Kesko, Finland’s second largest grocery retailer has unveiled a new strategy, targeting ‘profitable growth’ in grocery.
Primary ambition is to address market share
Kesko’s primary ambition is to turn 'market share around in Finland in 2015'.
€1bn investment in supermarkets and convenience stores
As part of its plan to address market share challenges, Kesko is to invest €1bn in supermarkets and convenience stores between 2015 and 2017. The retailer is targeting around 30 new supermarkets, while it also plans to launch 100 new neighbourhood convenience stores, testing a brand new concept. The retailer’s remaining convenience stores will also be refurbished.
Wholesale & online are other focus areas
Kesko's wholesale format, Kespro, is also at the heart of its strategic priorities as is targeting a 40% market share in online grocery.
Further expansion in Russia
Outside of Finland, Kesko plans to improve operations and drive profitability in St. Petersburg, in addition to exploring opportunities in Moscow and potentially other key Russian cities.
So what do we think?
Kesko's plans to drive growth will be welcomed given its declining sales performance in 2014, in contrast to competitor S Group, where food sales increased by 1.8% and Lidl, which counts Finland as one of its fastest growing markets.
The Finnish market has been characterised by fierce price activity as S Group and Kesko look to reinforce their price perceptions in the face of discounter Lidl's growth. While investment in new stores, concepts and refurbishments should help to grow Kesko's presence and enhance the shopping experience, it will be interesting to see whether Kesko will be able to finance future price cuts.
The targeting of a 40% market share in online grocery sounds ambitious given that Kesko hasn't revealed the specifics on how it plans to drive sales in this area. Watch this space for further developments.
Kesko's Russian food business has continued to perform, reporting 46.7% growth to €103m in 2014, despite 'the slowdown of the economy and the weakening of the rouble'. With Kesko currently operating less than ten food stores in Russia, the retailer is operating at a low base, although it is not alone in identifying the market as key to its future. A number of national and international retailers, including Rewe, X5 & SPAR International have reaffirmed commitments to expand in Russia.
|Harriet Cohen (Senior Retail Analyst)|
This article was written by Harriet Cohen who specialises in grocery retailing in Northern and Central Europe. Harriet brings five years of experience working for UK retailers to IGD. To learn more about how IGD's research can benefit your business further, please get in touch.