Annual and sustainability report 2019
“We believe in the Power of True Joy” Contents
2019 in brief 1 Risks and risk management 71 Words from the President 2 Letter from the Chairman 75 Goals and strategies 4 Corporate Governance Statement 76 Long-term financial targets 4 Remuneration of the Group Management Team 82 Sustainability targets 5 Internal control over financial reporting 84 Strategic priorities 6 Board of Directors 86 Cloetta’s value chain 12 Group Management Team 88 Cloetta’s sustainability agenda 14 Financial reports, contents 90 The confectionery market 17 Group financial statements and notes 91 Brand, category and product development 19 Parent Company financial statements and notes 131 The consumer in the spotlight 20 Proposed appropriation of earnings 140 Strategic product development 23 Auditor’s report 141 Brand and category leadership 25 Ten-year overview 144 Cloetta’s leading brands 30 Key ratios 146 Cloetta’s main markets 34 Reconciliation of alternative performance measures 148 Supply chain 41 Sustainability governance 150 Factories 46 GRI index 153 Resource effectiveness and environmental impact 48 Auditor’s Limited Assurance Report 155 Raw material 50 Definitions 156 Responsible sourcing 52 Glossary 157 Employees 54 History 158 Share and shareholders 58 Shareholder information 161 Financial performance 64 Net sales and profit 64 Financial position 67 Comments on the cash flow statement 69 Future outlook, Environmental impact and environmental management, Sustainability report 70
The audited annual report for Cloetta AB (publ) 556308-8144 consists of 6–11 (business model), 15–16, 73 (risks and risk management) and 5, 14–16, the administration report and the accompanying financial statements on 41–42, 48–49, 56–57, 150–152 (material sustainability matters, governance pages 1–4 and 64–140. and performance indicators). The reviewed sustainability account consists of pages 5, 12–16, 41–42, The annual report and sustainability report are published in Swedish 48–57, 150–154. The statutory sustainability report can be found on pages and English. The Swedish version is the original. Cloetta – a leading confectionery company in the Northern Europe.
SALES IN FOUNDED IN
1862 2,600 50 LEADING EMPLOYEES COUNTRIES BRANDS
ANNUAL SALES 8 SEK 6.5 BILLION CHOCOLATE CANDY
PASTILLES CHEWING GUM PICK & MIX NUTS
Our purpose Cloetta’s purpose, “We believe strategies and goals in the Power of express the compa- True Joy” ny’s business idea.
Cloetta’s strengths • Strong leading local brands. • Core markets in stable Northwestern Europe. • Strong European leader in pick & mix. • Scale benefits in Northwestern Europe versus local competition. • Route-to-market scale in core markets. • Locally tailored innovation. A joyful product portfolio
Cloetta’s net sales by category
“Kicking off dinner with friends” “After every meal” 4% 2% Other “Welcome to the party!” 6% Nuts Chewing gum “Always by my side” 59% Candy 12% Pastilles 27% “Family road trip” 73% Pick & mix Branded “Enjoy the mountain packaged- top view” products 17% Chocolate “Fun flavors to break the ice” “Prepping for adventure”
“Let the movie begin” “Finally, the weekend”
Cloetta’s net sales by country International Markets 6% q qSweden Germany 6% q 31% UK 7% u Nordic Other countries The Netherlands 33% 67% 14% u
Norway 5% u Denmark 10% p p Finland 21% THE YEAR IN BRIEF 1
WORDS WORDS FR O M TH E 2019 in brief PRESIDENT
A N D
• Cloetta Capital Markets day GOALS held in Stockholm. STRATEGIES Q1 • Niklas Truedsson appointed Q2 as Chief Pick & Mix Officer. - • Value Improvement Program Plus • Dividend of SEK 1 per share launched, a new company-wide is paid out . program to increase profitability and • Läkerol given a new design, MARKET invest in growth. and a wide media campaign THECON FECTI O N ERY • Earn-out consideration of SEK 146m is launched. related to the acquisition of Candyking • Cloetta Leading Performance Program is - settled. launched, the next step in Cloetta’s Lean program for increased manufacturing Net sales efficiency. SEKm 2,000 B R A N D, VELOPMENT CAT EG O RY & PRODUCT DE PRODUCT
• Cloetta launches a new
1,500 employer branding concept “Sweet spot for your career”.
Q3 Q4 M A I N
• Cloetta’s annual report 2018 ranked • Nathalie Redmo appointed as Head MARKETS 1,000 CLOETTA’S by e.com-ReportWatch as one of the of Investor Relations and Communi- top six in a selection of more than 300 cations . companies worldwide. • Cloetta signs a new global contract 500 • Cloetta in the Netherlands ranked by with communications agency PHD MT 500 magazine as the top employer of Media International. CHAIN
all FMCG companies in the Netherlands. SUPPLY 0 Q1 Q2 Q3 Q4 n 2018 n 2019
Examples of new product launches during the year Free cash flow SEKm
300 EMPLOYEES
250
200
150 SHARE- HOLDERS 100 AND SHARE
50 - 0
–50 MANCE PERFOR FINANCIAL FINANCIAL –100 Key ratios Q1 Q2 Q3 Q4 n 2018 n 2019 SEKm 2019 2018 2017 2016 2015
Net sales 6,493 6,218 5,784 5,107 5,674 Operating profit (EBIT), adjusted1 743 677 604 695 690 Operating profit, adjusted RISKS Operating profit margin (EBIT margin), SEKm adjusted, %1 11.4 10.9 10.4 13.6 12.2 250 Operating profit (EBIT)1 727 660 527 635 671
Operating profit margin (EBIT margin), 200 %1 11.2 10.6 9.1 12.4 11.8 Profit before tax 648 562 443 469 493 STATEMENT 150 CORPORATE Profit for the period 498 483 –97 –191 386 GOVERNANCE Earnings per share, basic, SEK 1.74 1.69 –0.34 –0.67 1.35 Earnings per share, diluted, SEK 1.74 1.68 –0.34 –0.67 1.35 100 Net debt/EBITDA, x1 2.2 2.3 2.4 2.4 3.0 1 Free cash flow 538 444 555 719 766 50
1 REPORTS Cash flow from operating activities 724 628 712 889 927 FINANCIAL
1) This metric has been affected by IFRS16 ‘Leases’ as of 1 January 2019. Comparative figures are not 0
restated. See Note 29 for indicative key figures excluding the impact of IFRS16. Q1 Q2 Q3 Q4 For definitions, see page 156. n 2018 n 2019 ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 2 Words from the president
Cloetta well positioned to deliver on financial targets
During 2019, Cloetta delivered strong growth in both branded packaged products and pick & mix, whilst improving the operating profit.
