Annual and sustainability report 2018
Annual and sustainability report 2018 Contents
This is Cloetta Letter from the Chairman 73 The year in brief 1 Corporate governance report 74 Words from the President 2 Remuneration of the Group Management Team 80 Internal control over financial reporting Goals and strategies 4 82 Board of Directors Long-term financial targets 4 84 Group Management Team Sustainability targets 5 86 Strategic priorities 6 Financial reports 88 Consolidated profit and loss account Cloetta’s value chain 8 89 Consolidated statement of comprehensive income Cloetta’s sustainability agenda 10 90 Consolidated balance sheet 91 The confectionery market 11 Consolidated statement of changes in equity 92 Strategies for growth 14 Consolidated cash flow statement 93 Brand, category and product development 15 Notes to the consolidated financial statement 94 Brand and category leadership 16 Parent Company financial statements and notes 130 Strategic product development 21 Proposed appropriation of earnings 140 Consumer front and centre 24 Auditor’s report 141 Cloetta’s leading brands 26 Ten-year overview 144 Key ratios 145 Cloetta’s main markets 30 Reconciliation of alternative performance measures 146 Supply chain 37 Factories 42 Long-term sustainability 148 Stakeholders and materiality issues Increased resource efficiency 44 150 Strategic priorities for Cloetta’s sustainability work Raw material 46 152 GRI index Responsible sourcing 48 153 Auditor’s limited assurance report on sustainability report 155 Employees 51 Definitions and glossary 156 Share and shareholders 56 Cloetta’s history 158 Financial performance 62 Membership of organizations 160 Net sales and profit 62 Shareholder information 161 Financial position 65 Comments on the cash flow statement 67 Future outlook, Environmental impact and 68 environmental management, Sustainability Report The audited annual report for Cloetta AB (publ) 556308-8144 consists of the administration report and the accompanying financial statements on Risks and risk management 69 pages 1–4 and 62–140. The sustainability report consists of pages 5–10, 24–25, 37–41, 44–55, 71, Industry and market-related risks 70 77, 148–154, 160. Operational risks 71 The annual report is published in Swedish and English. Financial risks 72 The Swedish version is the original. Cloetta – a leading confectionery company in the Nordic region and the Netherlands
SALES IN FOUNDED IN
1862 2,458 50 LEADING EMPLOYEES COUNTRIES BRANDS
ANNUAL SALES 8 SEK 6.2 BILLION CHOCOLATE CANDY
PASTILLES CHEWING GUM PICK & MIX NUTS
VISION MISSION To be the most To bring a smile to your The vision, together admired satisfier of Munchy Moments with the goals and Munchy Moments strategies, expresses Cloetta’s business concept
Categories in which Cloetta is a market leader
Sweden Finland The Netherlands Denmark UK Norway Pastilles Pastilles Pastilles Pastilles Pick & mix Pastilles Candy Candy Candy Candy Candy Chocolate bars Chewing gum Chewing gum Pick & mix Pick & mix Chocolate bags Pick & mix Pick & mix Cloetta’s strengths
• Strong leading local brands. • Scale benefits in Northwestern Europe • Core markets in stable Northwestern versus local competition. Europe. • Route to market scale in core markets. • Strong European leader in pick & mix. • Locally tailored innovation.
Cloetta’s net sales by category Cloetta’s net sales by country
International Markets 7% q Candy UK 7% q qSweden 31% Other 2% q t 58% Nuts 4% u Germany 5% u Pick & mix Nordic Chewing gum u Branded Other countries 6% packaged 28% products The Netherlands 14% u 33% 67% 72% Pastilles 12% u Norway 6% u p Finland 21% Chocolate 18% p Denmark 9% p The year in brief 1
Net sales SEKm The year in brief 2,000
1,500
• Katarina Tell appointed President • Ordinary dividend of SEK 0.75 and Cloetta Sweden. special dividend of SEK 0.75 is paid. 1,000 • Michiel Havermans appointed • Amended and extended loan pro- Senior Vice President International gramme and launched commercial- Markets and UK. paper programme. 500 • Thomas Biesterfeldt appointed • Frans Rydén appointed CFO. Chief Marketing Officer. • New production line installed in the • Oskari Vidman appointed factory in Turnhout, Belgium. 0 Q1 Q2 Q3 Q4 Chief Pick & Mix Officer. • Candyking units in the Nordic countries implemented Cloetta’s n 2017 n 2018 business enterprise Cash flow from system. operating activities SEKm Q1 Q2 350 300
• Cloetta awarded “Listed company • Cloetta awarded best corporate 250 of the year”. web site in Sweden. 200 • Malaco Gott & Blandat with • Record number of shareholders 30 % less sugar launched. (23,956) in Cloetta. 150 • Red Band celebrated 90 years. 100
50
0
–50 Q3 Q4 Q1 Q2 Q3 Q4 n 2017 n 2018 Examples of new launches Operating profit, adjusted SEKm 250
200
150
100
50
0 Q1 Q2 Q3 Q4 n 2017 n 2018 Key ratios
SEKm 2018 2017 2016 2015 2014
Net sales 6,218 5,784 5,107 5,674 5,313 Operating profit (EBIT), adjusted 677 604 695 690 632 Operating profit margin (EBIT margin), adjusted % 10.9 10.4 13.6 12.2 11.9 Operating profit (EBIT) 660 527 635 671 577 Operating profit margin (EBIT margin), % 10.6 9.1 12.4 11.8 10.9 Profit/loss before tax 562 443 469 493 338 Profit/loss for the period 483 –97 –191 386 242 Profit/loss for the period excluding impact of impairment loss discontinued operation including corporate income tax effects and other items affecting comparability 483 402 403 386 242 Earnings per share, basic, SEK 1.69 –0.34 –0.67 1.35 0.84 Earnings per share, diluted, SEK 1.68 –0.34 –0.67 1.35 0.84 Net debt/EBITDA, x 2.31 2.39 2.44 3.03 3.97 Cash flow from operating activities 628 712 889 927 500
For definitions, see page 156.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 2 Words from the President
Cloetta positioned for profitable growth
During 2018 Cloetta both increased sales in branded packaged products and grew operating profit. A sharper marketing focus, together with a cost savings programme and synergies from Candyking all contributed to our progress.
