S Group has signed an agreement with department store operator Stockmann to acquire its Finnish food courts. Executive Vice President at SOK, Arttu Laine, elaborates: "Our goal is to develop the Delicatessen stores into S Group's flagship stores. We are aiming for the top level in Europe and the Delicatessen stores' highly competent employees will play a crucial role in this respect. We have a great deal to learn from them." .
The acquisition of the six food courts will be subject to competition authority scrutiny and a decision is expected by the end of 2017. According to Stockmann, its Delicatessen revenue in Finland, excluding the Oulu store, was EUR127mn in 2016, with an operating loss of EUR11mn.
This move is a clear signal from S Group’s side that it wants its brand to mean something more than just price reductions. Operating the well-known and celebrated Stockmann food courts will be a challenging task that requires competence within food service, organic, special-interest and premium foods. These are terms currently more strongly associated to its competitor Kesko than to S Group itself. It is evident that the retailer is now trying to offset this comparative weakness by buying into the glamour that the Stockmann Delicatessen brand holds. This follows its recent decision to list Tesco premium and special interest private labels in its stores.
S Group already possesses some experience operating food courts in its own Sokos department stores. It may well be that we will see the learnings from Stockmann replicated in these food courts; and indeed, any new ones the retailer may open in Sokos stores.
If the deal goes through, it will represent further consolidation in the Finnish grocery market following Kesko’s acquisition of Suomen Lähikauppa last year. In fact, this might have influenced Stockmann’s decision to sell its food business since it bought from the same wholesaler whose volumes were then significantly reduced. In any case, outsourcing all departments other than fashion, beauty and home products to external partners has been Stockmann’s strategy for a while.