Frontpage Divisions Food trade

Food trade

Kesko Food is one of the leading operators in the Finnish grocery trade. K-retailers, with whom Kesko Food applies the chain business model, are responsible for customer satisfaction at the nearly 1,000 K-food stores. Kesko Food's chains are K-citymarket, K-supermarket, K-market and K-extra. Chain operations ensure the efficiency of operations and the achievement of competitive advantages. Kespro is the leading wholesaler in the Finnish hotel, restaurant and catering business. It offers the best sourcing solutions in the sector to its customers.

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.

Cooperation between Kesko Food and K-food retailers is based on the chain operations defined in the chain agreement, which ensure the customer-orientation of operations, efficiency and the achievement of competitive advantages.

Satisfied customers are a prerequisite of success

K-food stores are visited by 900,000 customers every day. Meeting increasingly individual customer needs and expectations is the objective of K-food retailers and a prerequisite of success. Quality, gourmandise, favourable prices, ease of cooking, responsibility, special diets and healthy eating are now emphasised in customers' needs and wishes.

K-food stores' competitive advantages include:

• By far the best fruit and vegetable department in the area, the bakery department and service counters with fresh meat and fish products and meals.
• The widest selections which, in addition to a comprehensive basic selection, include products from local producers, valued by customers of the particular store.
• More than 2,000 Pirkka products which combine high quality and permanently low prices.
• Exciting stores with displays and changing new products, combined with good service. The best food expertise, a diverse supply of recipes and cooking advice.
• E-commerce and online communications are being actively developed to serve customer needs and make shopping easier.
• Responsibility, which means, for example, that responsible alternatives are offered to customers.

K-retailers serve by taking local needs into account

Local K-retailers are responsible for the customer service, competence of personnel, product quality and profitability of business in their own stores. Making use of customer data, the retailers put together a selection and services that meet customer needs. The common selection of the chain is complemented, for example, with local food from local producers.

K-food stores have a quality enhancement and measuring system. Its objective is to ensure the continuous development of the operations of the store and the whole chain to best serve customers. The quality 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 K-instituutti, the K-Group's training centre.

Chain concepts valued by customers

According to the customer satisfaction survey carried out by EPSI Rating in November 2011, K-food stores have the most satisfied customers. It is an independent, nationwide survey on grocery store customers, which was now carried out in Finland for the first time.

K-citymarkets offer their customers the widest selections of groceries and home and speciality goods, a low-price shopping basket and the best special offers – every day. Their special strengths include fresh bread, meat and fish, fruit and vegetables, diversified food expertise, and eye-catching displays. There are 75 K-citymarkets in Finland.

K-supermarkets are better than the average food stores, the strength of which is excellent service and wide selections of food items. Abundant service counters provide meat, fish and meal solutions for everyday and more festive needs, and store selections are always complemented with local products. The growing chain consists of 205 stores.

K-markets are reliable, service-oriented and local neighbourhood stores located near customers. In addition to good basic selections, K-markets offer customers fresh bread straight from the store oven, fresh, high-quality fruit and vegetables, and the best local services. The chain comprises 453 stores.

K-extras are neighbourhood stores which focus on personal service and provide customers with daily essentials. The chain comprises 138 stores.

The K-food store network, which consists of nearly 1,000 K-food stores, is the most comprehensive in Finland. About half of Finns live less than a kilometre away from a K-food store.

K-food store chains have a strong common core

K-food stores' common foundation rests in the common operating systems concerning selections management, chain marketing and displays, the selections of essential products common to all chains, and Pirkka products.

K-food stores' good customer satisfaction is based on competitive prices, reached by the maximum pricing of common selections and low-priced Pirkka products as well as the chains' campaigns and store-specific special offers. K-Plussa offers are always at least 10% below the normal price. In addition, the benefit received in the form of K-Plussa points is up to 5%.

In the chain management of K-food stores, customer information is, above all, leveraged in the building of selections, pricing management, chain marketing and planning a store network that meets customer needs.

In addition to chain operations, competitiveness is reinforced by efficient practices 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 AMS, an international sourcing alliance, whose other major members include Ahold, Dansk SG, ICA, Micros and Système U.

Pirkka – high quality, permanently low prices and responsibility

The Pirkka range of more than 2,000 products plays an important role in the K-food stores' total selection. Pirkka products combine high quality and low prices.

Finnish consumers find the Pirkka brand positive. In a nationwide youth survey, Pirkka was highly successful again in 2011, ranking at the top when young people were asked which company or brand they have recommended or could recommend. Responsibility has also been highlighted in image surveys. The success of the brand in many consumer surveys is a result of long-term work.

At the end of 2011, there were 2,072 Pirkka products. The range includes about 70 Pirkka Organic and nearly 40 Pirkka Fairtrade products, and new products are sought actively.

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 ISO 17025 accreditation, an international recognition of competence. The laboratory is the only ISO 17025 accredited unit in Finland responsible for the quality assurance of own-brand products in the trading sector.