When I summarise 2018 I can conclude that Integration of Candyking and devel- creating the conditions for long-term value we laid the foundation for profitable growth opment of the pick & mix concept creation. By understanding and managing during the year. Even if Cloetta’s organic Pick & mix is a growing and important our impact on people and the environment, growth was negative, mainly due to the loss consumer market for us based on underlying and at the same time being an attractive of a larger pick & mix contract, we managed consumer trends such as individualism and employer that also exceeds consumers’ and to grow our branded packaged products for less use of plastic packaging. As the leading customers’ expectations, we are creating the first time in many years. This bodes well confectionery company in the Nordic coun the conditions for long-term profitability. for the future. During the year, the 2017 tries we have good opportunities to develop This means that Cloetta must be a safe and acquisition of Candyking was integrated into the category and thereby drive profitability also attractive place of work, that consumers Cloetta, giving us the ability to make the and growth. must be offered products of high quality but combined pick & mix business more solid Savings from synergies from Candyking, also that Cloetta’s brands offer choices to the and profitable. acquired in 2017, were in line with expecta consumer, for example with less or no sugar. tions for 2018. This means that half of the It means reducing the environmental impact Increased sales and total synergies of SEK 100m still remain to from Cloetta’s factories and from the use of improved operating profit be realised during 2019 and 2020, which is in packaging, as well as placing environmental This year’s net sales increased by SEK 434m line with the plan. and social requirements within our sourcing to SEK 6,218m (5,784) compared to last year, Operationally, the integration of Candy process. driven by structural changes and exchange king will be complete by summer 2019 once In our role as a responsible company we rate differences. Organic growth was –2.8 the last of the Candyking markets have shall offer consumers a choice when they percent. Operating profit, adjusted for items implemented Cloetta’s business enterprise want to enjoy our brands. We have success affecting comparability, increased and system. The insourcing of the Candyking fully launched both a product with 30 per amounted to SEK 677m (604). Profit from volumes is proceeding according to plan and cent less sugar and products with no sugar continuing operations improved and amount the necessary investments to further increase under the leading candy brand Red Band ed to SEK 483m (237). insourcing will be fully implemented during in the Netherlands. We also successfully 2020. Once all these investments are in place, launched a product with 30 per cent less sug Net debt/EBITDA ratio in line with the full synergies from the acquisition of ar under the brand Malaco Gott & Blandat in targets and increased dividend Candyking will be able to be realised. Sweden and Norway in 2018. Our long-term For the third year in a row we have achieved In the short term, our focus is on improv ambition is to be transparent and offer more a net debt/EBITDA ratio that is in line with ing the operating profit margin from pick choice to the consumer when making trade- our target. This gives us financial flexibility & mix. This may entail price increases on offs on sugar, naturalness, gluten etc., so that to focus on continued dividend payments certain contracts, and that we may choose to people have alternatives and can make their and potential acquisitions. In light of our exit unprofitable contracts. own choices. stable cash flow and an improved operating The cocoa and chocolate that Cloetta result, we proposed to the Board of Directors Sustainability work a priority buys is UTZ certified. We have removed palm an increase in the ordinary dividend to By further integrating and embedding oil from the majority of our glazing agents SEK 1.00 (0.75) per share. environmental and social aspects into our and for any products still containing palm business strategy and our operations, we are oil, we have started the transition towards
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Words from the President 3 “My goal is to grow Cloetta organically and with acquisitions to an EBIT margin, adjusted of 14 per cent. ” Henri de Sauvage-Nolting President and CEO
segregated, traceable palm oil. This increases Driving growth traceability. By focusing on our core categories and We also aim to decrease our carbon markets and, over time, doubling sales in dioxide per produced tonne even further, but International Markets, we will be able to in 2018 we have not seen a decrease due to grow at least in line with the market. This less renewable electricity being purchased. means both increasing market share as well We can decrease carbon dioxide further, for as increasing volumes in branded packaged example by taking a more integrated perspec products, at the same time as we increase our tive on the supply chain. penetration and improve our product offering Cloetta is a member of the UN’s Global within pick & mix. Additionally, we want to Compact and supports their ten principles make selective acquisitions in our categories regarding human rights, working conditions, in our main markets or adjacent markets. the environment and anti-corruption. Our able to reach the goal of a 14 per cent EBIT sustainability agenda also supports eight of Enabling growth margin. the UN’s 17 sustainability goals. We will create “One Cloetta” with a common We still have much to do in order to im Sustainability is one of Cloetta’s priority agenda and scale synergies to produce better prove and develop in the pick & mix business, areas. During 2019, we will therefore further conditions for growth. However, we also need but the foundation is now in place. This makes develop this work based on the materiality to strengthen our brands through increased me confident that we will increase profitabili analysis that we recently carried out. This and more effective marketing and innovation. ty in this important category while simultane means that both our ways of working and Through zero tolerance for accidents in the ously growing it over time. objectives may change. workplace and simultaneously creating a cul I am far from satisfied, even if we did ture of winning, we can ensure that we attract, increase profitability in 2018. Our goal of Strategic initiatives develop and retain competent employees. reaching an underlying operating profit mar My goal is to grow Cloetta organically gin of 14 per cent remains. Indeed, much work and with acquisitions to an EBIT margin, Financing growth remains, but we have laid the foundation that adjusted of 14 per cent. To succeed in this, the To free up resources to increase growth and will enable us to reach our goal through the consumer must always come first, at the same profitability, we will carry out cost-cutting plans and activities we have developed and as customers see Cloetta as their partner activities throughout Cloetta. This means started during the course of the last year. of choice. Through our strong leading local challenging costs and improving internal My new Group Management Team is now brands and a leading position in pick & mix, systems and processes. There is also ample complete following several new appointments we can benefit from economies of scale in scope in our factories to drive further during the year. This means that we now have production and innovation and use our strong efficiencies and cost reductions. To increase the people and the organisation in place that channels to market to continuously improve capacity in our factories, we are working can contribute to profitable growth. our brands. Quality and local tradition con with a capacity enhancement programme Cloetta has a profitable business with a tinue to be our guiding principles. ‘Perfect Factory’ and at the same time we stable cash flow in stable markets. We have We will strengthen our position as the are investing to enable more insourcing and strong brands and strong market positions leading confectionery company in North organic growth. and we have competent and committed western Europe. This should be done through employees that are proud of our company and a continued focus on profitable growth in our Cloetta stands strong our products. All this makes me confident in existing categories in our main markets and I am pleased that we managed to grow our saying that Cloetta stands strong. in selected international markets, while we branded packaged products during every concurrently carry out selected acquisitions. quarter of 2018, leading to a 1.5 percent Stockholm, March 2019 We have three main areas that are growth in the category. Branded packaged important for our ability to reach our goals. products are generally very profitable, which They are driving growth, enabling growth and is why profitable growth in this category is Henri de Sauvage-Nolting financing growth. of a significant importance for Cloetta to be President and CEO
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 4 Goals and strategies Long-term financial targets
Organic sales growth EBIT margin Net debt Cloetta’s long-term target is to increase organic sales at least Cloetta’s target is an EBIT margin, Cloetta’s long-term target is a in line with market growth. adjusted of at least 14 per cent. net debt/EBITDA ratio of 2.5x.
Sales EBIT and margin, adjusted Net debt/EBITDA SEKm SEKm % SEKm 7,000 700 14 3,500
6,000 600 12 3,000
5,000 500 10 2,500 3.97 4,000 400 8 2,000
3,000 300 6 1,500 3.03 200 2,000 4 1,000
100 2 2.44 1,000 500 2.39 2.31 0 0 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
nn EBIT, adjusted EBIT margin, adjusted, % nn Net debt, SEKm Net debt/EBITDA, x
Comment on the year’s outcome Comment on the year’s outcome Comment on the year’s outcome Historically, total annual growth in the mar The EBIT margin, adjusted improved In 2018, and for the third year in a row, kets where Cloetta is active has been around during the year, mainly due to growth Cloetta met its long-term target for one to two per cent. In 2018 organic growth in sales of branded packaged products, net debt/EBITDA. Net debt/EBITDA accounted for –2.8 per cent, due entirely to higher production volumes and good cost reached 2.31x, which is lower than the decreased pick & mix sales caused primarily control, partly offset by higher production target of 2.5x. by a lost contract in Sweden and the signif costs. icantly raised sugar tax in Norway. Sales of branded packaged products grew by 1.5% and pick & mix sales decreased by 12.8%.
Dividend policy
Cloetta’s goal is to have a dividend payout ratio of 40 to 60 per cent of profit after tax.
Comment on the year’s outcome Given that this year’s profit is higher compared to the previous year, the Board of Directors proposes a dividend of SEK 1.00 (0.75) per share for 2018, which corresponds to 60 per cent of the profit for the period.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Goals and strategies 5 Sustainability targets
Employees Increased Responsible sourcing and customers resource efficiency
Employees Energy consumption Cloetta’s ambition Cloetta has zero tolerance for occupational Energy consumption per produced tonne • Sustainability programmes will be injuries. to be reduced by five per cent by 2020, implemented for all prioritized raw compared with 2014 levels. materials. Lost Time Injury Rate (LTIR) Energy consumption • Palm oil present in Cloetta’s products (LTIR is absence due to accidents (for more MWh/prod. tonne Goal should be RSPO (Round Table on than 24 hours) per 1,000,000 hours worked.) 2020 2.0 Sustainable Palm Oil) certified*. Number • 100 per cent of all cocoa and chocolate 10 purchased by Cloetta is UTZ* certified. 1.5 Goal • From 2018, Cloetta will only source 8 2018 sustainable shea butter according to the AAK* principles. 1.0 6 Comments on 4 0.5 the year’s outcome • 100 per cent of cocoa purchased by Cloetta is UTZ certified. 2 0.0 • During 2018, Cloetta has switched to 2014 2015 2016 2017 2018 sourcing sustainable and traceable shea 0 Waste 2017 2018 butter via the AAK programme. The volume of waste per produced kg to be • Cloetta has replaced the majority of reduced by 25 per cent by 2020, compared the palm oil used in glazing agents with with 2014 levels. other alternatives. This means that Waste many of Cloetta’s products are palm oil kg/prod. tonne free. This effort to replace palm oils has Goal 80 2020 mostly been driven by customer expec tations and demands. In those chocolate 70 and fudge products that contain palm 60 oil, Cloetta has started transitioning to 50 segregated palm oil in accordance with LESS SUGAR & RSPO principles. RSPO certification 40 of Cloetta’s factories will take place in SUGAR-FREE 30 2019.
