S Group’s year 2013 SOK Corporation’s Financial Statements S Group is a forerunner in wind power in Finland. Our objective is to generate 50% of the electricity we need with our own wind power. Contents Contents Streamlining to serve you better 4 Today’s co-operative activities 5 New horizons in the grocery trade 6 Multichannel operations offer good service 10 New winds blowing in the ABC chain 14 Targeted personalised service 18 A changing palette of operations 22 Competitive advantage from logistics 23 Competent S Group personnel 24 Closer interaction with customers 26 Big decisions at S-Bank 28 What is S Group? 30 S Group’s Key Figures 2009–2013 33 Corporate Governance and Management System 34 SOK Supervisory Board 2013 38 SOK Executive Board 2014 40 SOK Corporation’s Corporate Management Team 2014 41 SOK Corporation’s Organisation March 1st, 2014 42 SOK Corporation’s Financial Statement’s 2013 43 3 S Group’s year 2013 CEO’s Review S Group’s financial result remained at the previous year’s level in 2013. Our goals are set slightly higher in 2014, although the overall economic situation continues to be challenging. Streamlining to serve you better inland, and the retail seg- For S Group, 2014 marks the innovative. In addition, it also re- ment in particular, faced beginning of many changes. We quires that we possess a new kind Fdifficult times in 2013, and will continue to streamline our of courage to involve our person- S Group’s journey was not easy operations in order to secure our nel in building new innovations, either. Regardless, our retail sales price competitiveness. At the and to expand this involvement stayed on a path of growth and same time, we will develop our to external partners as well over the Group’s combined result re- services in order to meet the time. mained at last year’s level. changing wishes of our co-op S Group’s greatest competitive Economic forecasts are not members. advantage is the cooperative acti- promising much improvement The share of online trade has vities which advocate the interests for 2014, and it also seems that also grown in Finland and in the of consumers in the changing we have entered a period of clear- consumer goods trade, in parti- world as well. Therefore, we must ly slower growth. In spite of this, cular. We will address the chal- focus on the core of our opera- we have justified reason to be lenge this creates by developing tions; in other words, on respon- hopeful. digital contents and services. In sibly producing competitive pro- The operating environment in this way, we want to both serve ducts and services for our co-op retail is changing rapidly, and this our customers in a more person- members. In doing this, our suc- requires that we also develop con- alised way and build a closer con- cess is measured by indicators tinuously. In the future, we will nection with them. At the same which are not only financial. need increased cost-effectiveness, time, we will combine shopping better understanding of different online and in physical stores. Taavi Heikkilä customer needs and new inno- Developing new services re- CEO vations. quires that we are increasingly SOK Corporation 4 S Group’s year 2013 Co-operation Today’s co-operative activities he co-operative movement that modern co-operative activi- most all aspects of operations arrived in Finland more ties create the best possible foun- development, but in particular, it Tthan a hundred years ago. dation for responsible operations. shows in the management of the One of S Group’s fundamental We exist for the customer entire lifecycle of our purchases claims is that the principles of means that we offer, among oth- and investments. By reading co-operative activities have not er things, high-quality products about our grocery trade, you’ll changed since that time. We even and services, competitive prices see what we do in order to ensure claim that we can succeed only and an extensive network, as well the responsibility of our procure- by constantly keeping in mind as reward co-op members with ment operations. the foundation of the co-opera- the best benefits. The section We constantly renew our tive activities. about the ABC chain offers more operations means that we take S Group’s current values are information on how we are deve- feedback from our customers based on the basic principles of loping our operations to meet and other stakeholders into con- co-operative activities. In turn, these objectives. sideration. This calls for an ac- our responsibility principles have We take responsibility for peo- tive dialogue, a willingness to been derived directly from these ple and the environment obligates face challenges which may be dif- values. They guide S Group in its us to carry out excellent HR ficult to resolve, and being pre- efforts to be a forerunner in re- work with exemplary supervisory pared to make quick corrections. sponsibility. By means of practi- work at its core. Environmental More information about how cal measures, we want to prove responsibility is reflected in al- business operations are being de- veloped, even rapidly if needed, can be found in the section about the travel industry and hospitality business, for example. We operate profitably illus- trates our holistic responsibility to carry out profitable operations in the long term for the bene- fit of society as a whole. We are Co-operation not looking for quick wins but, among other things, we plan our investments with a perspective of decades. Our sizeable logistics centre projects are a current example of this. 5 S Group’s year 2013 Grocery Trade New horizons in the grocery trade ales in the grocery trade taxation. it to be in recent years. were slow in 2013. In terms However, considering the cir- In practice, construction in- Sof volume, the sales of the cumstances, S Group did well. vestments in retail as a whole will entire grocery trade in Finland The market share of the grocery decrease. The main focus of in- declined, compared to the previ- trade remained at the previous vestments will shift from new ous year. The small statistical in- year’s level. building to repair and replace- crease seen in the value of sales The demand outlook in the ment. is due to the increased prices of grocery trade in the coming years At the end of 2013, S Group food products. is also weak, since the recovery had 99 Prisma stores, 437 The higher prices were due of the national economy from S-markets, 275 Sale units, 87 to the increases in indirect taxes, the recession is expected to be Alepa units and 106 ABC service which affected the grocery trade slow. In the declining demand, station stores. Total investments drastically. The purchasing power retail can no longer be the kind in developing the grocery trade of consumers was eroded by the of driver in the national econo- and improving the service and concurrent tightening of income my that we have come to expect product range for co-op members were still quite considerable. In S Group, groceries are sold by the Prisma stores, S-markets and Sale stores, as well as ABC service station stores. The Group also operates the grocery trade in St. Petersburg, Russia and in the Baltic countries. At the end of 2013, there were 64 Prismas, 437 S-markets, 275 Sale stores, 87 Alepa stores and 106 ABC service station stores in Finland. There were 17 Prismas in Russia and 17 in the Baltic countries. S Group is the market leader in the grocery trade in Finland with a market share of 45.7 per cent. In 2013, sales in the grocery trade amounted to EUR 6 960 million. 6 S Group’s year 2013 Grocery Trade It is important for S Group’s grocery stores to provide customers with a domestic alternative, whenever possible. In 2013, the Group began selling affordable, Finnish fat-free and light Rainbow milk varieties. Milk is collected from producers around Finland and processed at the Arla Ingman dairy in Sipoo and at the Hämeenlinna cooperative dairy. Growth through investments, all international Consumption is becoming po- units will soon be profitable. This larised. The sales of affordable internationalisation will strengthen the competitive- products, such as private labels, Whereas the demand outlook in ness of S Group as a whole in are increasing. At the same time, Finland is rather weak, there are Finland as well. demand for locally produced almost endless growth opportuni- The internationalising of food is increasing, as is the de- ties in the east. The international- Finnish retail brings much need- mand for organic, clean food free isation of S Group provides clear ed export income to our national of additives and the demand for benefits for the Group itself and economy. At the same time, the various special products. all co-op members. export of services strengthens In December 2013, SOK o- the position of the Finnish food Advocating the interests of pened its 16th and 17th Prisma industry, since retail provides it stores in St. Petersburg. The plan with excellent distribution chan- the customer is to open two to three more u- nels to very large markets. The most important customer nits in 2014. The revenue of the promise in S Group’s grocery Prisma stores in St. Petersburg Polarising consumption trade has remained the same for was EUR 242 million, and it is over a hundred years – since the expected to increase to approxi- The recession and the subse- beginning of cooperative activi- mately EUR 300 million in 2014.