Customer information serves as a basis for the development of selections, concepts, network planning and marketing, for example.
The “My favourite” campaign encouraged Finns to vote for their Pirkka favourites in August 2009. The campaign site was visited more than 500,000 times and over 190,000 votes were cast. The fun campaign focused on the diversity of the Pirkka range in everyday food solutions. The range now comprises over 1,800 products. The number one favourite among Finns was the Pirkka AB rye nut yoghurt.
All new Pirkka products are carefully analysed by Kesko Food’s own Pirkka Product Research. The unit was awarded the ISO 17025 accreditation, an important international recognition for competence, in March 2009 as the only laboratory in Finland responsible for quality assurance for the trading sector’s own brands. The Pirkka Product Research includes the Pirkka test kitchen, which creates and tests recipes for everyday and special purposes alike.
Finland, market share 34% (own estimate)
Competitors: Prisma, S-market and Alepa/Sale (S Group), Valintatalo, Siwa and Euromarket (Suomen Lähikauppa Oy) and Lidl
HoReCa, Finland, Kespro
Competitors: Meiranova Oy, Metro Chain, Heinon Tukku Oy
K-Group’s food trade, retail and B2B sales |
||||
| Number | Sales (incl. VAT) € million |
|||
| 2009 | 2008 | 2009 | 2008 | |
| K-citymarket, groceries | 69 | 64 | 1,412 | 1,249 |
| K-supermarket | 170 | 163 | 1,633 | 1,580 |
| K-market (incl. service station stores) | 487 | 490 | 1,502 | 1,494 |
| Others | 304 | 338 | 344 | 362 |
| K-food stores, retail sales | 4,891 | 4,685 | ||
| Kespro | 811 | 837 | ||
| Food trade, total | 1,030 | 1,055 | 5,703 | 5,521 |
Food segment’s key figures, |
2009 | 2008 | ||
| Net sales | € million | 3,798 | 3,707 | |
| Operating profit | € million | 170.6 | 185.5 | |
| Operating profit excl. non-recurring items | € million | 133.1 | 122.5 | |
| Operating profit as % of net sales excl. non-recurring items |
% | 3.5 | 3.3 | |
| Investments | € million | 69.4 | 139.7 | |
| Return on capital employed* excl. non-recurring items |
% | 20.9 | 19.3 | |
| Personnel average | 3,035 | 3,440 | ||
| * cumulative average | ||||
Food segment’s net sales, |
€ million | change, % | ||
| K-citymarket | 854 | 12.1 | ||
| K-supermarket | 1,001 | 3.7 | ||
| K-market and K-extra | 1,067 | -2.5 | ||
| Kespro | 677 | -2.6 | ||
| Others | 199 | 4.1 | ||
| Net sales, total | 3,798 | 2.4 | ||
Food segment’s capital employed at |
2009 | 2008 | ||
| Non-current assets | 632 | 704 | ||
| Inventories | 90 | 91 | ||
| Short-term receivables | 371 | 380 | ||
| ./. Non-interest-bearing debt | -489 | -510 | ||
| ./. Provisions | -8 | -8 | ||
| Capital employed** | 596 | 657 | ||
| ** capital employed at the end of month | ||||
