engl strategiasetti v10 · and dialogue between customer and k-store • targeted and personalised...

KESKO’SSTRATEGY27 May 2015

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KESKOTODAY

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KEY FIGURES 2014

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Net sales

Operating profit*

Equity ratio

Liquid assets

Return on capital employed*

Personnel (FTE)

* excl. non-recurring items

€9,071m

€233m

54.5%

€598m

9.9%

19,976

NET SALESBY LINE OF BUSINESS 2014

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Machinery trade 3%

Car trade 9%

Agricultural trade 4%

Sports trade 2%

Furniture trade 2%

Building and home improvement trade 25%

Kespro 9%Grocery trade

Russia 1%

Grocery trade

Finland 44%

Grocery trade €4,754m

Home improvement and speciality goods trade €3,000m

Car and machinery trade €1,011m

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NET SALES BY COUNTRY 2014

Russia 4%

Lithuania 4%

Latvia 1%

Finland 82%

Belarus 1%

Estonia 1%

Sweden 2%

Norway 5%

Over 80% of net sales

comes from Finland

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OPERATING ENVIRONMENT AND

MEGATRENDS

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“BIG PICTURE”

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• USA continues as the engine of the world economy

• Slow economic growth in the EU area continues

• Growth of the Chinese economy slower than before

but role in the world economy is emphasized

• Growth of the world economy slower than before

• Inflation and interest rates remain low

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FINLAND IS TURNING AROUND SLOWLY

• Weakening of the euro, low energy price and low interest rate level support

economic development

• Political tension in Europe maintains uncertainty and has a negative impact on

the Finnish economy

• Savings in public finances reduce purchasing power – tax reductions may

improve the situation

Decline of purchasing power will level off, but is not expected to improve significantly in

the next few years

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OPPORTUNITIES AND RISKS IN RUSSIA• Russia is the world’s richest country in terms of raw

material reserves

• Around 150 million consumers whose purchasing

power will improve also in the future

• Russia has 13 metropolitan cities

• As yet, political and financial risks are greater than

normal

• The Russian economy has potential for strong

growth as soon as the political situation is

normalised and the prices of energy and raw

materials rise

International trading groups focusing on a single line of business arechallenging local operators

MEGATREND 1

Kesko will have to

• concentrate on a more limited number of lines of business

• operate at a more efficient and higher quality level

Consumers’ ability to make analyticalbuying decisions has increased

Kesko will have to make clear customer promises and

to deliver on them• quality • price• service

MEGATREND 2

Digital servicesin a key role

MEGATREND 3

Kesko will have to provide an even

better customer experience by

exploiting the possibilities of mobile

services, web services and digital

marketing

Population ageing, urbanisation and the growth in single households coupled with the change in consumer behaviour make customer behaviour increasingly individualised.

Kesko will have to create new concepts and retailer modelsand exploit customer data more widely than before

MEGATREND 4

Responsibility combined with a strong identity and appealing brands will be an increasingly central requirement in every business line

MEGATREND 5

Kesko will have to continue its responsibility work and strengthen its corporate identity and core brands

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PORTFOLIO STRATEGY

Grocery trade

• Finland

• Russia

• Kespro, horeca business

Building and home improvement trade

• Europe

Car trade

• Finland

• The Baltic countries, primarily Estonia

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KESKO’S STRATEGIC GROWTH AREAS

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Sports trade

• Finland and Russia

Shoe trade

• Finland

ALL LINES OF BUSINESS WILL BE DEVELOPED AIMING AT BUSINESS SUCCESS

Furniture trade

• Finland and Estonia

Agricultural trade

• Finland

Machinery trade

• Finland and the Baltic countries

KEY STRATEGIC OBJECTIVES

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• Turning the market share in the Finnish grocery trade around

• Increasing the building and home improvement trade in Europe

• Strengthening the market leadership in the Finnish passenger car and van trade

• We will operate the retailer business model, or Kesko’s own stores when it provides

competitive advantage

• The best customer experience in the trading sector

• One unified Kesko

• Strong brand and identity

• Efficiency

• Managing customer relationships across divisional borders

STRATEGIC CORNERSTONES

Customer and quality – in everything we do

We operate together and grow in the grocery trade, the building and home improvement trade and the car trade.We operate the retailer business model, or Kesko’s own stores when it provides competitive advantage

We are the customer’s choice and the quality leader in the European trading sector

