Onko yritysasiakkaissa Keskon herkkupaikka, pääjohtaja Jorma Rauhala?

Well, let's start in the order I started. Over 30 years ago I went into the food side, so let's start there.

In grocery trade, Kesko's aim is to strengthen its market position. That usually means increasing market share. When you look at Kesko's grocery market share, it was around 36% 20 years ago, then it steadily declined, then we bought Suomen Lähikauppa and it rose back, and now it's around 34%. So is Kesko's grocery trade just a leaky barrel, or perhaps a cognac cask from which a little alcohol evaporates every year? Well, it's not exactly a leaky barrel, but over the past 10 years, if I've followed it closely, there have been different periods. One is definitely the purchase of Suomen Lähikauppa, when we gained market share. Then in 2017, 2018, 2019, when our strengths—high-quality stores, wide selections, domestic products—were valued, we gained market share. That wasn't due to the local store; we gained market share. Similarly, when Corona came, we reacted very quickly to e-commerce. Those were good years. But over the last 10 years, about half the years we gained and half we lost. And that's true. In recent years, we've lost market share for a few years, and that's why we set the strategy to turn it around while maintaining good profitability. We have very clear measures to do that. I believe they will work. Looking at the table, how to win market share: first, location is crucial, and second, it seems clearly that hypermarkets are where the trade goes. That means we need more hypermarkets in growth centers. In the Helsinki metropolitan area, we have—I think now in Helsinki there are four, after Vuosaari K-Supermarket was upgraded to Citymarket. In Espoo, there are two. So we need more here, but also in other growth centers. We have seven Citymarkets announced, three are completely new Citymarkets and four are conversions, like in Lahti, Finland's oldest Citymarket moving to new larger premises, or Vuosaari from supermarket to Citymarket. So growth centers more broadly, but especially the capital region. For example, in Espoo, we have only two Citymarkets, and we are doing something in Espoo center. But we also need supermarkets. We have a good portfolio of all these. It depends on what kind of plot we find. Not everywhere can fit a large store. So we have a good portfolio, and the strategy is clear for growth centers. The migration in Finland looks quite dramatic, so we have to be smart in our decisions.

Certainly in the Helsinki metropolitan area. For example, Kivistö in Vantaa has been announced, and the Espoo market square change. But it's not easy. We often get messages that southern Helsinki needs a bigger store. I completely agree, but such plots don't exist. So as I said, our flexibility is good: if an area needs a store but a large one doesn't fit, we can make a smaller one. But in any case, we get to enjoy the opening coffee of new stores.

Black is spicy. Yes, it is.

Exactly, yes, yes. I myself mostly ride on the road when I have the energy. In winter, it's on the trainer.

Well, the price image. Let's say in the grocery trade overall, these price differences and price images among different operators have remained very similar for over 20 years, as I've followed the statistics. And our price image is more unfavorable than the actual price difference. In the strategy, there are three things we do to turn the market share. First, the network issues are clear: we have invested quite little in recent years, we will do that, it will come with a delay. Some help will come during this strategy period, but later. Then there is price: we need to make certain investments in price so that we compete better when quality aspects are highlighted. But now that price has been very strong for consumers in recent years, we also need to invest in it so that consumers see it's smart to shop at our stores. That will be done. But perhaps most important is our core competitive advantage: strengthening the store-specific business idea and the quality of the store. So we strengthen our own competitive advantage and slightly reduce the competitive disadvantage, i.e., price.

Yes, we will do that. Actually, yesterday I went through the plans and was very satisfied with what I saw, how it will be done. It will also be marketed to some extent, not just a temporary price cut, but we will bring a clear message to consumers that smart pricing decisions have been made, specifically for the consumer.

No, campaigns are in our DNA very strongly and work, and we will keep them. Consumers appreciate that we have good campaigns and good offers. But we will also bring changes related to the basic shopping basket, also regarding private labels.

Yes, on the consumer side, we have Pirkka Parhaat, Pirkka, and K-menu, three different profiles. It's around 20%, and there haven't been huge changes. But remember, on the Kespro side, the share of private label products is about 50%. That is an interesting point. I see that especially in Pirkka and Pirkka Parhaat, we have potential for more. They are very high-quality products, offering good value for money for customers, and from our perspective, they are sensible products with good margins. It largely depends on individual large products. For example, in recent years, if Pirkka banana, Pirkka beer, Pirkka milk, etc., come, they can change the share quite significantly. So I see growth potential, but certainly not to 40%. At that point, the store would change quite a bit. Shelf space is limited, so it would mean something else has to go. And we see that one of our key strengths is the wide selection, diverse assortments of A-brands. We want to cooperate with A-brands, and that is our agility: new products come to the shelf very quickly. So I see growth potential in Pirkka and Pirkka Parhaat, but not 40%, and we are not aiming for that. Actually, a few years ago, when I was on the grocery side, we tried a concept that relied heavily on Pirkka. It was a good-looking store, but it didn't work yet. Consumers still wanted A-brands.