Less sugar and sugar-free 20 * Read more on pages 49–50. Cloetta’s larger brands will offer alter 10 natives with less sugar, no added sugar or 0 sugar-free products 2014 2015 2016 2017 2018 Carbon dioxide emissions
CO2 emissions from production to be re duced by 5 per cent per produced kg by 2020, compared with 2014 levels. Carbon dioxide emissions COe (Scope 1+2) per prod kilo, kg Goal 0.35 2020
0.30 NAFNAC No Artificial Flavours & 0.25 No Artificial Colours 0.20
No artificial colours or flavours 0.15 Cloetta believes it is important to in 0.10 crease the proportion of natural ingredi ents. Cloetta’s target is to have switched 0.05 entirely to natural colours and flavours in 0.00 its products by the end of 2020. 2014 2015 2016 2017 2018 The figures for 2016 and 2017 have been adjusted.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 6 Goals and strategies
Strategic priorities
Cloetta’s mission is “to bring a smile to your Munchy Moments”. For us, the consumer must always be front and centre, and we do everything we can so that our customers perceive Cloetta as their number one partner. Cloetta’s goal is to grow organically and with acquisitions to an EBIT margin, adjusted of 14 per cent.
Cloetta aims to strengthen its position as the leading confectionery company in Northwestern Europe. Cloetta has strong leading local brands and a leading position in pick & mix. Cloetta can utilize its scale in production and innovation and its strong route to market to continuously enhance its brands with a focus on high quality and local traditions.
Cloetta’s core categories are candy, chocolate, pastilles, chewing gum, nuts and pick & mix. The company’s core markets, where organic growth should be at least 1 – 2 per cent, are Sweden, Finland, the Netherlands, Denmark, the UK, Norway and Germany. Cloetta will also selectively expand and grow faster with a number of brands in International Markets.
Cloetta will create the conditions for growth by building “One Cloetta” with a common agenda across the Group. Further, a focus on cost-efficiency will enable Cloetta to increase profitability and invest for the future. Investments may be made to strengthen and increase the Group’s capabilities within production, marketing or sales as well as selective acquisitions.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Goals and strategies 7
Cloetta’s strategy is built on three pillars:
1 2 3 Drive growth Facilitate growth Fund growth
• Strengthen the strong local • Zero tolerance for • Drive cost saving activities brands and selectively ex- occupational accidents throughout the entire organ- pand brands internationally isation • Create “One Cloetta” with one • Focus on core markets and agenda and way of working • Embed “Perfect Factory” double the sales in Interna- and Lean programme in the • Strengthen brand and tional Markets supply chain category management • Grow market shares and • Insource production volume in branded packaged • Create a winning culture products • Improve profitability in pick • Develop, attract and retain & mix • Grow the pick & mix pene- skilled leaders and employees tration and offering in core • Improve marketing efficien- markets cy and internal systems and • Selective acquisitions in processes Cloetta’s core categories in core and adjacent markets
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 8 Goals and strategies
Cloetta’s value chain
Cloetta’s mission for creating value is «To bring a smile to your Munchy Moments». Cloetta creates economic value through innovative product development, efficient purchasing and high-quality production, as well as good relations with the retail trade and marketing that strengthen the brands.
+
Product development 1 Purchasing 2 Production 3 Value creation
• Product development is based on • Cloetta’s total purchasing costs • Cloetta had 2,458 employees during 2018 a combination of customer and amounted to SEK 4,001m, of which and total personnel costs amounted to consumer-driven needs/preferences, SEK 2,680m were for raw materials SEK 1,331m. innovation and opportunities in the and consumables. The three main raw • Cloetta’s 8 factories had 1,645 employees. existing production network. materials in terms of purchasing costs are sugar, cocoa and milk powder. • During the year, Cloetta produced 102 thousand tonnes of candy, chocolate, chewing gum, pastilles and nuts.
• For several years Cloetta has conduct • Suppliers to Cloetta’s production Environment ed a long-term programme, NAFNAC are subject to an approval process in Sustainable corporate responsibility • Continuous endeavours to use energy aimed at offering a portfolio of which both product safety, social- and more efficiently in production and to products that contains only natural environmental requirements are reduce CO2 emissions. flavours and colours. evaluated. • Improved resource efficiency through • Cloetta systematically develops alter • Cloetta promotes sustainable produc recycling of materials and energy. native products for its major brands tion of the prioritized raw materials that have lower sugar or are sugar- cocoa, palm oil and shea butter. Read • Systematic environmental manage free. Under the brands Red Band and more on pages 48–50. ment is a natural part of processes in all Malaco Gott & Blandat products that factories. are low sugar, sugar-free or vegetarian Occupational Health have been launched. and Safety (OHS) • Focus on personal safety.
• OHS activities with systematic Sustainability monitoring are part of the daily follow-up. programmes for Product Safety cocoa, palm oil and • Product safety system in place in all shea butter factories. • The factories focus on measures to prevent serious product complaints. Read more on page 40.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Goals and strategies 9
Taxes paid Tax paid per country Other 2% q Slovakia q 1.0% qBelgium 0.7% Corporate income tax 3% q Germany q 1.0% qIreland 0.2% Value-added tax UK 4.5% q t 41% Employment- t Sweden 16.7% related taxes u Norway u 21% Total 17.9% SEK 1,326m t Finland 13.7.%
Sugar tax u t The Netherlands 33% Denmark u 9.8.% 34.5% Tax information Cloetta paid SEK 1,326m (1,177) in various taxes in 2018. These were Tax paid in Norway and Denmark is proportionally higher mainly value-added tax, sugar tax and employment-related taxes. due to sugar taxes. Considering the profit reported before tax, the amount of corporate income tax paid is relatively low due to the availability of tax losses carried forward. The majority of the remaining tax losses carried forward are expected to be utilized in the near future.
+ Repayment of borrowings Customers 4 Consumers 5
• Total net sales amounted to • Cloetta satisfies Munchy Moments. SEK 6,218m. Cloetta’s largest cus • Feedback on complaints and points tomer category is the grocery retail of view. trade. The service trade is also a very important customer group.
Profit for the year was SEK 483m
• In general, customers require BRC or • Products of a high quality are ISO certification. marketed responsibly. Shareholders • All packaging can be sorted for waste • Offer consumers a wide range of A certain share of non-restricted equity is dis management. products. tributed to Cloetta’s shareholders in the form of dividends, after the business has been pro vided with the capital necessary for continued development. For 2018 the Board of Directors (Board) has proposed an ordinary dividend Generated value SEK 6,222m of SEK 1.00 per share, which corresponds to Creditors, qShareholders 7% 60 per cent of the profit for the period, to be financial partners 2% q paid in 2019. In 2018, SEK 433m was distrib Corporate income tax 1% u Employees uted to the shareholders through ordinary as t 23% well as special dividend. Distributed value Other suppliers u SEK Suppliers of raw 22% materials 5,942m* and consumables t 45%
* Excluding amortization/depreciation, and profit for the year and including paid dividends.