We create welfare responsibly for all our stakeholders and the whole society

VISION

STRATEGY

VALUE

MISSION

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I TRUST

PEOPLE

I PROVIDE

A CLEAR

DIRECTION

I OPERATE DIRECTLY, OPENLY AND HONESTLY

I GET

INVOLVED

OUR OPERATING PRINCIPLES

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GROCERY TRADE

GROCERY TRADE 2014

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Kespro 17%

Grocery trade

Finland 81%

Grocery trade

Russia 2%Net sales €4,754m

Operating profit €223m

Operating margin 4.7%

ROCE 22.2%

Personnel (FTE) 6,176

STRATEGY DEFINITIONSOF THE GROCERY TRADE IN FINLAND

• Capital expenditure in the K-supermarket and K-market chains will be increased

significantly

• The whole neighbourhood store network will be renewed

• Target is 130 new stores and a completely new store concept will be tested on the

market

• The whole K-citymarket concept will be renewed

• We will increasingly improve our price competitiveness and price image

• We will increasingly emphasize digitisation at K-food stores

• We will revise the retailer business model

• We will improve the quality and service level

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K-CITYMARKET

• The whole K-citymarket concept will be renewed and the

stores will be tailored to meet local customer needs

• In food, superiority factors are freshness, quality and

Finnish origin

• In the home and speciality goods, focused selection and

optimised space utilisation are central

• Attractive partnerships include

Starbucks, Posti and K-rauta Express…

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”Best store for the family”

K-SUPERMARKET

• Implementation of store specific business ideas in line

with local customer demand

• Target at approximately 30 new K-supermarkets

• Further strengthening of quality image: freshness,

Finnish origin, service, displays

• Diversification of food culture – Finnish products, local

food products and latest international trends

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”Best in food”

K-MARKET

• Division of the chain’s stores into three formats:

”Express”, ”City” and ”Province”

• Implementation of a completely new service station store

concept and network expansion jointly with Neste

• Comprehensive renewal of the existing network

• Target at over 100 new neighbourhood stores

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”Most service oriented neighbourhood store”

NUMBER ONE IN DIGITAL SERVICESIN THE FOOD TRADE

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• We will create inspiring customer encounters

and dialogue between customer and K-store

• Targeted and personalised marketing

• Customer oriented mobile services

• Our target is a 40% market share in the online

food trade

• Already now Click & Collect service and

home delivery

• We are continuously looking for new

innovative solutions

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RETAILER ENTERPRISE IS OUR SUCCESS FACTOR

• We will develop retailer enterprise in order thatit is profitable and attractive also in the future

• Retailers will be encouraged to developselections and services taking account of stores’ different competitive environments

• It will be possible for a successful retailer to run more than one store in the future

• New efficient retailer model for neighbourhoodstores smaller than the existing ones

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STRATEGY FOR RUSSIA

• Increasing operations and improving profitability

in the St. Petersburg area

• We will operate actively in the acquisition of plots and store sites

• Our aim is that K-ruoka is the best food store in the St.

Petersburg area in terms of quality and customer experience

• Identifying new growth possibilities in the Moscow area

and possibly in other metropolitan cities in Russia

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WE WILL INCREASE THEHORECA BUSINESS

• We will seek organic growth through strong international

cooperation, differentiating the selection especially with the help

of private label products

• We will improve service counter efficiency and diversification of

offering by increasing cooperation with K-food stores

• We will examine expansion alternatives in Finland and the

neighbouring areas

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CUSTOMER AND QUALITY –IN EVERYTHING WE DO

• We will build a quality programme for the

whole supply chain to help us improve the

quality and efficiency of Kesko and K-food

stores

• Customer feedback will guide our

operations: customers can give feedback

easily and through multiple channels

• Feedback on quality programme will help

us identify development targets and

develop our operations

• We will actively monitor and measure the

delivery of chain specific customer and

quality promises

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WE WANT TO OFFER OUR CUSTOMERS FOOD THAT IS BOTH AFFORDABLE

AND OF GOOD QUALITY

#SEKÄETTÄ

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BUILDING AND HOME IMPROVEMENT TRADE

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HOME IMPROVEMENT AND SPECIALITY GOODS TRADE2014

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Sports trade

€186m 6%

Shoe trade

€20m 1%

Furniture trade

€176m 6%

Agricultural trade

€372m 12%

Others

€20m 1%


Belarus €125m 4%


Russia €250m 8%

Building and home

improvement trade

Finland

€785m 26%

Building and home

improvement trade

Scandinavia €625m 21%


Baltics €443m 15%

Net sales €3,000m



ROCE 7.9%

Personnel 10,600

STRATEGY DEFINITIONS OFTHE BUILDING AND HOME IMPROVEMENT TRADE• In Finland, market position will be strengthened further and profitability will be

improved

• In Scandinavia, improvement of profitability will continue in Sweden and Norway and

then profitable growth will be sought

• In Russia, profitable growth will continue in the St. Petersburg and Moscow areas in

moderation

• Possibilities to increase operations in Russia on a wider scale through both

partnerships and acquisitions will be examined

• In the Baltic countries, Belarus and Eastern Central Europe, the aim is to grow faster

alone or with partners

• Possibilities to expand also elsewhere in Europe will be examined

• In the future, we will aim to offer increasingly extensive services to business and

project customers, in addition to consumer customers

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NUMBER ONE IN DIGITAL SERVICES

