Our core strategy is to continue developing our value proposition and to better serve our customers in the Nordic markets, with focus on pet parents.
Winning new customers
Musti Group is well positioned to continue our track record of winning new customers from the large and growing Nordic pool of 5.7 million pets. Succeeding in new customer acquisition, especially acquisition of puppies and kittens, is a key driver of continued market share gain across our Nordic markets. This is supported by our concept, our leading brand awareness, and customer focus. The underlying pet parenting trend, favoring Musti Group’s concept, continues strong.
Financial year 2022 continued with above average pet adoption levels, a trend seen since 2021 driven by the COVID-19 pandemic. This period has led to higher rates of pet ownership, with many new first time pet parents. While growth in the number of new puppies and kittens in our society shows indications of stabilizing, this period of higher pet adoption has a long tail benefit as it has expanded our Nordic market opportunity. Over the same period, Musti Group has gained share of new puppies. Our share has been augmented by two initiatives, new puppy and kitten clubs launched in financial year 2020 followed by an upgraded breeder club launched in financial year 2022. These investments into early stages of the pet parenting journey are paying off.
The number of loyal customers, Friends of Musti, increased by 12% to 1,454 thousand during the financial year 2022 continuing the steady growth of earlier years. Our pet loyalty club is the largest in the Nordics.
Grow share of wallet within existing loyal customers
Growing the share of wallet within our base of 1.5 million loyal customers is a clear opportunity for Musti Group. To deepen the engagement of our customers, Musti is developing an ecosystem approach for Nordic pet parents with the aim to further increase share of wallet and loyalty, with an ‘All you need is Musti’ mentality across the pet lifecycle. Selected initiatives driving increased engagement advanced during the financial year 2022. Initiatives included developing our puppy and kitten related concepts, with our recently launched puppy and kitten clubs ramping up, supported by our newly updated breeder club and adding wider services to our offering. In addition, Musti Group launched live shopping online events in fiscal year 2022.
Rolling 12 months average spend per loyal customer was EUR 181.5 in financial year 2022 (EUR 188.3 on 30 September 2021) stabilizing from the pandemic levels and affected by the unfavorable exchange rate fluctuations.
Expand store network and number of service points
We continue rolling out further stores to win new customers through our strong concept and increased convenience, attracting customers to switch to the Musti Group platform. Musti Group has the largest footprint in the Nordic countries, enabling us to gain further market
share in the growing pet care market. Operating through our own stores, complemented by our omnichannel offering, enables Musti Group to provide its customers with the same award-winning store experience in any Musti Group store they wish to visit, and online. Over the financial years 2021 and 2022, Musti Group has had elevated focus on increasing the coverage of its directly operated network. This investment comes with longer term benefits, as a significant share of our network is currently at ramp-us stage. We aim to continue investing in our network at a more stabilized pace going forward, while continuing to see ample room for expansion especially in the Norwegian market to support further market share gains by entering new local communities.
The number of directly operated stores increased by net 39 stores during financial year 2022. This included new greenfield stores adding convenience to our existing network and acquisitions of 17 stores, mostly formerly operating under franchising agreements in Sweden.
Focus on driving gross margins through increased O&E share and leveraging scale
A core element of Musti Group’s strategy is growing the share of sales of own and exclusive products sold only in Musti Group’s channels. This comes with three main benefits of the uniqueness of our offering, loyalty especially in food and other consumable categories, and higher gross margin profile. Musti Group has strong historical track record in driving gross margin improvement. Own and exclusive brands are a cornerstone of our high gross margins as these brands typically carry 10-15 percentage points higher margins compared to global brands. In addition, we focus on leveraging scale in procurement supported by pricing and category management.
In financial year 2022, gross margin increased to 46.4% mainly driven by increased share of own and exclusive brands, efficient campaigning, and favorable product mix developments. Musti Group continued initiatives to further strengthen both own and exclusive brands and gross margins. Key initiatives in the financial year 2022 included ramping up dry food production in our pet food factory in Lieto (Finland) and launching Smaak line of own pet food and treats. Share of sales of own and exclusive brands increased to 52.7% (51.0%) during the year.
Leverage broadly invested platform to drive operating leverage and scale benefits
Significant investments to Musti Group’s IT, digital platforms and warehouses are expected to drive increased operating leverage and scale benefits to further increase Musti Group’s profitability as topline growth is expected to continue while fixed costs may be spread across larger net sales.
In the financial year 2022, we were especially pleased with the improved performance of our Eskilstuna central warehouse operations.