When summarizing 2019, I am particularly believe in the Power of True Joy”. We want and results to integrate the Global pleased that we have continued to deliver our products to play a positive part in adding Compact’s principles into our business, branded packaged growth, whilst making that special touch to people’s daily lives. culture and daily operations. good progress on our journey towards When they savor Cloetta’s products, people bringing sustainable value to the pick & mix experience a moment of true joy. Strategic initiatives business. This has been achieved through Cloetta will continue to strengthen My goal is to grow Cloetta organically, in focused attention and investments in our its position as the leading confectionery line, or better than the market, and at the core markets, categories and brands. company in northern Europe within its key same time reach an EBIT margin, adjusted categories. Thanks to the Group’s strong of at least 14 per cent. Increased sales and local brands, Cloetta is well prepared to By focusing on our core categories and improved profitability respond to the growing trend of consumers markets and, over time, doubling sales in This year’s net sales increased by SEK 275m requesting local brands. International Markets, we will be able to to SEK 6,493m (6,218) compared to the achieve our desired growth. Additionally, same period of last year, driven by strong Updated sustainability agenda we will consider selective acquisitions in growth in branded packaged products as We continue to incorporate sustainability our core categories in our main markets or well as pick & mix. Organic growth was 2.3 into our business strategy and operations. adjacent markets. per cent. Operating profit, adjusted for items This means anticipating, understanding We have identified three key focus areas affecting comparability, amounted to and exceeding stakeholders’ expectations that support us in reaching our financial SEK 743m (677). The improvement in op- of Cloetta. Among other things, consumers targets. These are growing the branded erating profit, adjusted, was driven by sales should be offered high-quality products as packaged business, bringing sustainable growth and cost efficiencies, partly offset by well as alternatives such as products with value to the pick & mix business as well as increased marketing investments. less or no sugar. reducing costs and driving efficiencies across Cloetta’s sustainability work also aims the organization. Dividend in line with policy to reduce environmental impact from I am also pleased that we have achieved production and packaging and to require Branded growth the target of 2.5x net debt/EBITDA for the sustainability-related actions of our suppli- We have now been able to organically grow fourth consecutive year. In combination ers. During the year, we achieved our goals the branded packaged business, which has a with improved profitability and a healthy for responsible sourcing of prioritized raw margin above 14 per cent, for eight con- cash flow, this enables the Board to propose materials in 2019, with 100 per cent UTZ secutive quarters. This has been achieved a dividend in line with our dividend policy of certified cocoa and 100 per cent segregated through working with fewer but bigger inno- SEK 1.00 (1.00) per share for 2019. palm oil. vations as well as increasing our marketing We are currently intensifying our investments that are visible to the consum- “We believe in the ambitions in sustainability. Cloetta’s new ers. During the year, the share of marketing Power of True Joy” sustainability agenda and targets will be visible to consumers reached 60 per cent It is our belief that when consumer demands finalized and presented in 2020. compared to 40 per cent a year ago. and expectations are met or exceeded, Cloetta continues to support the UN We have also increased our focus on Cloetta will grow as a company and our Global Compact’s ten principles in human premiumization and value growth, both in brands will flourish. rights, labor, environment and anti-corrup- terms of achieving a higher price on the same This consumer-centric approach is well tion. In this annual and sustainability re- volume as well as the same price for less reflected in our new purpose statement “We port, we present our performance indicators volume.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Words from the president 3
WORDS WORDS FR O M TH E PRESIDENT
A N D
We have all GOALS “the building STRATEGIES - blocks in place MARKET THECON to drive both FECTI O N ERY - growth and B R A N D, VELOPMENT profitability. CAT EG O RY & PRODUCT DE PRODUCT
” M A I N MARKETS CLOETTA’S CLOETTA’S
We will continue to focus on profitable As we close the year, 11 out of 17 targeted growth in branded packaged products and CHAIN SUPPLY SUPPLY growth within the branded packaged production lines have been addressed by we started our value creation journey with business, thereby driving a favorable mix the “Perfect Factory” program, aiming to pick & mix. Across the organization people effect across the business and enabling us to create higher efficiency and less waste in our worked hard to reduce costs as well as to in- reach an EBIT margin, adjusted of at least factories. crease the capacity in our factories. I hereby 14 per cent. In 2019, indirect costs were addressed want to thank all employees for their hard through the Value Improvement Program work and contribution to the achievements EMPLOYEES Sustainable value to pick & mix Plus, that is centered around zero-based in 2019. Pick & mix is a growing and important budgeting. In the Netherlands, we increased For 2020, my focus remains on the consumer market for us based on underlying our central sales capabilities in response above-mentioned focus areas of growing global consumer trends such as individual- to our customer demands, whilst reducing the branded packaged business, bringing
ism and less use of plastic packaging. With our field sales-force, thereby delivering both sustainable value to the pick & mix business SHARE- HOLDERS the shift to e-commerce, retailers are also in- increased collaboration service and savings. as well as reducing costs and driving efficien- AND SHARE creasingly looking for products that can give Furthermore, we will continue to focus cies across the organization. We will contin-
consumers an experience in stores. This is on creating “One Cloetta” with a common ue to increase our pricing, to compensate for - something that the pick & mix category can agenda and scale synergies to produce better higher commodity costs and a weaker SEK, offer. As a leading confectionery company in conditions for growth. During the year, we with a potential negative impact on volumes MANCE PERFOR
Northern Europe we see great opportunities reached an agreement with PHD Media for the Swedish pick & mix business. Cloetta FINANCIAL to develop the category further, thereby International, part of Omnicom Media has a profitable business with a healthy cash driving profitability and growth. Group, to consolidate to one media agency. flow in stable markets. We have leading local In the short term, our focus is on The agreement will create additional syn- brands, which we are making more compet- improving the operating profit margin from ergies and scale, and allow us to invest more itive, as well as competent and committed pick & mix in Sweden. During the year, price effectively in our brands to enable continued employees that are proud of our company RISKS increases have been implemented in the organic growth. and our products. In conclusion, we continue Swedish business to address higher costs to execute on our organic growth strategy as well as to turn around the loss-making From acquisition to organic growth and are well positioned to deliver on all our business by year-end 2020. We have also For many years, the growth of Cloetta was financial targets. finalized the contract to consolidate two only driven by acquisitions. Today, Cloetta STATEMENT CORPORATE CORPORATE
warehouses into one, effective mid-2020. We has successfully made a strategic shift from Stockholm, March 2020 GOVERNANCE continue to focus on activities to optimize acquisition growth to organic growth and at the assortment and improve merchandizing the same time delivered margin expansion. efficiency across all markets. We have all the building blocks in place to Henri de Sauvage-Nolting drive both growth and profitability, and in President and CEO REPORTS Reduce costs and drive efficiency the medium term this will drive Cloetta’s FINANCIAL Several initiatives were carried out during EBIT margin, adjusted to at least 14 per cent.
2019 to reduce costs as well as to drive effi- 2019 has been a great stepping stone for ciencies throughout the business. us where we had another four quarters of ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 4 Goals and strategies
Long-term financial targets
Organic sales growth EBIT margin Net debt
Cloetta’s long-term target is to Cloetta’s long-term target is an Cloetta’s long-term target is a increase organic sales at least EBIT margin, adjusted of at least net debt/EBITDA ratio of 2.5x. in line with market growth. 14 per cent.