Yes, that's right. Now, if we talked about price, at the other end is probably service, which at its extreme is online grocery shopping with home delivery. I saw that in the third quarter, online grocery grew by double digits, although in absolute terms it's still small, a few percent. But when we talk about market share in tenths of a percent, it already starts to show. Has there been a change that Finns have started to order food home? So the option to pick up groceries from the store or get them delivered to the door. Apparently, ordering has increased. That's exactly right. And I can say that was one of the biggest surprises for me when I was in the grocery business earlier, then in construction and building services, and now in this role looking at grocery trade more closely. For example, in this time when price is a key factor in consumer purchasing decisions, simultaneously there is this ease of shopping and living. And this ordering: this year alone, we will make over 3 million deliveries—not 3 million euros, but 3 million deliveries—and the average purchase is around 20 euros. That was a surprising and eye-opening thing for me. It's about convenience and comfort, and I don't think that trend is going away. And regarding e-commerce, I've been following it since the late 1990s and have been involved in starting a couple of pilots at Kesko. Today, it's business as usual. We have about 800 stores that offer e-commerce services to customers, with the traditional model: order today and it's delivered tomorrow to your home, or you can pick it up on the way to the cottage or on the way home from work. There are also express deliveries. So everything is available, and the consumer decides what they want. It's no longer a question of whether Finnish retail is awake to e-commerce. I think we have found a very good concept for how we operate. It's still the case that store picking is the main method, even for the world's largest online grocer, Tesco. We have store picking, express delivery from stores, and also an automated warehouse. So it's growing slowly. I think the current trend is that it grows gradually, mainly due to express deliveries.

Let's say that our model works quite well. This is voluntary for the retailer, and I can say that retailers really want it. Especially on the K-Market side, where we started, it has even saved some K-Markets by bringing so much additional sales and profit. It is profitable, especially when the store is small, because the picking time is short. The same staff can do it during a short break. Now we have added it to larger supermarkets, and there the equation changes a bit because the picking routes are longer. But we are constantly developing it together with Wolt. Wolt develops how to do it better, and we look at how we can do it more efficiently. But it is a concept that there has been a lot of willingness for. Ultimately, the consumer decides how it goes.

15% fits well with the usage context: you go to the grocery store and buy wine to go with it. Yes, that is desirable. So put that on the list. So K's logistics can handle these gingerbread-flavored buns with glögi. There might be some products that naturally go together. And then there are the specialities, whether to ferment yourself or not. There are many special rules in Finland. The grocery business area also includes Kespro, which is like an old cash-and-carry serving restaurants, cafes, etc. In practice, nowadays it's ordered online and delivered to the restaurant door. Apparently quite quickly: if you order in the evening, the salad ingredients might arrive the next morning. There are 13 cash-and-carry stores left, but it's a good mention. My first job was at K-Citymarket in Vaasa in 1992, so it's a familiar place. But it's just that the share of delivery sales has grown a lot. Is the nearest one in Lahti from Helsinki? Good question. I was about to wrap up, but it illustrates the shift to online. Yes, there were 25 when I started, now 13. Maybe Kotka still? But Lahti is quite close. Kespro's share of Kesko's grocery trade is about a fifth, and its market share in its own segment is about half. This is scale business, so the scale advantage comes. That's exactly it. In many other B2B trades, it's the same. If you have a large customer base, you can maintain a wide good assortment, availability, delivery reliability, routes to Lapland, etc. There is synergy with the stores. It's a strong business, and it competes a bit with K-retailers if a restaurant can choose to buy salad ingredients at a good discount from a nearby K-store or order them from Kespro. But I don't think it's a problem. Overall, restaurants and stores have been converging over the years. Today, stores have high-quality ready meals, sushi, etc. So they have converged. And this seems like a really good spot for the food service side. But it's probably not possible to internationalize through that because it requires large volume. Yes, that's true. It has been considered sometimes, but it would have to be through an acquisition. Greenfield would be impossible. So it's not on our agenda at the moment. For food, we have decided to stay in Finland. We have been in the Baltics and Russia, but Finland is the area for the entire grocery business, including Kespro.

Yes, it is. Overall, construction and building services, which now consists of us—it can be a bit of a difficult term, but we mean the hardware store side. In Finland, it's easy: K-Rauta and Onninen. K-Rauta also has a strong consumer side, but abroad we have more professional customers. Then there is the technical wholesale trade, which often splits into electrical and plumbing lines. Some operators work in only one, but Onninen in Finland is very strong in both. So in our clear strategy, we have chosen eight countries where we operate. For example, in Poland we are only in technical wholesale. But we see that construction is moving to B2B trade, all the requirements and regulations related to the green transition, etc. Few people build their own house anymore, and even renovation is moving to the B2B side. That is clearly in our strategy: we only buy companies that operate there. We look country by country. For example, Denmark most recently, we entered through the acquisition of Davidsen, and now three more have been announced. The market is large. Just looking at the Nordic countries, it is our clear strategy to seek growth.

