EU rules put Halsua village shop under up to 2m investment

A European Union regulation will force grocery stores to replace refrigeration equipment by 2030, leaving the owner of two shops facing an investment of up to two million euros, Yle reports.

Eemeli Vinkka runs K-Market Halsua in Central Ostrobothnia and another K-Market in the neighbouring region. Both stores will require extensive refrigeration upgrades in the coming years.

The regulation bans the use of fluorinated greenhouse gases in shop refrigeration systems from 2030 because they contribute strongly to climate warming. New refrigerants cannot be used in older equipment, which must therefore be replaced.

A survey by the Finnish Grocery Trade Association in summer 2023 estimated that replacing refrigeration technology costs an average of about 190,000 euros per store.

Vinkka says his costs will be considerably higher because he is also looking for a new property for the stores.

“In total, we are talking about an investment of one or two million euros for my shops,” Vinkka said. “In sparsely populated areas, properties have a lot of repair debt, and it does not make sense to install refrigeration equipment costing hundreds of thousands of euros in old buildings whose useful life is coming to an end.”

Kesko faces greater concern than S Group

S Group says it does not expect many of its stores to close because of the regulation. The company has been replacing refrigeration equipment in its stores for about 10 years, although some stores have yet to be updated and each investment is assessed separately.

S Group’s market retail planning director Mika Lyytikäinen said its operations differ from those of Kesko, which relies more on individual retailers. S Group’s cooperative is responsible for the business, while a separate store manager is appointed to each shop.

Kesko has both stores it owns and leases, where it is responsible for renovations, and stores owned by individual retailers.

Nuutti Rantatupa, Kesko’s director responsible for retail locations and retailer operations, said the regulation could have a greater impact on Kesko’s stores. More than 60 retailer-owned stores in the group’s network have not yet undergone refrigeration renovations.

“These are the stores we are most concerned about, because the retailer is responsible not only for the equipment but also for the other investments connected to the renovation,” Rantatupa said.

He said succession between generations could provide a solution, but that was not always possible. Investing in new refrigeration equipment requires a commitment of about 10 years for the investment to be profitable.

Kesko has increased the number of renovations this year and estimates that it can modernise its own store network by the end of the decade if it continues at the same pace. It has also replaced some stores by building entirely new ones.

Shop serves as village centre

Vinkka, 28, doubts that many retailers nearing the end of their careers will undertake such large investments. He said he would not want to calculate how long it would take to repay the bank loan.

“Everything has to be calculated, of course, and everything has to be profitable. You cannot invest on the basis of hope alone, and nobody will finance that,” he said.

Vinkka is the fourth generation of his family to run the shop and said closing it was not an option. The grocery store is the centre of the village, he said, around which other services develop.

Halsua has about 1,000 residents, many of them pensioners and older people. The nearest grocery store is about 20 kilometres away in the neighbouring municipality of Veteli.

Customer Vuokko Kauppinen said the shop was essential to her.

“I go to the shop every day. I could not manage without it. I cannot imagine this ending,” she said.

“The shop is vital in this small community. It is quite difficult for older people and those without cars to travel farther to shop,” Maj-Len Meriläinen said.