Sales EBIT and margin, adjusted Net debt/EBITDA SEKm SEKm % SEKm 7,000 800 16 3,500 7
6,000 700 14 3,000 6 600 12 5,000 2,500 5 500 10 4,000 2,000 4 400 8 3,000 1,500 3.0 3 300 6 2.4 2.4 2,000 1,000 2.3 2.2 2 200 4
1,000 100 2 500 1
0 0 0 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
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 EBIT margin, adjusted improved In 2019, and for the fourth year in a the markets where Cloetta is active has during the year. The improvement was row, Cloetta met its long-term target for been around one to two per cent. In 2019 driven by sales growth and cost efficien- net debt/EBITDA. Net debt/EBITDA organic growth accounted for 2.3 per cies, partly offset by increased marketing reached 2.2x. cent, encompassing growth of branded investments. packaged products and pick & mix which both amounted to 2.3 per cent.
Dividend policy
Cloetta’s policy is to have a dividend payout ratio of 40 to 60 per cent of profit for the year.
Comment on the year’s outcome In line with the policy, the Board of Directors proposes a dividend of SEK 1.00 (1.00) per share for 2019, which corresponds to 58 per cent (60) of the profit for the year.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Goals and strategies 5
WORDS WORDS FR O M TH E Sustainability targets PRESIDENT
Consumers Employees Responsible sourcing A N D GOALS GOALS
Less sugar and sugar-free Employees Cloetta’s ambition STRATEGIES Cloetta’s larger Cloetta has zero tolerance for occupational Cocoa: All cocoa and chocolate - brands will offer injuries. The LTIR target for 2019 was 5.0. purchased by Cloetta must be UTZ alternatives Read more about Health and safety on certified. In this way, the chocolate that
with less sugar, no page 41. Cloetta produces will be based on UTZ MARKET THECON
added sugar certified cocoa. FECTI O N ERY LESS SUGAR & Lost Time Incident Rate (LTIR) (LTIR is absence due to an incident (for more or sugar-free - SUGAR-FREE Palm oil: All palm oil in Cloetta’s prod- products. than 24 hours) per 1,000,000 hours worked.) ucts must be RSPO certified (RSPO: Number 10 Round Table on Sustainable Palm
No artificial colors or flavours Oil). The factories must also be RSPO B R A N D, VELOPMENT Target CAT EG O RY & Cloetta believes DE PRODUCT 8 2019 certified. it is important Shea butter: All shea butter purchased
to increase the 6 proportion of nat- by Cloetta must be sustainably produced according to AAK’s principles. NAFNAC ural ingredients. M A I N
No Artificial Flavorings & 4 MARKETS Cloetta’s target is CLOETTA’S No Artificial Colors to have switched Outcome 2019 entirely to natural colors and flavors in its 2 Cocoa: All cocoa purchased by Cloetta products by the end of 2020. Read more in 2019 was UTZ certified. about ingredients on page 21. 0 Palm oil: Cloetta has removed palm oil CHAIN
2017 2018 2019 SUPPLY from most of its range. All palm oil in Cloetta’s products were RSPO certified in 2019. RSPO certification of all Cloetta’s factories commenced during the year. We estimate that we will be fully certified in 2020. EMPLOYEES Shea butter: All shea butter purchased by Cloetta in 2019 was sustainably
produced according to AAK’s principles..
Read more about responsible sourcing SHARE- HOLDERS
on pages 52–53. AND SHARE
-
Reduced climate and environmental impact MANCE PERFOR FINANCIAL FINANCIAL Energy consumption Waste Carbon dioxide emissions
Energy consumption per produced tonne The volume of waste per produced tonne CO2 emissions from production to be to be reduced by 5 per cent by 2020, com- to be reduced by 25 per cent by 2020, com- reduced by 5 per cent per produced kg pared with 2014 levels. pared with 2014 levels. by 2020, compared with 2014 levels. RISKS Energy consumption Waste Carbon dioxide emissions Goal MWh/prod. tonne 2020 kg/prod. tonne COe (Scope 1+2) per prod. kg Goal 2020 2.0 70 Goal 0.35 2020
60 0.30 1.5 50 0.25 STATEMENT CORPORATE CORPORATE 40 0.20 GOVERNANCE 1.0 30 0.15
20 0.10 0.5 REPORTS 10 0.05 FINANCIAL
0.0 0 0.00 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
The figures for 2016 and 2017 have been adjusted. ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 6 Goals and strategies
Strategic priorities
“We believe in the Power of True Joy”. Cloetta’s purpose is that our products play a positive part in adding that special touch to people’s daily lives. When they savor Cloetta’s products, people experience a moment of true joy. The consumer always comes first in everything that we do. We are convinced that when consumer demands and expectations are met, Cloetta will grow as a company and our brands will flourish.
Cloetta will strengthen its their individual preferences, tions for growth by building position as the leading con- every time. The grocery retail “One Cloetta” with a com- fectionery company in trade also desires products mon agenda across the entire Northern Europe within the that can give consumers an Group. candy, chocolate, pastilles, experience in stores, which is chewing gum, nuts and pick & something that pick & mix can Furthermore, a focus on mix categories. offer. cost-efficiency enables Cloetta to increase profita- Thanks to the Group’s strong Cloetta’s goal is to grow bility and invest for the future. local brands, Cloetta is well organically by 1–2 per cent, Investments are being made positioned to respond to the which is in line with or better to strengthen and increase growing trend of consumers than the market. This would the company’s manufacturing demanding local brands. mean an organic growth of capacity, and to enhance 1–2 per cent in Cloetta’s core the value of the company’s Individualization is another markets, Sweden, Finland, most attractive brands. strong global trend. As the Netherlands, Denmark, Cloetta’s goal is to achieve the leading pick & mix the UK, Germany and Nor- an EBIT margin, adjusted of at player, this trend is favorable way and to expand and grow least 14 per cent. to Cloetta as the category faster with selected brands allows consumers to choose in International Markets. the mixture of candy that suits Cloetta will create the condi-
<< Back to contents CloettaCloetta A Annualnnual and and S sustainabilityustainability R reporteport 2019 Goals and strategies 7
WORDS WORDS FR O M TH E PRESIDENT
A N D GOALS GOALS STRATEGIES - MARKET THECON FECTI O N ERY - B R A N D, VELOPMENT CAT EG O RY & PRODUCT DE PRODUCT
M A I N MARKETS CLOETTA’S CLOETTA’S CHAIN SUPPLY SUPPLY Driving growth Enabling Financing • Strengthen local brands and growth growth selectively expand brands internationally EMPLOYEES • Focus on the core markets and
• Zero-tolerance for work- • Drive cost-saving activities double sales in International place accidents throughout the entire Markets organization within Value
• Create “One Cloetta” with SHARE- HOLDERS
Improvement Program Plus AND SHARE • Grow market shares and volume one shared agenda and
in branded packaged products way of working • Further develop the
“Perfect Factory” a Lean - • Grow the pick & mix penetration • Strengthen brand and program in manufacturing and value in core markets category management MANCE PERFOR
• Increase capacity to be able FINANCIAL • Make selective acquisitions in • Create a winning culture to insource additional manu- Cloetta’s categories in core or • Develop, attract and facturing adjacent markets retain skilled leaders and • Improve the effectiveness • Offer consumers in all markets employees
of marketing, and internal RISKS the choice of regular, less-sugar, systems and processes or sugar-free products STATEMENT CORPORATE CORPORATE GOVERNANCE GOVERNANCE REPORTS FINANCIAL FINANCIAL
ABILITY SUSTAIN- Cloetta AnnualAnnual and sustainabilitySustainability reportReport 2019 2019 << Back to contents 8 Goals and strategies
Strategic background