Yes, probably. Of course, the market has been weak in recent years, but it is so. I was involved in many of these, especially in Davidsen and the later ones. It went quite perfectly. Davidsen was only in southern Denmark, but through acquisitions we got a few individual stores elsewhere. We saw that we weren't satisfied with that, so we sent a message to the market that we are interested, and it worked quite well. We got the message across in Denmark and quickly got contacts for the next targets. It went well. Now, when these are included in our figures next year, we will cover all of Denmark, and it will rise to around 800-900 million euros. The market will surely start growing, and then we will be number two or three in the market. It was quite fast to get a new country under control, and a market share of around 20% allows for scale, which is inevitable in these businesses. Actually, this will surpass Norway in hardware trade, becoming the second largest hardware country after Finland, if you include technical wholesale. Yes, that's right. The volume is sufficient. Are there more acquisitions? That is possible, but not necessary. It's more if a single store or something comes up. Of course, the bigger it gets, the more competition law issues may arise. But the volume is sufficient, and the important thing is that we can serve all nationwide customers, like construction companies with nationwide coverage, with deliveries everywhere.

No, that is a separate story. One lesson learned, and I myself started in 2018, is that you should not mix hardware and technical wholesale. They are different markets, different customers, even though it's all construction. The good operators are different, the competitors are completely different. Technical wholesale in Denmark is of course interesting, but that would be a different set of players. Individual products can be added to hardware stores, but an electrical contractor wants to deal with a professional wholesaler focused on electrical contracting. In Finland, some K-Rauta and Onninen are in the same premises, but that's just a few. It was an early stage experiment. We haven't decided to increase that. They could be close to each other, that doesn't matter, but they are different businesses.

Yes, that's exactly it. Actually, if we look at our target countries and look at the technical wholesale and hardware markets, the total wholesale market is about 4 billion, and if we have 4.3, we are about 10% of that, so there is growth potential. But of course, in Sweden, we need growth on both sides: hardware and technical. Acquisitions are the only way to get sufficient scale. And ideally, the targets would be a bit larger rather than smaller. There aren't an overwhelming number of them, but there are some. Many are known, or all are known, and some are known personally. But it's clear that if I had to put Sweden on a wish list for where the next significant acquisitions will be, I would see Sweden there. Then there are the Baltics and Kesko Senukai, half of which is owned by Lithuanian businessman Artūras Rakauskas. That name is probably familiar to you because there has been arbitration. I read a news item that Kesko Senukai might be buying Panevėžio bankas? But that seems to be Rakauskas's own business. You are not involved in such company acquisitions there. What is the situation now? It is largely unchanged. The important thing is that the business is working. It shows in our figures. Kesko Senukai is no longer in our sales figures; it was removed in 2020, so about a billion in sales left, but we get profit from it. The important thing is that the business works, and we have a very systematic and regular approach.

We have board cooperation with Arturas and his colleagues, and it works. There have been some differing views on leadership strategy, but no major changes. The most important thing is that business is going well and profits are coming.

Exactly. Growth in the car business can come both through acquisitions and organically. For example, we acquired Lohjan Autotalo recently. In the grocery business, it's practically impossible to enter new fields. In the car business, both are possible.

That's a good question. There isn't a lot of synergy between the divisions. There are some common things like the K-brand, Plussa loyalty system, and car charging stations at grocery stores. But we don't force synergy; we look for it where it makes sense. For example, within the building trade, we look for synergies between countries like Davidsen in Denmark and Byggmakker in Norway.

We are the leading building trade player in Northern Europe. Today we have the division management team here. Synergies exist in procurement with global suppliers, but we also take local conditions into account. For example, Byggmakker and Davidsen now use the same IT system, and we are also bringing the three newly acquired companies onto that system. We also share some concept development, but we don't force it; we learn from each other.

It's changed a lot. In the past, to drive sales you needed a big ad spread in a major newspaper. Now digital channels have taken over. We have excellent tools: in-store digital displays, our K-ruoka app, etc. It's a growing and profitable business. For example, if a supplier wants to promote their products in our weekly offers, they pay for that.

Good question. Historically, Kesko divested from many businesses and focused on these three. When I meet investors, I have to explain why we have these divisions. The grocery market in Finland is limited, and we are already number one in food service and number two in retail. International expansion is difficult in grocery. Building and technical trade is a more natural path for growth. We need these divisions to grow and become a better investment. The car business we see as a kind of asset that could be sold if needed.

Right. What came up was that we need to do a thorough review of our AI strategy. We started that this fall. We are quite far along and will finalize it after the turn of the year. So far, the biggest benefit is in grocery assortment optimization using customer data to help stores select products. It can increase sales and reduce waste. Also in e-commerce product data management. For example, Onninen launched a Ukrainian-language webstore in a few months. We also did a marketing campaign 90% cheaper than traditional methods. But the key is to find where it brings cost savings or customer benefits, and then management must decide to implement it.

Honestly, I've traveled internationally and have never been asked about it. The A-share ownership is only about 7.5%, so it's not a major issue. I personally am happy because I can do arbitrage when the prices vary. There hasn't been discussion about merging the share classes during my time as CEO.

I haven't been a very active stock investor. I bought some Finnish stocks about twenty years ago, and a couple of them are worth less now than then, but the amounts were small, so I don't really regret anything. With Kesko's dividends I've covered any losses.