All Kesko Food's recipes have been developed and tested by the Pirkka test kitchen, which is part of the research unit. These diverse recipes are published in the Pirkka magazine, on the Pirkka.fi web site, on the K-RuokaPirkka leaflet that is available at all K-food stores, on the TV programme "What are we having today?", and on Pirkka product packaging.

Kespro offers the best sourcing solutions in the sector

Kesko Food's subsidiary Kespro is the leading wholesaler in the Finnish hotel, restaurant and catering (HoReCa) business and acts as a partner for its customer companies and municipalities in Finland. Kespro provides delivery and cash&carry services to its customers. In 2011, the total HoReCa market in Finland was approximately €2.6 billion (own estimate).

Kespro offers its customer the best sourcing solutions in the HoReCa sector. Kespro's aim is to be the most desired business partner in the HoReCa sector. The wide, customer-driven product selection comprises food items, alcohol, cookware, tableware and cutlery. Kespro's own Menu range is versatile, high-quality and favourably priced. Kespro operates throughout Finland in six sales areas, with six delivery sales units, 13 cash&carry outlets and 510 employees.

Profitable growth as a target

Kesko Food's key objectives include increasing market share in Finland, improving customer satisfaction and achieving profitable growth.

K-food stores cater for customers' various needs and expectations. The aim is to strengthen customer relationships and so increase the average purchase. Our objectives also include increasing the number of customer relationships. K-food stores' largest customer target group is families with children.

K-food stores competitive advantages include the best fruit and vegetable departments, bakery departments, and service counters which offer fresh meat, fish and meals. Key competitive advantages also include the widest selections, Pirkka products, eye-catching displays, good service and responsibility, which means, for example, that responsible alternatives are offered to customers. These competitive advantages will be strengthened further.

Over next few years, Kesko Food's key strategic focuses include the strong building and enhancement of the store network. The maintenance of the store sites' quality level, the expansion of selections, new service needs and migration require constant development of the network. Major capital expenditure will be made in new K-supermarket and K-citymarket stores in particular in the years to come. The aim is to open 23 new K-supermarkets and seven new K-citymarkets in 2012.

In 2012–2013, four large grocery stores in will opened in Russia: two in the St. Petersburg region and two in the Moscow region. Estimated capital expenditure in Russia will total €300 million in 2011–2015. The aim is to acquire sites both in St. Petersburg and Moscow for at least 10 large grocery stores. The aim is to achieve net sales of €500 million and a positive operating result in Russia by 2015. In addition to greenfielding, Kesko Food will continue to survey company acquisitions both in St. Petersburg and Moscow.

Kesko Food will also vigorously enhance its electronic services. In the development of services, the focus is on increasing electronic customer interaction. Examples of this include Pirkka.fi web service, revised in May 2011, and the Pirkka Facebook page. There is a good basis for developing the electronic order process and online sales of food in Kesko Food and K-food stores. K-food retailers can serve their customers online and the online food store of K-market Ruoholahti was introduced in Helsinki in December 2011. Kesko Food is also planning to launch a common online store with the home and speciality goods trade.

Operating environment

K-food stores, Finland

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-tukku, Heinon Tukku Oy

Food trade market

The Finnish grocery market totalled about €15.4 billion (incl. VAT) in 2011, representing an estimated growth of 6.0% from 2010 (statistics by the Finnish Grocery Trade Association and own estimate).

K-Group's food trade. store numbers. and retail and B2B sales	Number		Sales. (VAT 0%) € million
	2011	2010	2011	2010
K-citymarket. food	75	69	1,433	1,295
K-supermarket	205	181	1,627	1,488
K-market (incl. service station stores)	453	472	1,274	1,266
Others	231	285	247	294
K-food stores. retail sales			4,581	4,343
Kespro			732	682
Food trade. total	964	1,007	5,314	5,025
Food trade segment’s key figures			2011	2010
Net sales		€ million	4,182	3,896
Operating profit		€ million	173.7	158.4
Operating profit excl. non-recurring items		€ million	172.2	160.1
Operating profit as % of net sales excl. non-recurring items		%	4.1	4.1
Capital expenditure		€ million	221.5	117.2
Return on capital employed* excl. non-recurring items		%	28.6	27.1
Personnel average			2,706	2,881
* cumulative average
Food trade segment's net sales in 2011			€ million	Change. %
K-citymarket. food			1,043	14.6
K-supermarket			1,189	11.8
K-market and K-extra			1,019	-0.7
Kespro			740	7.5
Others			191	-8.6
Net sales. total			4,182	7.3
Food trade segment’s capital employed at 31 December. € million			2011	2010
Non-current assets			701	601
Inventories			105	108
Short-term receivables			429	400
./. Non-interest-bearing debt			-588	-557
./. Provisions			-9	-13
Capital employed**			637	539
** capital employed at the end of financial year

Interaction with Pirkka fans

The Pirkka brand opened a Facebook site of its own to enable interaction with Pirkka fans. Pirkka.fi, the best food site in Finland, was revised and complemented with interactive services, such as an electronic recipe book 'Own kitchen' and the 'Pirkka idea corner' service for ideas and wishes.

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www.facebook.com/Pirkka www.pirkka.fi