Economic impact Production and sales of Cloetta’s products generate economic value that benefits its stakeholders.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 10 Goals and strategies
Cloetta’s sustainability agenda
By further integrating environmental and social aspects into both the business strategy and operations, Cloetta is creating the conditions to grow as a company. This also leads to risks and opportunities being identified, while enabling Cloetta to understand and manage impact on people and the environment, and live up to the expectations of the world around us.
The materiality analysis is a process for de Health and development Increased resource fining the environmental and social aspects that are most relevant both to Cloetta’s ability of our employees efficiency to create long-term value as a company and Cloetta’s employees are essential for Cloetta’s Cloetta makes all efforts to use resources as to how Cloetta creates value for the most success. Cloetta’s ability to attract, retain and effectively as possible. Cloetta manages the important stakeholders. Cloetta has through develop employees is therefore of the utmost environmental impact from operations and the materiality analysis defined four priority importance. This is why Cloetta has activity transportation through optimising energy areas, and within each of these, goals have plans and goals in place for ensuring that consumption, reducing emissions and waste been set and programmes and follow-up the workplace is as safe and as attractive as and prioritising climate-smart transporta systems have been established. possible. tion. Cloetta is also developing packaging The materiality analysis also serves as a solutions with improved environmental basis for adapting the sustainability agenda performance. to the UN’s Sustainable Development Goals, Consumer front and centre and it supports eight of the 17 goals. In 2019, Cloetta will offer safe and high-quality the Group’s sustainability agenda will be up products. In response to consumer prefer Responsible sourcing dated and new long-term goals and KPIs will ences, Cloetta also offers products with more Cloetta controls that suppliers live up to be defined and integrated into the business natural raw materials, less sugar, sugar-free Cloetta’s standards by integrating environ strategy. products and products with functional prop mental and social requirements into the erties, such as chewing gum for better dental sourcing process. Furthermore, Cloetta has a hygiene. programme for purchasing certified raw ma terials that is aimed at improving the social and environmental conditions in the places where the raw materials are produced.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 The confectionery market 11
The confectionery market
The confectionery market is traditionally divided into candy, chocolate, pastilles and chewing gum. Cloetta is active in all these categories, as well as in nuts.
Cloetta’s main markets are Sweden, Finland, strong confectionery brands, the continuous Consolidation of the confectionery in the Netherlands, Denmark, Norway, the UK launch of new flavours and products is a key dustry is taking place gradually. The industry and Germany. The total market for confec success factor. as such has a long history and the pace of tionery in Cloetta’s main markets amounts to In terms of value, candy including technological product innovation is low. approximately SEK 228bn (225). pastilles accounts for 26 per cent, chocolate for around 66 per cent and chewing gum The nut market Mature market for around 8 per cent of the total market in Cloetta is also active in the nut market via The confectionery market is relatively Cloetta’s main markets. the brands Nutisal and Parrots. The total nut insensitive to economic fluctuations and market in the Nordic region is worth around shows stable growth that is driven primarily Competitive market SEK 5bn, and the private labels of the retail by population trends and price increases. The global market for confectionery is domi trade account for approximately one third of Market recessions affect Cloetta mainly nated by international companies like Mars/ the total market. through general price pressure from the retail Wrigley, Mondelez, Nestlé, Ferrero, Perfetti, In Cloetta’s main markets, the nut market trade and increased competition from the Haribo, and Lindt & Sprüngli. However, in is experiencing annual growth of 1–2 per trade’s own private labels. However, private the local markets these meet tough opposi cent in volume. However, the nut market has labels account for a relatively small share of tion from players with locally established grown in value by some 4 per cent due to price confectionery compared to other grocery brands such as Cloetta, Fazer, Orkla and increases and a shift to the premium product products. Toms. No player has a strong position across category during 2018. Since growth takes place almost exclu all European markets. sively through the development of existing
Confectionery consumption Market size, by region, Market development per capita Cloetta’s main markets, 2018 in Cloetta’s main markets Kg per person 2018 SEK billion MEuro 20 100 4.000
3.500 80 15 3.000
60 2.500 10 2.000 40 1.500
5 1.000 20 500
0 0 0 GermanyUK SwedenNetherlandsDenmarkNorwayFinland GermanyUK Sweden NetherlandsDenmarkNorway Finland 2004 2008 2012 2018 u Chocolate u Candy u Chewing gum u Pastilles
Source: Datamonitor and Mintel The graph refers to candy and chocolate in u Chocolate u Chewing gum the countries where Cloetta is active. u Candy incl. pastilles Source: Mintel Source: Mintel
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 12 The confectionery market
Consumption patterns Consumption patterns and taste pref pick & mix is considerably lower in Central Confectionery is one of the most impulse- erences vary between the different markets. Europe where packaged candy and chocolate driven categories in the retail trade. With For example, compared to the rest of Europe, have a stronger position. In Sweden, pick over 80 per cent of purchasing decisions made the Nordic region has a lower per capita & mix accounts for 30 per cent of the total at the point of sale, brand, availability and consumption of chocolate, but a significantly confectionery market, while in the other product placement are significant success higher consumption of candy. Nordic countries it accounts for 5 to 15 per factors. cent. Pick & mix candy as a market is growing The European confectionery market is Pick & mix faster than packaged products in most Nordic characterized by strong consumer loyalty to The pick & mix category has a very strong countries. local brands. The main considerations when position in the Nordic countries and accounts buying are brand, flavour, quality and curiosi for a high share of the total confectionery ty about new products. consumption, while the consumption of
Cloetta’s sales channels
Grocery retail trade Service trade Other sales channels
Increasingly fewer and larger stores, Generous opening hours, centrally These include movie theatres, build which is leading to greater efficiency and located in the form of convenience stores ing supply stores, airports and arenas. strength. Typically covered by central and filling stations. An increasingly wide This channel often requires support in agreements at a national level. range of snack alternatives. developing its confectionery sales. The e-commerce sales channel is growing rap idly, although still at a relatively low level compared to other consumer goods.
Pantone 485 (Red) 100m 100y
Pantone 116 (Yellow) 15m 100y
Pantone 301 (Blue)
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 The confectionery market 13
Traditional sales channels Other sales channels online and over 50 per cent say they are will Cloetta’s foremost sales channels in all Since availability and a strong brand are two ing to do so in the near future. markets are the grocery retail trade and the key factors for impulse-driven purchases, The UK is the most mature market in service trade. Cloetta continuously evaluates new types of Europe, closely followed by France and the The grocery retail trade has undergone sales channels to ensure availability where Netherlands. extensive consolidation and restructuring the consumers are found. The typical online shoppers are families over the past ten years, and the number of Other sales channels include those where with small children, in urban and suburban stores has decreased at the same time as floor confectionery has been offered for many areas. The main driver for buying groceries space per store has grown larger. Concen years, including ferry lines, movie theatres, online is ‘convenience’. tration in the grocery trade is high in the airports and arenas, and also channels that The fast-moving consumer goods indus majority of European markets, which means have not been traditionally associated with try has taken several initiatives to strengthen that the channel can place high demands on confectionery sales, such as building supply its e-commerce presence. Unilever has its suppliers. Nonetheless, as a leading sup stores, furniture and appliance stores, hotels acquired Dollar Shave Club (shaving prod plier Cloetta has the opportunity to develop and bars. ucts for consumers) and Wal-Mart has both partnerships that benefit both sides. Strong One key success factor is to develop acquired JET.com (an online discount plat brands and high-quality products that are different packaging solutions to help custom form, including confectionery) and increased attractively priced and can be effectively dis ers in the different channels to display the its holding in JD.com, a major Chinese online played and marketed are therefore of major products. retailer that also offers food products. importance. Alibaba (a Chinese e-commerce platform) A large share of the everyday consump E-commerce has acquired a stake in a large Chinese tion of confectionery has traditionally taken E-commerce is continuing to grow globally offline retailer. In addition, the American place via the service trade, i.e. filling stations in all types of industries, including food e-commerce platform Amazon has purchased and convenience stores, kiosks, etc. Over products and confectionery. Historically, the Wholefoods, an offline groceries player, the past decade, confectionery sales to the consumer goods industry has not been a lead clearly demonstrating their ambition to move service trade have decreased, primarily due er in the e-commerce segment, but forecasts into groceries. In Sweden Axfood has ac to the presence of fewer filling stations, but indicate that half of the growth in the next five quired Mat.se and in the Netherlands, Albert also because the service trade has developed years will be driven by online sales. Research Heijn has acquired BOL.com, a local compet its own snack alternatives that compete with shows that in 60 countries, 17 to 30 per cent itor to Amazon. Read more about Cloetta’s confectionery. of consumers are already buying groceries e-commerce development on page 17.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 14 Strategies for growth
Strategies for growth
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Strategies for growth 15
Brand, category and product development
• Innovation • Consumer and business gap identification • Geographical expansion of existing brands Strategic product • Valorisation • Development of package development enables sizes and prices organic growth
How Cloetta creates continuous organic growth – Brand and category read more on pages 21–23. development is the core of day-to-day activities
• When potential strategic opportunities arise, Cloetta will widen its footprint New markets, through the acquisition or development brands and of new brands, expansion into new concepts geographical markets or new initiatives/ business concepts
• Continuous support for core brands through effective marketing campaigns • Leverage category development strategies and future key growth drivers with customers • Excite the consumer with enchanting core brands through line extensions, new flavours and packaging How Cloetta takes care of its innovations strong porfolio of brands – • Develop pick & mix concepts read more on pages 16–20. • Develop consumer and customer-centric concepts with a strong and competent sales force • Maximum visibility in stores • Sales and in-store campaigns
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 16 Strategies for growth
Brand and category leadership
Confectionery is the most impulse-driven category in retail. Consequently, good availability and visibility in stores, alongside strong brands with high recognition and loyalty, are critical to confectionery sales. Cloetta’s continuous development of its brands and concepts, and having a strong sales force, are therefore of vital importance.
