In April the Finnish Competition Authority approved the sale of retail shops in the Suomen Lähikauppa chain to the large-scale retailer Kesko. All in all, 640 Siwa and Valintatalo shops, along with their 4,000 workers, will be transferred under the K Group flag.
The acquisition will increase Kesko’s share of the foodstuffs market by approximately 40 percent. At the end of 2015, Kesko stores in the grocery trade had 8,364 employees.
Of the shops that have been acquired in the deal, 200 have been transformed into K-markets this year. The remaining stores will be either remodelled, closed or sold by April 2017. Kesko has said that it seeks “to keep as many shops open as possible”.
A recruiting campaign has been launched to find prospective K-market managers. Kesko is trialling a new shop management model, whereby one shop manager can oversee the operations of several shops.
There are currently about 400 K-market stores in Finland, and Kesko has said it wants to increase this number to one thousand, if customer demand is sufficient to keep them running.
Kesko ups its game
Ari Peltoniemi, director of the Consumer Research Centre at the University of Helsinki, says that instead of the buy-out, he would have preferred to see another player enter the field.
“No matter what the market, there should be more players so the competition stays fair and the consumers have more of a choice,” he said.
He says the acquisition means that more of the grocery trade is concentrated with the two market giants in Finland: S-Group and Kesko. The only real competition outside this duopoly is the German-owned supermarket chain Lidl. Lidl sales account for less than ten percent of the total market share, while Kesko and S-Group take in 85 percent.
“Local shops compete with prices and location. It is likely that some of the Siwa shops will be eliminated altogether,” says Peltoniemi.
Peltoniemi says Kesko is clearly playing catch-up to the market leader S Group with the Lähikauppa acquisition. The S Group's successful price-slashing campaign last year extended its market lead.
S Group isn’t worried
Market leader S Group wasn’t fazed by the Kesko deal. It says it is planning new sales points and further development of its network.
In 2016, 16 new Alepa shops were established, with 25-30 more planned in the next five years. Ten of these are intended to replace older properties. The S-markets’ Alepa chain was Siwa and Valintatalo’s main competitor in the convenience store market.
The number of retail shops in Finland has declined in the 2000s, while the average size of transactions increased. The legislated liberalisation of shop opening hours that came into effect on the first of January ate into turnover even further.
Even so, both S Group and Kesko are expanding their network of neighbourhood stores.
The race is on to launch new shops in budding business locations near widely-used transport hubs. In the capital city region, the perimeter of the ring roads, the metro extension west and the future Jokeri light rail line all come to mind.