• Stores and chains will have the best digital services for each customer group

in the sector to support sales and engage customers

• Good product findability, extensive planning features and easy multichannel

purchasing

• All stores will offer Click&Collect service

• 82 K-rauta and Rautia stores already in Finland

• 20 K-rauta stores already in Sweden

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NEW K-RAUTA EXPRESS CONCEPT

• A concept for locations with large flows of

customers to offer fast and easy shopping

• Satellite store in a shopping centre, city centre

or in connection with a K-citymarket

• Customers will find inspiration, tools and

services for renovation and home improvement

• All tools, small accessories and renovation

projects on the same visit

• Will operate as K-rauta branches

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• Increasing the attractiveness of the K-rauta chain by launching a separate Cello Home & Season sub-concept

• New sub-concept will complement the existingK-rauta stores

• The concept will offer inspiring home improvement and seasonal products in the smart quality category

• The sub-concept will be built around the currentCello product brand, whose selection of home improvement and garden products will beexpanded

NEW CELLO HOME & SEASON CONCEPT

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STRATEGY DEFINITIONS OF THE SPECIALITY GOODS TRADE

• Improvement of the profitability of the furniture trade will continue and

competitive advantage for the building and home improvement trade

will be sought in the Asko and Sotka chains

• The agricultural and machinery trade will be integrated into one unit

• Efficiency in the agricultural and machinery trade in Finland will

be improved

• Continuing as the leading machinery dealer in the Baltic countries

• Improvement of the competitiveness of the sports trade and the shoe

trade

• Maintaining market leadership in the Finnish sports trade

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CAR TRADE

CAR AND MACHINERY TRADE 2014

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Konekesko

Baltics €96m 9%

VV-Auto

€756m 75%

Konekesko

Finland €161m 16%Net sales €1,011m



ROCE 18.3%

Personnel 1,244

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STRATEGY DEFINITIONSOF THE CAR TRADE

• Aiming at an even closer and more extensive cooperation with Volkswagen

Group

• Aiming at even stronger market leadership in the Finnish passenger car and

van trade

• Expanding operations in Estonia and possibly into other Baltic countries as

far as it supports the cooperation with Volkswagen Group and our

operations in Finland

• Digital services based on customer needs will make transactions easier and

increase sales

• Konekesko’s business operations will be organised as part of the home

improvement and speciality goods trade

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BEST CUSTOMER EXPERIENCE

STRATEGY DEFINITIONSFOR IMPROVED CUSTOMER EXPERIENCE

• Corporate identity of Kesko and the K-Group will be revised to be more customer oriented

• Customer loyalty system will be revised to make it even more attractive

• Customers’ shopping, transactions and interaction with the K-Group will bemade easier by offering the best digital services in the sector

• Improving quality in everything we do

• Quality targets will be announced publicly

• Simple customer feedback system will be created

• Received feedback will guide the development of both stores’ and Kesko’soperations

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STRONG COMMON IDENTITYFOR THE WHOLE K-GROUP

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BRAND PROMISE

FOR SHOPPING TO BE FUN

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STRATEGY DEFINITIONSFOR MORE EFFICIENT OPERATIONS

• We will operate even more than before as a unified Group across

divisional and organisational borders

• We will create shared processes and functions that support operations:

finance and risk management, HR, communications, legal services,

ICT, customer loyalty system and indirect sourcing

• Improving the competitiveness of business operations through even

more cooperation: logistics, direct sourcing, marketing, store sites and

business development and digital services

• In order to ensure competitiveness and improve profitability the

objective is to achieve cost savings of at least €50 million in fixed costs

by the end of 2016

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FINANCIAL TARGETS ANDCAPITAL EXPENDITURE

• Return on capital employed 14%

• Return on equity 12%

• Interest bearing net liabilities / EBITDA < 2.5

• Capital expenditure in 2015–2017 approximately €1 billion

• Excluding possible acquisitions

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FOR SHOPPING TO BE FUN

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engl strategiasetti v10 · and dialogue between customer and k-store • targeted and personalised...

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