Brand management Marketing communication Above all, it is a key ambition to ensure Cloetta’s ten largest brands account for Effective and well-planned marketing advertising effectiveness for the marketing around 49 per cent of the Group’s sales. communication across relevant touch-points, investments Cloetta makes. It is about what Read more about the leading brands on pages shaped by the audience profile and behaviour, is creating impact and is giving consumer im 26–29. is the key driver for building awareness, pref pression, which must be carefully developed For each brand there is an individual erence and emotional connection to Cloetta’s and planned for each campaign based on the development plan aimed at continuously brands. When combined with in-store pro defined performance objectives. See example contemporizing and developing the brand. motion and visibility, marketing communica on page 20. To ensure strong and sustainable consumer tion stimulates brand trial, loyalty and overall connection with our brands, activities such demand for Cloetta’s products. Category development as impactful and relevant communication, Cloetta’s marketing is tailored to each Confectionery is a very important and prof new flavours and line extension, package brand’s strategy and position. It is often itable category in retail. Hence, category de development and commercial campaigns are characterized by image and emotion-creat velopment and category management are key considered key drivers for growth. ing brand advertisements, sponsorship and levers in developing penetration and loyalty events directed at selected target groups. through consumer experience and service.
Acceleration of brand strength
Awareness and loyalty Development Availability Tools to strengthen brands Tools to strengthen brands Tools to strengthen brands • Impactful and effective brand • New flavour innovations and • A large and competent sales force communication. seasonal products to meet relevant supports retailers. consumer needs. • Consumer centricity: Actionable • Cloetta offers stores a complete insights to drive relevance. • Package development to expose product range to satisfy consumer the product and adapt it to different choice. sales channels. Opportunities • Utilize technologies for enhanced Opportunities consumer services and experience. Opportunities • Continuously identify new • Further cross-market developments channels to reach consumers. • Be visible where consumers are: create new opportunities, scale and optimize targeting of marketing and • Develop new sales solutions adapted cost synergies. point-of-purchase campaigns. to different customer categories.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Strategies for growth 17
Profitable growth for both Cloetta and its sumer can pick in bags or cups. Today, pick & and margins in the store. Through the sales customers is supported by always having the mix accounts for 28 per cent of the Group’s organization’s category knowledge and strong best facts and insights. sales. in-store presence, Cloetta can reach out with Cloetta also provides the pick & mix campaigns, monitor local compliance with Category vision and strategy concept under the private labels of certain centrally negotiated listings and distribution A long-term category vision supports the retailers, and also sells pick & mix candy to agreements, and ensure good visibility on development of the shelf, the assortment and other concept suppliers. the store shelves, in the checkout lines and in consumer experience from the current state Through the Parrots brand, Cloetta is other places. Read more on page 19. towards tomorrow´s future state. Powerful also a leading pick & mix player in the natural brands and a differentiated product portfolio snacks market in Sweden and Finland. Sales-promotional activities that fit today’s and future consumer and Cloetta typically combines marketing activ customer needs are important parts of the Package development ities with in-store campaigns. New products category vision. Thus, any category strategy An important part of brand management are normally given sales support through to support this vision must be built on solid consists of package development to provide campaigns, events, in-store activities and and relevant consumer and shopper insights. the best consumer experience. The packaging advertisements to reach consumers as quick material must perform several functions, ly as possible. New flavours including protecting the product on its way to The launch of new and attractive product the consumer, enabling easy handling of the E-commerce variants or flavours, in segments where there product, providing product information and Like many food producers, Cloetta has a clear is consumer demand, strengthens Cloetta’s communicating the brand. Package develop strategy for how to grow its online business. offering to both customers and consumers. ment also includes retail packaging for the A central e-commerce team supports the Since successful innovations inspire various sales channels. local markets in building the right capabil trials of both the new product and often also ities and competencies and gaining a better the original product, good seasonal products Visibility in stores understanding of digital retail, both in “Brick and innovations normally generate incremen One decisive success factor for consumer & Clicks” (e.g. ICA.se and AH.nl) as well as tal sales. sales is good exposure in the store, thus, how “Pure Play” (e.g. Mathem.se and PicNic.nl) the retail trade receives new products and in retail. Pick & mix novations is a crucial factor. Customers must Cloetta aims to achieve online growth Cloetta is the leading concept supplier in the perceive that the products are needed, easy to in line with its market share. Online sales of pick & mix category in the Nordic region and handle and profitable for their trade. confectionery are lower than for other catego the UK. This means that the Group offers Cloetta has a large, trend-setting and ries, but are expected to catch up in the next retailers a total concept in pick & mix, under innovative sales force in its main markets. few years. Although the share of confection the brands Candyking, Karamellkungen, Through good trade relations and extensive ery sold online is still very low, the growth Parrots and Karkkikatu. knowledge about the industry, market and rate among consumers who have started to The concept consists of products, racks products, Cloetta can present attractive buy groceries online is around 30 per cent, and merchandising as well as in-store and sales solutions that support the customers’ year on year. logistics services. A customer can choose business objectives and create added value for Cloetta has in-house skills in e-com from different concepts containing between both Cloetta and the customer. merce from its online stores. For instance, in 16 to 200 different articles. The pick & mix The most important part of the sales Finland, Cloetta has optimized and rebuilt assortment consists of chocolates, gummy force’s day-to-day work consists of helping the Xylitol Direct2Consumer web shop candies, hard-boiled candies, toffee, foam, the individual retailers display Cloetta’s (www.ksylitolikauppa.fi) for mobile devices liquorice and natural snacks that the con products to achieve higher turnover rates to deliver a better consumer experience.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 18 Strategies for growth
Online sales are set to impact impulse- In addition to media, touch-point- plications for both national and international driven goods like confectionery. Hence, specific tracking and general brand health registration of brands that are identical to, or Cloetta will accelerate its focus on online measurement (e.g. brand consideration and can be confused with, Cloetta’s key brands. confectionery sales to play a leading role with preference), the success of our investment For example, Kexchoklad’s chequered key customers in the future. can be gauged by the detailed reactivity of pattern has been design-protected for many immediate sell-out, the final truth in the years and the name “Kexchoklad” has been Measurement tools fast-moving consumer goods industry. trademarked since 2004. Effective marketing is dependent on con tinuous monitoring and analysis of changes Protection of intellectual in consumer patterns. In-depth knowledge property rights of consumer behaviour and media trends is To prevent infringement of its intellectual essential for successful product development property rights, Cloetta uses a specific mon and marketing. itoring service that provides alerts about ap
Examples of new flavours during the year
Juleskum Kola
Aakkoset Choco
Jenkki pro fresh apple
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Strategies for growth 19
Good relations with customers at a central and local level Through good relations with the retail trade and in-depth knowledge of the industry, market and products, Cloetta can present attractive sales solutions that support each customer’s business objectives. The right products Good visibility for the right customer for Cloetta’s products Selling the right products to the right cus High visibility in stores, and particularly at tomer generates profitability for both Cloetta the checkout stands, is vital for growth in and for the customer. Cloetta’s sales force sales. In order to maximize the visibility of is strong and effective, which provides good Cloetta’s products, the sales force also works opportunities for a presence at many different actively to increase the number of display sales points. points in the stores.