Since today’s Cloetta was created in 2012 based decision-making and allows orders large number of brands, and second came through the merger of Cloetta and Leaf, the to be traced from the customer through the acquisition of Candyking, which made Group has developed in several phases. Im- purchasing of raw materials, manufactur- pick & mix an important part of the Group’s mediately after the merger, the focus was on ing, warehousing, delivery and invoicing. business. streamlining the network of factories, which Implementation will conclude in 2020 with Since 2018, the Group has focused on involved approx. 40 per cent of the products Germany as the last market. achieving organic growth with the customer changing factories. At the same time, the Two large structural changes took place front and center. This is how Cloetta will implementation of the group-wide business in 2017. First, Cloetta’s Italian business reach its financial goals. system commenced, which has enabled fact- was sold including several factories and a
Focus for 2019–2020
Cloetta will continue to create organic growth and generate a profitable pick & mix business by focusing on lower costs, greater efficiency and increased investments in marketing of the largest brands. The long-term goal of at least 14 per cent EBIT margin, adjusted will be achieved through three prioritized focus areas:
3 1 Lower costs Organic growth Create opportunities for and greater for branded • Essential marketing investments efficiency packaged • Investments in manufacturing for growth products • Achieving financial goals
Other value-creating initiatives EBIT margin, • New and shared best practices, including revenue adjusted Pick & mix business, optimization, net productivity, portfolio management profitability and growth and mix ≥ 14.0% Long-term goal Reduce indirect costs 2 • Program based on zero-based budgeting Perfect Factory • Cost-efficiency through the Leading Performance program • Continued insourcing of the sold Italian factories
Branded packaged products • Efficient, faster cross-market innovation • More effective marketing
Pick & mix business • Candyking, create synergies • Increase margins EBIT margin, • From a volume to a value-adding business adjusted 11.4% 2019 Value Improvement Program Plus
<< Back to contents CloettaCloetta A Annualnnual and and S sustainabilityustainability R reporteport 2019 Goals and strategies 9
WORDS WORDS FR O M TH E 1 PRESIDENT Organic growth for branded packaged
products A N D Focus on organic growth GOALS STRATEGIES
for branded packaged products - MARKET THECON FECTI O N ERY Sales of the Group’s branded packaged prod- also allow reduced lead times from concept/ Growth in branded - ucts have increased for eight consecutive idea to final product on the market. packaged products, quarters and Cloetta grew its market shares One of the most important innovations change from previous year in 5 of 16 categories in its core markets during recent years has been successively % during 2019. As branded packaged products offering lower sugar and sugar-free alterna- 4 B R A N D, VELOPMENT CAT EG O RY & PRODUCT DE PRODUCT have an EBIT margin, adjusted of over 14 tives for the major brands. New alternatives 3 per cent at a Group level, growth within of Red Band, Malaco and Venco have ena- 2 the branded packaged products category is bled these brands to reach new consumers. important for Cloetta to be able to reach its One quarter of the lower-sugar products 1 M A I N profitability target. were purchased by consumers who are new 0 MARKETS There is a clear strategy for growth for to the segment. CLOETTA’S –1 branded packaged products which focuses on both the core operations and the Group’s Media investments –2 strong brands, and also more clearly focuses Media investments have increased during –3
on the Group’s main markets. 2019 in absolute terms, while the company’s CHAIN –4 SUPPLY media campaigns have become more focused Q1 Q2Q3Q4 Q1 Q2Q3Q4 Q1 Q2Q3Q4 Innovations and new products with fewer but larger campaigns with 2017 2018 2019 Cloetta has made fewer but larger invest- greater consumer visibility. Cloetta knows ments in new products and flavors during the that the Group’s largest brands are loved by year. New products are needed for the con- their consumers, and the brands need to be fectionery sector as interest is growing in the visible constantly to remain top-of-mind for The fact that Cloetta EMPLOYEES brands. At the same time, innovations should consumers. now offers lower-sugar fulfil a purpose for both Cloetta and the re- In terms of the global brands, the Group tail trade, and there should be consumer de- has carried out common campaigns that and sugar-free alter- mand for them. By being more selective with have, to a greater extent, been suitable for natives is important
new products, focus can be given to novelties use in several markets. The purpose was SHARE- HOLDERS
for the organic growth AND SHARE that have a chance of becoming permanent. to increase visibility of marketing invest- of branded packaged
If possible, new products and flavors should ments amongst consumers. During the year, be able to be launched in several markets Cloetta also signed a global media contract products. - under different brands. Fewer new products for the core European markets. MANCE PERFOR FINANCIAL FINANCIAL
Global brands RISKS STATEMENT CORPORATE CORPORATE GOVERNANCE GOVERNANCE REPORTS FINANCIAL FINANCIAL
ABILITY SUSTAIN- Cloetta AnnualAnnual and sustainabilitySustainability reportReport 2019 2019 << Back to contents 10 Goals and strategies
2 Pick & mix business, profitability and growth Focus on the pick & mix business
The pick & mix category constitutes a large making business by year-end 2020. In growth together with the retail trade. share of the confectionery market in the conjunction with increased prices, activities Cloetta offers a holistic concept including Nordic countries and Cloetta has several to make in-store merchandizing more effec- stands, bags and merchandizing, both under years of experience and great knowledge of tive as well as reduce costs for warehousing Cloetta’s name and under the customer’s the category. Cloetta implemented a new and distribution were initiated for imple- own name. Furthermore, there is a hybrid pick & mix strategy in 2019 to drive the busi- mentation in 2020. service in which the customers themselves ness towards sustainable value creation. Insourcing of Cloetta’s products in the manage merchandizing. In addition to As a result of these market activities, pick & mix range has continued according Cloetta’s own pick & mix concepts Cloetta sales of pick & mix once again increased to plan. Since the acquisition of Candyking offers bulk sales to other concept suppliers from the second quarter of 2019. Yet, the at the end of 2017, approximately 7.5 tonnes enabling availability of Cloetta products and main short-term focus during the year has have been insourced and about 4 tonnes additional profitable sales. been to increase profitability in the business. remain to be insourced. Optimization of the product assort- Unique position Increase profitability in Sweden ment has been carried out to coordinate The Group is on the right path towards cre- In 2018, the pick & mix business in Sweden the assortment across all markets, where ating a more unique offering and positioning experienced a loss of SEK 60m. During possible. The pick & mix concept is based on pick & mix to compete more effectively for 2019, price increases have been implemented the consumer being able to select their own consumers. A single concept is currently be- in the Swedish business to address higher individual bag of candy, making a large as- ing developed, which will work in all markets costs as well as to turn around the loss- sortment an important part of this business with common stands, bags and containers. model as well. A project to develop e-commerce is also underway. Cloetta’s objective is to be able to Four business models Increase growth in other markets – offer the best service to the retail trade and medium-term to consumers. In the core markets outside Sweden, Cloetta continues to focus on creating profitable Cloetta offers customers four different pick & mix business models:
Holistic concept • Includes branding, the assortment, fixtures Sales in core markets and in-store merchandizing. Share of Cloetta’s pick & mix sales Own private labels • Similar to the holistic concept but products are sold under the own private brands of the retailer.
