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8<br />
<strong>Kesko's</strong> <strong>year</strong> <strong>2007</strong><br />
Operating<br />
environment<br />
Trends in the trading sector<br />
●●<br />
Internationalisation continues in<br />
the trading sector.<br />
●●<br />
Importance of customer loyalty is<br />
increasing.<br />
●●<br />
Consumers’ purchasing behaviour is<br />
becoming fragmented; consumers seek<br />
simplicity, experiences, a healthy way<br />
of life and variation.<br />
●●<br />
Corporate responsibility and ethics are<br />
emphasised.<br />
●●<br />
The manufacturing industry’s brands<br />
remain strong.<br />
●●<br />
The number and market share of store<br />
private label products are increasing.<br />
●●<br />
Use of the Internet and online sales are<br />
growing.<br />
●●<br />
The trading sector’s role as a producer<br />
of services is strengthening.<br />
●●<br />
New store concepts are being developed.<br />
●●<br />
New operations control systems improve<br />
the efficiency of store operations.<br />
Sweden<br />
9.1 million<br />
consumers<br />
Norway<br />
4.6 million<br />
consumers<br />
●●Building and home<br />
improvement trade<br />
●●120 K-Group<br />
stores<br />
Belarus<br />
9.8 million<br />
consumers<br />
●●Building and home<br />
improvement trade<br />
●●3 K-Group stores<br />
Sources: Nordea and Statistics Finland<br />
●●Building and home<br />
improvement trade,<br />
technical trade<br />
●●19 K-Group stores<br />
Market areas<br />
Kesko’s main operating areas are Finland,<br />
Sweden, Norway, Estonia, Latvia, Lithuania,<br />
Northwestern Russia and Belarus.<br />
Strong growth, about 4.0%, continued in<br />
the Finnish economy in <strong>2007</strong>. However,<br />
growth slowed down towards the end of the<br />
<strong>year</strong>. Private consumption continued to grow<br />
briskly, by some 3.7%, but consumer confidence<br />
in the economy dropped during the latter<br />
half of the <strong>year</strong>. The Finnish economic<br />
growth is expected to slow down to some 2.6%<br />
in 2008, mainly due to a decline in export<br />
demand. Private consumption is estimated to<br />
increase by around 3.0% and investments by<br />
about 3.6%. Consumer prices are expected to<br />
rise by 2.7%. Housing production is expected<br />
to decline in 2008.<br />
The Swedish economy is expected to grow<br />
by 2.1% and private consumption by 2.7% in<br />
2008. Consumer prices are expected to rise by<br />
3.2%.<br />
The Norwegian economy is estimated to<br />
grow by 2.9% and private consumption by<br />
3.0% in 2008. Consumer prices are expected<br />
to rise by about 3.3%.<br />
The growth of the Estonian economy is<br />
expected to slow down in 2008 and remain at<br />
about 4.0%. Private consumption is estimated<br />
to grow by about 6.0%. Consumer prices are<br />
expected to rise by 7.9%.<br />
The Latvian economy is expected to grow<br />
by 5.6% in 2008. Private consumption is<br />
anticipated to slow down slightly and remain<br />
at around 7.0%. Consumer prices are<br />
expected to rise by 12.0%.<br />
The Lithuanian economy is expected to<br />
grow by 7.4% in 2008. Private consumption is<br />
anticipated to continue growing with a rate of<br />
around 14.0%. Consumer prices will rise by<br />
about 7.0%.<br />
In Russia, growth in private consumption<br />
varies strongly from one region to another;<br />
the average growth rate is estimated to be<br />
about 7.0% in 2008. Private consumption is<br />
anticipated to grow by 10.0% and investments<br />
by 21.0%. Consumer prices are expected to<br />
rise by 12.0%.<br />
Trends in the market areas of each division<br />
are discussed in division-specific<br />
presentations.<br />
Finland<br />
5.3 million<br />
consumers<br />
The Baltic<br />
countries<br />
7.2 million<br />
consumers<br />
Russia<br />
St. Petersburg 4.6<br />
million. Moscow<br />
10.4 million<br />
consumers<br />
●●All Kesko’s<br />
divisions<br />
●●1,850 K-Group<br />
stores<br />
●●Building and<br />
home improvement,agricultural,<br />
machinery<br />
and technical<br />
trade<br />
●●Furniture trade<br />
and Anttila<br />
distance retail<br />
sales (Estonia<br />
and latvia)<br />
●●52 K-Group<br />
stores<br />
●●Building and<br />
home improvement<br />
trade,<br />
technical trade<br />
●●8 K-Group<br />
stores