Success factors for the sales organization
Effective sales campaigns Boost sales in cooperation with To increase sales, Cloetta’s products need to be where consumers are. The task for the customers Cloetta’s sales organization is therefore to Marketing campaigns are typically combined continuously seek new non-traditional sales with sales promotional activities in stores. points for selected parts of the product range, The sales force helps retailers to display these and also to increase display space and sales in in the best way. Ensure compliance existing stores. with customer agreements The sales force ensures compliance with central agreements and that the agreed range of products is found in the stores.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 20 Strategies for growth
Impactful campaigns Venco – an everyday Dutch favourite The campaign for Venco established Venco as part of the everyday Dutch life and that everything becomes better and tastier with Venco. Three television campaigns were combined with campaigns in other media, according to the 360-degree model, to reach consumers through several channels simultaneously. The campaign strengthened the brand’s leading position in the liquorice market. Tupla Space Expedition This year’s major investment in adventurous Tupla started with the launch of a Tupla into space and the announcement of a competition looking for candidates for a space programme. Twenty fearless applicants were chosen to go to a camp to test their stress resistance and mathematical knowledge. The top five candidates had the opportunity to travel to the Yuri Gagarin Cosmo naut Training Center to experience the challenges of real cosmonauts. Finally, the winner was sent to Arizona, USA for a real Zero-G flight. The campaign generated a high level of engage ment and Tupla increased its market share in Finland by 2 per cent during the year.
Major investment in the new Plopp chocolate bar The launch of the new Plopp chocolate bar flavoured with Djungelvrål, Gott & Blandat and Kexchoklad was supported by a major four-week campaign during the autumn. Traditional media such as television and out door advertising were combined with digital media such as on-line videos, social media and display advertising. The film dramatizes the combined flavours of Plopp milk chocolate Successful campaign The Jelly Bean Factory and the tasty familiar “friends” from Cloetta. for Pops in Norway – in international airports Samples were also handed out in many places During 2018, Pops has moved from the number Together with Heinemann, Cloetta’s Travel around Sweden. four to the number two market position for Retail has developed The Jelly Bean Factory bagged chocolate in Norway. Aside from the “stands” for Ferihegy airport in Budapest, product itself, the success of Pops can be Gardermoen airport in Oslo and Stavanger explained by the media campaign to strength Airport. Investments in The Jelly Bean Til dem der falder i søvn, en the brand combined with effective pricing Factory are part of the global brand strategy campaigns. The communication concept has to increase awareness of the brand. The Jelly når de læser højt. focused on the product itself and the new design. Bean Factory is sold in some 60 markets Facebook and Instagram were two important around the world and at several European channels. The results were so good that Face airports. book has published the campaign as a success story on its global Facebook Business website. Danes loves Malaco “Family Guf” Malaco “Family Guf” (Family Candy) is the second-best selling confectionery product in Denmark. It is a mixed candy bag for the whole family. There are many different family struc tures in Denmark and to embrace these, Cloetta created a campaign around the candy bag. The campaign included changing the product to 6 different family structures (“Families with children”, “Royal family”, “Bonus family”, “Rainbow family” etc.), encouraging consumers to in teract with the brand and talk about their family. The campaign was hugely successful and sales Guf til alle slags familier increased by 22 per cent during the period . The campaign included outdoor, online advertising and TV commercials and involved influencers, instore activities and PR.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Strategies for growth 21
Strategic product development
Cloetta develops strong brands to maximize value accretive, organic growth through strategic product development based on consumer insights. Our strategic initiatives include brand extension, new geographical markets, the relaunch of brands and pure innovations. Strategic initiatives also include pricing strategies and the related changes in packaging sizes.
Innovation and trends provide the marketing department with valu Product development process Product development is a key driver for the able data for analysis of changes in consump An effective product development process strength of Cloetta’s brands and enables tion patterns. is essential for profitable growth. Product differentiation in the market. Cloetta’s inno Natural ingredients and consideration for development is steered by combining market vation work and optimization of the product environmental and ethical aspects are factors trends and consumer behaviour optimally development process create the conditions for that are increasingly affecting the confection with existing brands. new product launches and relaunches. ery market. Cloetta continuously reviews all The biggest costs in product development Fashion and trends are present in all products and questions their ingredients. For arise in the product launch phase. They are areas, even in the confectionery industry, example, sweeteners and fruit flavourings primarily associated with marketing where they are primarily related to colours, have been replaced with stevia and fruit juice. activities, but also with ensuring efficient packages, flavours and ingredients. Identify Stevia is used in Läkerol and xylitol is used in production. ing the trends that could impact Cloetta is of Läkerol Dents and DentaFresh. Cloetta has Cloetta carries out category projects major importance. Knowledge about market an ambition to launch all major brands with in candy, chocolate, pastilles, chewing gum trends and consumer behaviour is necessary a sugar-free or less sugar alternative. Some and nuts. This is the framework for Cloetta’s for the development of successful product examples are the recently launched Red Band product development process that combines innovations. and Malaco Gott & Blandat –30% sugar line consumer demand and needs with the possi Market analysis, trend monitoring and and Venco liquorice with zero sugar, sweet bilities of the existing production structure interaction with consumers in social media ened with Stevia.
Strategic product development during the year
Gott & Blandat – less sugar
Plopp – chocolate bars Venco – sugar-free
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 22 Strategies for growth
The path to a new product
Launch
Consumer validation
New product Market – consumer-driven Product development – innovation Idea – concept Product solution • Evaluation 3 3 • Product development • Market surveys • Packaging • Packaging solution Consumer Technical solutions • Needs 2 2 • Function in existing production lines • Preferences • Exchange between the factories • Ideas • Feelings Target group Trends • Who? 1 1 • Internal and external data • Why? collection • When? • Collaboration • What? • Technical development
and the innovation activities on-going within market. A large database of earlier tests and to the various trade sales channels and mar the Group. reference values facilitates the necessary kets. With the right packaging, many of the Tools for idea and concept generation and assessment. products that are strong in one market can continuous follow-up create the pre-requi The process from concept to a launch- also secure a good position in new markets. sites for Cloetta to be even greater when it ready product normally takes around one Package sizes are often associated with comes to innovation. year, but can be accelerated through focused pricing strategies for different customer resources. categories and markets. Changing a package A focus on taste size is therefore a strategic decision for how Packages and marketing can tempt con Launches in new markets a brand can be further developed in order to sumers to try a new product, but if the taste A product that is successful in one market can reach new customers and, thereby, also new doesn’t measure up there is rarely a second be launched in another market under an ex consumers. purchase. It is therefore critical that the new isting local brand. For Cloetta, with its many products launched by Cloetta meet consumer brands in different markets, economies of Travel retail requirements and expectations. So when scale in production can be utilized effectively For many years Cloetta has had substantial Cloetta develops new products, the focus is on by matching brands. Some examples include: sales to ferry lines, charter tour operators and taste. Before a product is launched, it under • Sportlife Mints from the Netherlands sold airports, referred to as Travel Retail. goes both internal and external taste tests via as Mynthon ZipMint in Finland. Well-known brands and unique packages consumer panels that assess factors such as • Polly from Sweden sold as Pops in Norway, in terms of both appearance and size are two flavour, consistency and overall impression. and Norwegian Pops Puffar sold as Polly of the most important competitive tools in To systematically gather consumer Puffar in Sweden. this market. feedback, Cloetta uses a consumer panel that regularly provides feedback and ideas via the Package design internet after receiving product samples to In addition to tasting good and being reasona their homes. The ideas received have been bly priced for the consumer, a new product highly valuable for Cloetta’s innovation work. must be commercially attractive to the retail Without approval from the consumer trade and part of a category concept. Its panel, products are not released on the weight, package and distribution are adapted
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Strategies for growth 23
On-the-go More and more, we eat outside the home on our way to and from different activities. Natural raw materials Greater availability of products and different solutions allow consumers to satisfy their and transparency needs immediately. Greater individualization There is a continued interest in natural and Consumers are increasingly seeking satis genuine raw materials. Additives of various faction of their individual needs. This means types and artificially produced substances that they want the option of both choosing are being questioned in favour of natural products, and also having access to products materials. On packaging, E numbers are and services that are individualized and being replaced with the name of the additive can be adapted to different occasions. Pick in plain language. Natural sugar or stevia are & mix is a good example of a concept that is preferred to artificial sweeteners. individualized.