Hybrid Sweden • In the hybrid model, the customer handles in-store merchandizing themselves. 36% Finland Bulk 18% • Bulk sales to other pick & mix concepts or Norway sales of individual products. 8%
Business models UK 16% Denmark Bulk 24% u t Holistic concept 18% 55%
Hybrid Other markets 7% u 4% Own private labels u 14%
<< Back to contents CloettaCloetta A Års-Annualnnual och and and hållbarhetsredovisning S sustainabilityustainability R reporteport 2019 Goals and strategies 11
WORDS WORDS FR O M TH E
3 PRESIDENT Lower costs and greater efficiency
A N D Focus on lower costs GOALS STRATEGIES
and greater efficiency - MARKET THECON FECTI O N ERY Cloetta needs to invest to continue to duced, which translates into lower costs and By using industry leading best practices and - grow. This includes both increasing market increased capacity. By increased resource zero-based budgeting principles all indirect investments for branded packaged products effectiveness Cloetta also reduces its nega- and marketing costs are being reviewed. and also responding to increased demand. tive impact on the environment. Several activities are being driven in parallel The Group’s network of factories is running The program is built on standardized within the scope of the program to improve B R A N D, VELOPMENT CAT EG O RY & at full capacity due to the increased sales of tools, real-time measurement, process profitability and provide flexibility for DE PRODUCT branded packaged products, and insourcing control and skilled employees. Essential Cloetta to invest in its brands. of Candyking’s products and products that investments in manufacturing are being To create visibility into Cloetta’s cost were previously produced by the Italian carried out gradually to increase capacity, structure benchmarking was performed at factories. efficiency and to reduce carbon dioxide emis- the beginning of 2019 for an analysis and M A I N MARKETS sions. As an example, drying capacity will be evaluation of Cloetta’s costs. Through trans- CLOETTA’S Increased efficiency in increased during 2020 through investments parency, accountability and rigor, Cloetta the Group’s factories – in new drying chambers. has improved cost control and created a Perfect Factory Program structure through which all cost-saving
The “Perfect Factory” program was Value Improvement Program Plus opportunities are reviewed and the need for CHAIN SUPPLY SUPPLY launched in 2019 and will run over several In 2019, Cloetta launched a group-wide all spend is challenged. Overlapping projects years. A systematic approach with tools, holistic program aimed at improving profita- are screened with the objective of confirming training, knowledge exchange and other bility, referred to as the Value Improvement that all activities that occur contribute to improvement activities will lead to greater Program Plus. Part of the program focused profitable growth as a part of the journey to efficiency and reduced waste per unit pro- on optimizing the cost structure of Cloetta. achieving our financial targets. EMPLOYEES
SHARE- HOLDERS SHARE AND AND SHARE
- MANCE PERFOR FINANCIAL FINANCIAL RISKS STATEMENT CORPORATE CORPORATE GOVERNANCE GOVERNANCE REPORTS FINANCIAL FINANCIAL
ABILITY SUSTAIN- Cloetta AnnualAnnual and sustainabilitySustainability reportReport 2019 2019 << Back to contents 12 Goals and strategies
Cloetta’s value chain
Cloetta creates value through the purpose “We believe in the Power of True Joy”. Cloetta creates value for the company and its stakeholders through great products, innovative product development, efficient purchasing and high-quality manufacturing, as well as good relations with the retail trade and marketing that strengthens the brands. 3 Manufacturing
• Cloetta had 2,629 employees during 2 2019 and total personnel costs amount- Purchasing ed to SEK 1,440m. Cloetta’s eight factories had 1,680 employees.
• During the year, Cloetta produced 106 1 • Cloetta’s total purchasing costs amount- thousand tonnes of candy, chocolate, Product ed to SEK 4,023m during the year, of chewing gum, pastilles and nuts. development which SEK 2,539m was for raw mate-
Value creation rials and consumables. The three main raw materials in terms of purchasing • Product development is based on costs are sugar, cocoa and milk powder. a combination of consumer-driven needs/preferences, innovation and opportunities in the existing manufacturing network.
Environment • Continuous improvements enable more efficient energy consumption in manufacturing aimed at reducing Sustainable corporate development • Cloetta’s suppliers are subject to an carbon dioxide emissions. approval process in which product safety, quality and social and environ- • Increased resource efficiency through mental requirements are assessed. reduced wastage. • Cloetta has prioritized increasing the proportion of natural ingredients. The • Cloetta promotes sustainable manu- • Systematic environmental manage- goal is for Cloetta’s product portfolio facturing of prioritized raw materials ment is being used in all factories. to be free from artificial flavorings such as cocoa, palm oil and shea Workplace environment and artificial colorants during 2020. butter. Read more on pages 52–53. • Focus on leadership, management • Cloetta develops and offers lower- of workplace environment risks and sugar or sugar-free alternatives for reduction of work-related injuries. its major brands. Under the Malaco, • Health and safety activities with a Red Band and Venco brands, Cloetta systematic way of working are part of has launched lower-sugar and sugar- daily follow-up and control. free alternatives. Product safety • All factories have a product safety system.
• The factories work proactively with product safety and quality to ensure more satisfied customers and fewer product complaints.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Goals and strategies 13
WORDS WORDS FR O M TH E Profit for PRESIDENT the year
SEK 498m A N D GOALS GOALS STRATEGIES
5 - Consumers Shareholders MARKET
A certain share of non-restricted equity THECON • Cloetta believes in “The Power of True is distributed to Cloetta’s shareholders in FECTI O N ERY 4 Joy” in that our products give that spe- the form of dividends, after the business - Customers cial touch to people’s daily life. Cloetta has been provided with the capital provides strong brands and a large necessary for continued development. For range of pick & mix products.
2019 the Board of Directors has proposed B R A N D, VELOPMENT CAT EG O RY & • Total net sales amounted to • Cloetta always provides feedback on a dividend of SEK 1.00 per share, which DE PRODUCT SEK 6,493m. Cloetta’s largest customer complaints and points of view. corresponds to approx. 58 per cent of the profit for 2019, to be paid in 2020. In 2019, category is the grocery retail trade. The service trade is also a very impor- SEK 289m was distributed to the share-
tant customer group. holders through dividend distribution. M A I N MARKETS CLOETTA’S CLOETTA’S Distributed value SEK 5,981m*
t Shareholder, SEK 289m 5% CHAIN • Cloetta provides high-quality prod- SUPPLY ucts that are marketed responsibly.
