Kesko DIY - the growth engine within the conglomerate

The DIY business has always been somewhat less significant part of the multi category Kesko. Grocery has been the number one priority in terms of both revenue and profit.

DIY segment benefiting from a clear focus

During the tenure of Mikko Helander, Kesko has become a much more focused company. This can be seen especially in the many divestments that have been done. However, even bigger influence on the overall Kesko performance and especially growth potential has been on the clear focus of the DIY business.

The DIY business has for long been a major part of the Kesko corporation. It has also become international quite some time ago. However, the business used to be organised rather complexly and it seemed to lack clear focus.

One of the biggest signs of strategic clarity in the business was the acquisition of Onninen in 2016. It clearly showed that Kesko was committed to building the B2B segment into an essential element of the DIY business.

B2B has been a great strategic choice as it consists today 46,5% of revenue within the DIY business.

Besides the B2B focus, internationalisation has been another great success. Over the years, Kesko DIY has built a 500+ M€ international business, which is growing rapidly. During 2020 and early 2021, the Norwegian and Swedish businesses grew the DIY business, whereas the Finnish has been the growth driver in 2022, alongside Onninen.

Big growth on top of big revenues

The most notable element of the DIY business is the big growth it has been able to generate over the last years. For the last four quarters, the DIY business has been growing 20+% Year on Year. And this has been done on top of nearly 1bn€ revenues. There are not many Finnish retailers that can represent similar numbers.

This growth of the DIY business has enabled Kesko to become a growth company.

Traditionally Kesko has been a stable company that produces good dividends instead of high growth. 

Grocery after all is not a high growth business. Very few grocers (besides Aldi and Lidl) have been able to successfully become international. Therefore, the grocers in each market basically battle out within a somewhat zero sum game between a handful of big national players.

For that reason, the growth prospects of Kesko food are somewhat limited. Thus, it was very interesting move from ICA (the closest comparison to Kesko food) to take the company private. For ICA there was no major growth prospect in sight and thus the entrepreneurs could start to build the business with a more patient long term view and less pressure to generate high growth.

For Kesko, the diversified and international nature of the DIY business, has changed the growth prospects. The DIY business has also become rather profitable. Gradually the DIY is gaining the Food segment in both revenues and profits. Currently the DIY segment generates 77% of the revenues and profits produced in Food.

When will the DIY segment the biggest within Kesko? This happens probably rather soon during the coming few years.