6 distinct consumer trends
Health and less sugar E-commerce and social People are increasingly seeking raw materials media gaining importance with positive health effects. E-commerce is growing rapidly across all Cloetta’s product range includes nuts, sectors, including the grocery retail trade. which are rich in vitamins and minerals. Both grocery retailers and food producers are Xylitol, which is found in chewing gum and building up their own e-commerce capacity chewy pastilles, is good for dental health. In to sell their goods online, and new players addition, Cloetta has launched sugar-free are also capitalizing on the strong growth of products or products with 30 per cent less Responsibility for online sales. Alongside e-commerce, direct sugar under the Red Band brand and Malaco the environment and communication with consumers via social Gott & Blandat brand. working conditions media is emerging as one of the most impor tant channels for further developing brand One key trend is the interest in the effects of personalities and capturing trends. food production on the environment and social conditions. Suppliers and retailers have re sponded to consumer demand for information, above all in terms of the origin of raw materials, quality and cultivation methods, by introduc ing different types of labelling and certification.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 24 Strategies for growth
Consumer front and centre
Consumers must be able to feel confident that products are safe and of high quality, and that Cloetta is transparent in the information provided about product contents.
The importance of transparency Cloetta gives consumers the possibility to make well-informed choices, by being clear and transparent about the contents of our products, their calorific value and the impact of the raw materials included.
Cloetta offers choices Sugar is an important ingredient for providing products with great taste, structure and preservative properties. Cloetta’s mission “To bring a smile to your Munchy Moments” means that Cloetta pro vides alternatives in the form of sugar-free products, products with less sugar and products that are naturally free from sugar. Cloetta is working to have key brands with a sugar-free alternative or an alternative with a reduced amount of sugar.
No artificial flavours, no artificial colours There is an increasing consumer interest in natural ingredients. Different types of additives and chemically produced substances are being questioned from a health standpoint, even though they are safe and have been approved for food products. To respond to consumer demands, Cloetta is working to remove artificial flavours and colours from its assortment. Cloetta’s target is to have switched entirely to natural colours and flavours in its prod ucts by the end of 2020.
TARGETS
Oer No alternatives Artificial with Flavours (NAF) or less sugar NAFNAC Colours (NAC) LESS SUGAR & No Artificial Flavours & by 2020 SUGAR-FREE No Artificial Colours
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Strategies for growth 25
Nuts – full of nutrients Nuts are a natural source of many vital nutri ents and also contain antioxidants. Cashew nuts are rich in iron, folic acid and zinc. Pea nuts are rich in protein and contain high levels of Vitamin B3. Almonds are rich in Vitamin E and pistachios are very rich in antioxidants. Dental benefits with xylitol Less sugar The sweetener xylitol, which has fewer In response to the increasing demand for calories than natural sugar, is extracted from products with less sugar or sugar-free prod various deciduous trees and maize. Xylitol ucts, Cloetta offers products with less sugar. prevents caries and is found in several of Cloetta’s long-term goal is that all our larger Cloetta’s chewing gum products, such as brands will be able to offer both sugar-free Jenkki and Mynthon, and in the pastille and low sugar alternatives. Läkerol Dents.
Consumer front Uusi and centre ilme!
Natural raw materials High quality The Jelly Bean Factory is an example of prod and product safety uct that only contains natural ingredients. High quality and product safety are pre- Artificial colours and flavour agents have been requisites for food production and are strictly replaced by natural fruit and plant extracts, adhered to in every step of Cloetta’s produc and all other unnecessary additives have been tion process, from inspection of raw materials removed. to finished products. Good quality raw ma terials, correct handling and well-controlled Clear declaration processes create the right flavour, appearance of ingredients and consistency and eliminate any risks to consumers. Cloetta works continuously to develop responsible and clear information about the contents of the products via packages and our website.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 26 Strategies for growth
Cloetta’s leading brands
Cloetta is the name and symbol of the Nordic region’s oldest confectionery company, with a very strong local heritage. Cloetta’s brands fulfil the mission »To bring a smile to your Munchy Moments«.
Bridge is a candy mix that was created in 1966 when some employees were playing bridge and ate a mixture of different tasting products that were made at the factory. One day someone came up with the idea of launching this mix of various delicious flavours in a bag. Bridge is the mature candy mix where everyone can find their favourite. Sold in: Sweden, Norway, Denmark.
Ahlgrens bilar is a fruit-flavoured foam that a large majority of the Swedes love and enjoy. The original taste and elegant design have remained unchanged since 1953, when Ahlgrens’ candy factory decided to try to produce marshmallows. The result was not as expected; instead it was small foam pieces of candy in the shape of a car. Sweden’s best tasting car was born! New car models have been launched since then, in flavours such as salty liquorice and sweet & sour. Sold in: Sweden, Norway, Denmark, the US, Center Thailand, Poland, Cyprus, Guinea, Malta. has been around since 1941 when the roll was first launched in Sweden. Center is the tasty roll at the centre of attention – just unroll a piece and enjoy! Sold in: Sweden, Norway, Denmark, Estonia, Finland, Cyprus, Poland.
The Jelly Bean Factory offers 36 different flavours of gourmet jelly beans, made from 100 per cent natural flavours and fruit juices. Free from gluten, gelatine and Chewits nuts. The Jelly Bean Factory was established in was launched in the UK in 1965 as a kids chewy 1998 in Ireland. Every day over 12 million gourmet sweet. Chewits is vegetarian, free from artificial jelly beans are produced at the factory in Dublin, colours and contains no hydrogenated fats. The packaged in a wide range of playful formats. stick’s flavours are strawberry, cola, blackcurrant, “The most juicy, mouthwatering jelly beans on orange, fruit salad and ice cream. The Chewits the planet.” Xtreme range consists of sour apple, tutti frutti Sold in: around 60 countries worldwide, mainly and pineapple. Newest to the range is the Chewits in the UK, Sweden, Germany, the Netherlands, Crazy Face, an extreme candy based on well known Switzerland, Austria, the Baltics, Russia, Canada, bonbon technology, filled with extreme powder the US, Cyprus, Portugal, Spain, Israel, China, flavours. “Chewie the Chewitsaurus” is the brand Singapore, Australia, New Zealand. mascot. Sold in: the UK, Norway, Finland, the Baltics, Russia, Belarus.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Strategies for growth 27
Juleskum is the original that has become a natural part of the Swedish Christmas traditions. Cloetta started making marshmallow Santas as early as the 1930s. Each year a limited edition is released, this year with a caramel taste. Although Juleskum is only sold for a limited period around Christmas, it is the fourth largest-selling candy bag in Sweden on an Jenkki annual basis. Juleskum Original is a fluffy, is the market-leading chewing gum brand in Finland, two-coloured marshmallow Santa with a where it was originally launched in 1951. Since 1975 taste of strawberry. the brand has been sweetened with the dental Sold in: Sweden, Norway, Denmark. innovation xylitol, and has thus become a smart tooth-friendly habit for Finns: as a breath refresher or an enjoyable treat after each meal. Sold in: Finland, Estonia, China.