• Consumers are offered a wide range of • Cloetta fulfils environmental and products with non-artifical flavorings food safety requirements, such as and colorants. t Suppliers of raw through BRC and ISO certification. • Cloetta uses environmentally adapted materials and consumables, SEK 2,539m EMPLOYEES • Cloetta is reducing the amount packaging solutions. 42% of transportation packaging and optimizing transportation to improve financial and environmental perfor- mance. SHARE- HOLDERS SHARE AND AND SHARE
t Employees, - SEK 1,440m 24% MANCE PERFOR FINANCIAL FINANCIAL Tax information Cloetta paid SEK 1,464m (1,326) in various taxes in 2019. These were mainly value-added tax, sugar tax and employment-related taxes. The difference between corporate income tax t Other suppliers, paid and the income tax charge for the year is mainly driven by timing differences. SEK 1,501m 25% RISKS Creditors, Tax paid per country financial partners, Taxes paid t SEK 62m 1% Corporate Germany 1% qq Slovakia 1% t Corporate income tax income tax 4% q qOther 1% qBelgium UK 4% q 2% SEK 150m 3% t Sweden Employment- Value-added * Generated value of SEK 6,493m related tax Norway u 13 % STATEMENT
excluding profit for the year, amortization, CORPORATE
14% GOVERNANCE taxes u t 41% t Finland 19% depreciation and impairments and Total 13% including paid dividends. Total retained SEK 1,464m economic value of SEK 512m. t The Netherlands Economic impact Sugar tax 9% Manufacturing and sales of Cloetta’s REPORTS 35% u Denmark u FINANCIAL 43% products generate economic value that benefits its stakeholders. Tax paid in Norway and Denmark is proportionally higher due to sugar taxes. ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 14 Goals and strategies
Cloetta’s sustainability agenda Cloetta continues to integrate social and environmental aspects into its business strategy and operations. This allows the company to identify risk and opportunities, understand and manage its impact on people and the environment, and live up to external expectations. This is also how Cloetta creates the conditions for growth.
Materiality analysis Goals, programs and follow-up systems are Cloetta’s sustainability agenda con- Cloetta reports the results of its sustaina- in place for each area. The goals cover the tributes to eight of the 17 UN Global bility work in accordance with the Global period until the end of 2020 and are detailed Sustainable Development Goals Reporting Initiative (GRI). Amongst other under each section of the annual report. things, this means that the Group has defined Cloetta’s sustainability agenda contributes the sustainability-related aspects that are to eight of the 17 UN Global Sustainable most relevant for creating long-term value Development Goals (SDG). for the company and its stakeholders and for running business operations responsibly. Sustainability agenda Representatives of the primary stakeholders in development regularly contribute to Cloetta’s materiality During the year Cloetta carried out a new analysis. Read more on pages 150–152. materiality analysis to further develop the Cloetta’s sustainability agenda encom- sustainability agenda and set new goals. passes the following areas: consumer first, This work will be finalized and the updated employee development and health, reduced sustainability agenda will be presented climate impact and responsible sourcing. during 2020.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Goals and strategies 15
WORDS WORDS FR O M TH E PRESIDENT The consumer comes first
Cloetta will offer high-quality and safe products. In response to consumer preferences, Cloetta also
offers products with more natural raw materials, A N D GOALS GOALS less sugar, sugar-free products and products with STRATEGIES functional properties, such as chewing gum for better dental hygiene. - MARKET THECON FECTI O N ERY
Significance Approach Governance - Consumers should feel confident that • Product safety and quality are always top • Code of conduct Cloetta’s products are safe and of high of mind. • Cloetta’s sustainability board quality, and that Cloetta is transparent • Cloetta develops alternatives with natural • Cloetta’s product board
about product content and the impact of B R A N D, raw materials and less sugar or no sugar, • Responsible marketing VELOPMENT raw materials. CAT EG O RY & and markets products responsibly and • Lean 2020 DE PRODUCT ethically. • BRC (British Retail Consortium Global
Standard for Food Safety) • GMP (Good Manufacturing Practices)
• Internal control policy M A I N MARKETS CLOETTA’S CLOETTA’S
Most important goals Significant risks Global goal • All products must be of high quality and safe. • Brand-related risks resulting in decreased 2. Zero hunger • All major brands will have a lower-sugar or sales. 12. Responsible consumption and production sugar-free alternative. • Political decisions such as sugar taxes. 17. Partnerships for the goals CHAIN SUPPLY SUPPLY • By 2020, Cloetta’s products will not contain • Risk of changing consumer dietary artificial flavorings or colorings. preferences, with negative consequences for Cloetta. EMPLOYEES
Employee development and health Cloetta’s employees are essential to the company’s success. SHARE- HOLDERS
It is therefore of fundamental importance that Cloetta is able to AND SHARE attract, retain and develop the most competent and engaged employees. Cloetta has activities, plans and goals in place for - ensuring that the workplace is as attractive and safe as possible. MANCE PERFOR FINANCIAL FINANCIAL
Significance Approach Governance Being able to attract, develop and retain • Cloetta secures its future supply of skills by • Code of conduct RISKS the right employees is a pre-requisite for being an inclusive employer that prioritizes • HR policy Cloetta’s long-term profitability. employee health and safety and well-being, • Cloetta’s leadership platform offers interesting opportunities to grow and places sustainability high up on its agenda. • Cloetta’s sustainability board • Lean 2020 • Fraud and whistleblower policy • Internal control policy STATEMENT CORPORATE CORPORATE GOVERNANCE GOVERNANCE
Most important goals Significant risks Global goal • Zero-tolerance vision for workplace • Health and safety in Cloetta’s factories. 3. Good health and well-being injuries. • Inability to recruit and retain the right 8. Decent work and economic growth • Improvement of employee engagement employees. REPORTS through the Great Place to Work Trust FINANCIAL index.
ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 16 Goals and strategies
Reduced climate impact Cloetta endeavors to consume resources as efficiently as possible. Cloetta is developing packaging solutions with improved environmental performance. The climate impact of Cloetta’s own operations and from transportation is being reduced by Cloetta optimizing energy consumption, re- ducing emissions and waste, and prioritizing climate-smart transportation.
Significance Approach Governance Management of global challenges, in terms • Cloetta is becoming more resource-efficient • Code of conduct of climate change, access to resources, and monitors, thereby staying ahead of, • Cloetta’s sustainability board dissemination of chemicals and plastics. new regulations. The company thus manages its environmental and climate impact and • ISO 14001 creates the conditions for long-term profit- • Lean 2020 ability. • Internal control policy
Most important goals Significant risks Global goal By 2020: • Negative impact on the environment. 12. Responsible consumption and production • 5% less energy consumption vs 2014. • Legislation. 13. Climate action 5% reduced CO emissions vs 2014. 15. Life on land • 2 • Lower availability and/or higher prices of • 25% less waste vs 2014. important raw materials. By 2025: • 100% recyclable or reusable packaging.
Responsible sourcing Cloetta integrates social and environmental requirements into the sourcing process and controls that suppliers comply with them. The purchasing departments for each raw material (palm oil, cocoa and shea butter) endeavor to increase transparency and traceability, and also contribute to better environmental and social conditions in places where the raw materials are produced.
Significance Approach Governance Many of the raw materials • Cloetta includes environmental and social requirements into • Code of conduct contained in Cloetta’s products the sourcing process, thus promotes supplier compliance with • Cloetta’s sustainability board originate in countries where the company’s requirements. • UTZ and RSPO there is a higher risk of deviation • Cloetta maintains high ethical standards in its business relations. from Cloetta’s Code of Conduct. • Internal control policy • Cloetta has a program for sourcing of certified raw materials (palm oil, cocoa and shea), which aims to increase transparency • Fraud and whistleblower policy and traceability and contribute to improved environmental and social conditions in places where the raw materials are produced.
Most important goals Significant risks Global goal • Sustainability program applied • Infringement of 3. Good health and well-being to priority raw materials. human rights. 8. Decent work and economic growth 12. Responsible consumption and production No later than 2020: • Brand-related 13. Climate action • Palm oil will be RPSO-SG certified. risks resulting in decreased sales. 15. Life on land • Palm oil in glazing agents largely 16. Peace, justice and strong institutions Limited access to im- replaced with alternatives. • 17. Partnerships for the goals portant raw materials. • All cocoa and chocolate must be UTZ certified. • 100% sustainable shea butter.
<< Back to contents Cloetta Annual and Sustainability Report 2019 The confectionery market 17
WORDS WORDS FR O M TH E PRESIDENT
The confectionery A N D GOALS GOALS STRATEGIES
market - The confectionery market is traditionally divided into candy, chocolate, pastilles MARKET THECON and chewing gum. Cloetta is active in all these categories, as well as in nuts. FECTI O N ERY -
Cloetta’s main markets are Sweden, Finland, for around 62 per cent and chewing gum trade account for approximately one third of B R A N D, VELOPMENT CAT EG O RY & the Netherlands, Denmark, the UK, Germa- for around 8 per cent of the total market in the total market. DE PRODUCT ny and Norway. The total market for confec- Cloetta’s main markets. In Cloetta’s main markets, the nut
tionery in Cloetta’s main markets amounts market is experiencing annual growth of 1–2 to approximately SEK 269bn (253). Competitive market per cent in volume. However, in the past two
The global market for confectionery is domi- years the growth has been around 4 per cent M A I N MARKETS Mature market nated by international companies like Mars/ a year due to price increases and a shift to the CLOETTA’S The confectionery market is relatively Wrigley, Mondelez, Nestlé, Ferrero, Perfetti, premium product category. insensitive to economic fluctuations and Haribo and Lindt & Sprüngli. However, in shows stable growth that is driven primarily the local markets these meet tough opposi- Consumption patterns by population trends and price increases. tion from players with locally established Confectionery is one of the most impulse- CHAIN Market recessions affect Cloetta mainly brands such as Cloetta, Fazer, Orkla and driven categories in the retail trade. With up SUPPLY through general price pressure from the Toms. No player has a strong position across to 80 per cent of purchasing decisions made retail trade and increased competition from all European markets. at the point of sale, brand, availability and the trade’s own private labels. However, Consolidation of the confectionery product placement are significant success private labels account for a relatively small industry is taking place gradually. The in- factors. share of confectionery compared to other dustry as such has a long history and the pace The European confectionery market is grocery products. of technological product innovation is low. characterized by strong consumer loyalty EMPLOYEES Since growth takes place mostly through to local brands. The main considerations the development of existing strong confec- The nut market when buying are brand, flavor, quality and tionery brands, the continuous launch of new Cloetta is also active in the nut market via curiosity about new products. flavors and products is a key success factor. the brands Nutisal and Parrots. The total nut Consumption patterns and taste pref- SHARE- HOLDERS
In terms of value, candy including market in the Nordic region is worth around erences vary between the different markets. AND SHARE pastilles accounts for 30 per cent, chocolate SEK 5bn, and the private labels of the retail For example, compared to the rest of Europe,
-
, by region, MANCE Confectionery consumption Market size Market development PERFOR per capita Cloetta’s main markets, 2019 in Cloetta’s main markets FINANCIAL Kg per person 2019 SEK billion EURO billion 20 120 20
100
15 15 RISKS 80
10 60 10
40 5 5 STATEMENT 20 CORPORATE GOVERNANCE GOVERNANCE
0 0 0 SwedenFinland DenmarkGermanyUK Norway Netherlands GermanyUK NetherlandsSwedenNorway Finland Denmark 2007 2013 2019 u Chocolate u Candy u Chewing gum
Source: Global data
The graph refers to candy and chocolate in u Chocolate u Chewing gum REPORTS FINANCIAL FINANCIAL the countries where Cloetta is active. u Candy incl. pastilles Source: Mintel and Global data Source: Global data
Market size and growth rates have been calculated based on new data to Cloetta for 2019, comparative figures have also been adjusted. ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 18 The confectionery market
the Nordic region has a lower per capita A large share of the everyday consump- in the next five years will be driven by online consumption of chocolate, but a significantly tion of confectionery has traditionally taken sales. E-commerce now accounts for 36 higher consumption of candy. place via the service trade, i.e. filling stations per cent of global FMCG growth, making and convenience stores, kiosks, etc. Over it crucial for retailers and brand owners to Pick & mix the past decade, confectionery sales to the understand and unlock the channel. Kantar The pick & mix category has a very strong service trade have decreased, primarily due (market research and insight company) ex- position in the Nordic countries and ac- to the presence of fewer filling stations, but pects that online grocery sales will continue counts for a high share of the total confec- also because the service trade has developed to flourish and should account for 10 per cent tionery consumption, while the consump- its own snack alternatives that compete with of total FMCG sales worldwide in 2025. tion of pick & mix is considerably lower confectionery. According to recent research, Europe in Central Europe where packaged candy with 5.6 per cent value share is the second and chocolate have a stronger position. In Other sales channels largest market in the world for e-commerce Sweden, pick & mix accounts for 30 per cent Since availability and a strong brand are two following Asia. However, despite the prox- of the total confectionery market, while in key factors for impulse-driven purchases, imity and economic similarities of European the other Nordic countries it accounts for 5 Cloetta continuously evaluates new types of countries, they are still embracing e-com- to 15 per cent. Pick & mix candy as a market sales channels to ensure availability where merce at varying speeds. While the UK and is growing faster than packaged products in the consumers are found. France remain in the lead, with 7.5 per cent most Nordic countries. Other sales channels include those and 5.6 per cent market share respectively, where confectionery has been offered for Germany 1.7 per cent and the Netherlands Traditional sales channels many years, including ferry lines, movie the- 2.6 per cent lag behind. Mega-cities hold a Cloetta’s foremost sales channels in all atres, airports and arenas, and also channels much larger share of the online grocery mar- markets are the grocery retail trade and the that have not been traditionally associated ket than smaller towns and cities, or