Candyking/Karamellkungen allows you to put together the most delicious sweets we can find and lets you mix things your way. Sour, sweet and salty. Hard, soft and chewy. The original brand, Candyking, in Sweden known as Karamellkungen, has been developed over 30 years. This pick & mix concept is currently offered at 8,000 sales points. Sold in: Sweden, Denmark, Norway, Finland, the UK, the Baltics.
King The De Vries family started producing peppermint in 1902, and from 1922 under the brand name King. Over time, the brand has evolved from a simple throat lozenge into a modern breath freshener. Today, after more than 90 years, it still contains the same secret peppermint blend that makes King loved by many Dutch consumers. Sold in: the Netherlands, Lithuania, Russia, Canada, the US, Italy, Germany, France, Belgium, Surinam, Australia. Kexchoklad was launched as early as 1938 and is one of Cloetta’s active Swedish classics. Sweden’s best-tasting between-meal snack. Three layers of crispy, chocolate-covered filled wafers make Kexchoklad a snack for active people who need to quickly refill their energy. Sold in: Sweden, Denmark, the Baltics, the US, Cyprus, Guinea, Malta, Russia.
Lonka At Lonka, the focus is on soft and delicious sweets made with passion and high quality. Since the first Lonka factory opened in 1920 in the Netherlands, Lonka has been providing consumers with traditional favourites like caramel, fudge, soft nougat and chocolate. With Lonka products, consumers make their coffee and tea moment more indulging. Sold in: around 40 countries worldwide, mainly in Benelux, Sweden, Denmark, the UK, Spain, Germany, France, Israel, Latvia.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 28 Strategies for growth
Läkerol Dents is the world’s first xylitol pastille with 50 per cent xylitol. In Finland it is market-leading and in Sweden and Norway it is new, and it is available in several flavours. Take two tablets after every meal to stop acid attack and strengthen your teeth. Läkerol Dents is the most delicious way to take care of your teeth. Läkerol DentaFresh – a smart habit for Läkerol stronger teeth. is a classic brand and the tastiest refresher for all Sold in: Finland, Sweden, Norway. occasions. The first box was sold in 1909. Läkerol is available in a variety of flavours and is perfect when you want to soothe your throat, refresh your breath or just fancy something tasty. Läkerol makes people talk. Sold in: Sweden, Norway, Denmark, Finland, Germany, Switzerland, the US, China, South-Korea, Singapore, Lebanon, Belgium, the Netherlands.
Malaco Mynthon offers a wide variety of candy products. The name is the leading pastille brand in Finland, where Malaco comes from the first letters of the company it was launched in 1976. Fresh and effective is name Malmö Lakrits Compani, founded in 1934. Mynthon’s brand essence. The product range Over the years, many new products have been consists of chewy, hard and compressed launched under the brand, such as Gott & Blandat, pastilles in a variety of fresh flavours. In 2012, TV MIX, Aakkoset, Familie Guf, Lagerman Konfekt chewing gum was also launched under the and Kick. Quite simply – Saturday all week. brand. Sold in: Sweden, Finland, Norway, Denmark, Sold in: Finland, Norway, Germany, the Baltics, Switzerland, Canada, the US, Germany, Thailand, Russia, Belarus. Cyprus, Guinea, Malta, the Baltics.
Nutisal is the Group’s nut expert as of 2014. The business started in a shop in Beirut, Lebanon. There, back in 1948, a unique ‘dry roasting’ method was developed Plopp for roasting without oil. Nutisal took this technology is the mini-bar for indulging yourself or someone close to to Europe and created a range of dry-roasted mixes your heart. Originally introduced in 1949, Plopp is personified that was launched in 2007. Since no oil is used in by the little mini-bar that stands for nostalgia, fun and play- the process, the consumer can enjoy the genuine fulness. Plopp is loved by many for its good milk chocolate taste of nuts. and its sweet liquid toffee filling. In 2018, Plopp has expanded Sold in: Sweden, Denmark, Finland, the Nether- its brand by launching milk chocolate tablets with exciting lands, Switzerland, Saudi Arabia, Italy, Latvia. flavours from the candy and chocolate portfolio. Sold in: Sweden.
Pops Pops are one of Norway’s Polly best-kept and tastiest secrets – bags of light and was launched in 1965 and is the leading brand of bagged airy chocolate bites. Pops is chocolate on the Swedish market. It’s impossible to eat just fun to share, perfect for the one. Polly is delightfully chewy foam drops, covered with weekend treat and enjoyed chocolate. The original is flavoured with vanilla, arrack and by the whole family. butter toffee. Polly is also the candy that surprises, for example Polly with a taste of Ahlgrens bilar. Sold in: Norway (and in Sweden as Polly Pops). Sold in: Sweden, Finland, Denmark, Poland.
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 Strategies for growth 29
Red Band has roots going back to 1928. Since its start, the Red Band brand has built up a leading position in the Dutch and German confectionery markets with a promise to deliver fun, quality and pleasure. The classic Winegum Mix, the original Drop Fruit Duos and Pret Mix are some of the well-known products that are sold under the Red Band brand. Today Red Band also offers the consumer more alternatives with the sugar-free version, the 30% less sugar and the vegetarian version. Sold in: more than 25 countries, mainly the Netherlands, Switzerland, Belgium, Germany, France, the Baltics, Canada.
Sisu is a liquorice pastille flavoured by a secret Sisu-aroma that was launched in Finland in 1928. Sisu is named after the true nature of the Finnish people – the word ‘sisu’ means guts, endurance or relentless courage. For the Finns, the Sisu brand is part of the Finnish spirit that no other brand can replace. With Sisu, you can do it. Sisu is available in several flavours packaged in boxes. Sold in: Finland.
Sportlife was launched in the Netherlands in 1981 as the first chewing gum in “blister” packaging. Since its start, Sportlife has been a leader in the Dutch market and also has a strong position in Belgium. Sportlife is based on the brand essence of unexpected freshness and has an international brand profile. In 2015 Sportlife launched the core flavors in jars. Sold in: the Netherlands, Belgium, Surinam. Sportlunch is a crispy wafer generously coated with pure milk chocolate in easy-to-break pieces. Sportlunch was launched in Sweden in 1937, under the name “Mellan- mål” and changed name to Sportlunch in 1996. Sold in: Sweden, Norway, Estonia, Lithuania.
Tupla was launched in 1960 and is the number one chocolate countline in Finland. Tupla means ´double´ in Finnish and Tupla original countline contains two pieces that are filled with energy and easy to share. The original Tupla countline has a cocoa nougat filling covered with milk chocolate, with a twist of saltiness and roasted almond crush. The taste and texture of Tupla is fuel for the body and attitude. Tupla is available in different flavours and sizes, and since 2015 also as a sport bar Tupla+, which contains protein. Sold in: Finland, the Baltics, Russia.
Venco Venco was launched as early as 1878 and is the leading liquorice brand in the Netherlands. Venco has ‘a passion for liquorice’, which is delivered in a wide range of unique, iconic and top-selling items like chalk and honey liquorice. When the Dutch think of liquorice, they think of Venco. Sold in: the Netherlands, Canada, Germany, Israel, Spain, Italy, Surinam, South Africa, Belgium. LEADING BRANDS
Cloetta ANNUAL AND SUSTAINABILITY REPORT 2018 30 Cloetta’s main markets
Cloetta’s main markets
Cloetta’s main markets are the countries where the Group has its own sales and distribution organization, and consist of Sweden, Finland, the Netherlands, Denmark, Norway, the UK and Germany.