rural service trade. with confectionery sales, such as building areas. For example, in London e-commerce The grocery retail trade has undergone supply stores, furniture and appliance accounts for almost 10 per cent of the total extensive consolidation and restructuring stores, hotels and bars. FMCG market. over the past ten years, and the number of One key success factor is to develop The profile of people who buy grocer- stores has decreased at the same time as different packaging solutions to help custom- ies online is mainly young families with floor space per store has grown. Concen- ers in the different channels to display the children. In emerging markets, e-commerce tration in the grocery trade is high in the products. is also more popular with young high-income majority of European markets, which means consumers. The key driver for buying online that the channel can place high demands on E-commerce is convenience. The major accelerator is its suppliers. Nonetheless, as a leading sup- E-commerce is continuing to grow globally technology with mobile and voice assistants plier Cloetta has the opportunity to develop in all types of industries with almost half of set to play a crucial role. Read more partnerships that benefit both sides. Strong e-commerce revenue coming from mobile about Cloetta’s e-commerce development brands and high-quality products that are devices in 2019. Historically, the consumer on page 27. attractively priced and can be effectively dis- goods industry has not been a leader in the played and marketed are therefore of major e-commerce segment, but forecasts continue importance. to indicate that half of this industry’s growth
Cloetta’s sales channels
Grocery retail trade Service trade Travel, home and e-commerce
Increasingly fewer and larger stores, Generous opening hours, centrally Includes movie theatres, building supply which is leading to greater efficiency and located in the form of convenience stores stores, airports and arenas. This channel strength. Typically covered by central and filling stations. An increasingly wide often requires support in developing its agreements at a national level. range of snack alternatives. confectionery sales. The e-commerce sales channel is growing rapidly, 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)
<< Back to contents Cloetta Annual and Sustainability Report 2019 Brand, category and product development 19
Strategies for growth: WORDS FR O M TH E PRESIDENT
Brand, category and A N D GOALS GOALS STRATEGIES
product development - MARKET THECON FECTI O N ERY - B R A N D, VELOPMENT CAT EG O RY & PRODUCT DE PRODUCT
M A I N MARKETS CLOETTA’S CLOETTA’S CHAIN SUPPLY SUPPLY
1 2 3 EMPLOYEES The consumer Strategic Brand and in the spotlight product category SHARE-
Listen, understand and evolve development leadership HOLDERS SHARE AND AND SHARE Consumers are the key to growth, Innovate to enable growth Accelerate growth
which is why they are at the center - • Enter new markets and • Continuous support for core of all the Group’s strategies. segments and implement brands through effective
• Understand trends and values new initiatives marketing campaigns MANCE PERFOR FINANCIAL FINANCIAL • Assess behaviors, preferences • Enhance experiences • Leverage category develop- and needs through new flavors and ment strategies and future • Validate concepts, products and textures key growth drivers with retail customers advertising • Ensure sustainability and RISKS • Ensure safety, quality and consumer choice • Develop pick & mix concepts transparency • Increase the value of • Develop consumer-centric • Provide the right choices products and customer-centric activ- ities through a strong and • Develop new packaging • Use all feedback to improve competent sales force every day technologies and sizes
• Increase visibility in stores STATEMENT CORPORATE CORPORATE GOVERNANCE GOVERNANCE • Sales and in-store campaigns REPORTS FINANCIAL FINANCIAL
ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 20 Brand, category and product development
The consumer in the spotlight
Consumer insights and trends are the key source of input for Cloetta’s strategies, development and continuous improvement. To ensure consumer satisfaction we apply the principle that consumers must feel confident that products are safe and of high quality, and that Cloetta is transparent in the information provided about the content of the product. 6 distinct consumer trends
On-the-go Greater Responsibility for More and more, we eat away from individualization the environment home on our way to and from different Consumers increasingly wish to satisfy activities. Greater availability of prod- and human rights their individual needs. This means that ucts and different packaging solutions One key trend is the interest in the effects they want the option of both choosing allow consumers to satisfy their desires of food production on the environment products, and also having access to immediately. and the social conditions of the producer. products and services that are individ- Suppliers have responded to consumer ualized and can be adapted to different demand for information, above all in occasions. Pick & mix is a good example terms of the origin of raw materials, the of a concept that is individualized. farmer’s working conditions, quality and farming methods, by introducing differ- ent types of labelling and certification.
E-commerce and digital channels in- creasingly important E-commerce is growing rapidly across Health and less sugar all sectors, including the grocery People are increasingly looking for raw retail trade. Both grocery retailers materials with positive health benefits. and food companies are building up There is also continued interest in Local, genuine brands their own e-commerce capacity to sell natural and genuine raw materials. Local brands with a strong history are their products online. New players are Additives of various types and artifi- very popular with consumers. This is also capitalizing on the fast growth of cially produced substances are being evident in social media. During the year, e-commerce. Alongside the growth of questioned in favor of natural materials. Cloetta has carried out campaigns in e-commerce, direct communication E-numbers are being replaced with the several markets that are based on this with consumers via social media is name of the additive in plain language. trend: Venco as the typical Dutch brand, emerging as one of the most important Natural sugar or stevia are preferred to Sisu as the most Finnish there is, and channels for feedback, capturing trends artificial sweeteners. stadium advertising for Gott & Blandat and sharing inspiration and preferences Less sugar is another important when Sweden has played in the football with others. trend. European Championship qualifiers.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Brand, category and product development 21
WORDS WORDS FR O M TH E PRESIDENT
A N D GOALS GOALS Fulfil consumer expectations STRATEGIES - on choice and transparency MARKET THECON FECTI O N ERY
The importance of transparency also provides alternatives in the form of are being questioned from a health stand- - Cloetta gives consumers the chance to make sugar-free products, products with less sugar point, even though they are safe and have well-informed choices, by being clear and and products that are naturally free from been approved for food products. To respond transparent about the contents of its prod- sugar. to consumer demands, Cloetta is working B R A N D,
Cloetta is working to have a sugar-free to remove artificial flavorings and colorants VELOPMENT
ucts, their calorific value and the impact of CAT EG O RY & PRODUCT DE PRODUCT the raw materials included. alternative or an alternative with a reduced from its assortment. amount of sugar for its major brands. Cloetta’s target is to have switched
Cloetta offers choices entirely to non-artificial colorants and fla- Sugar is an important ingredient for No artificial flavorings, vorings in its products by the end of 2020. M A I N
providing products great taste, texture and no artificial colorants MARKETS CLOETTA’S CLOETTA’S preservative properties. There is an increasing consumer interest in Cloetta’s purpose, “We believe in the natural ingredients. Different types of addi- Power of True Joy” means that Cloetta tives and chemically produced substances CHAIN SUPPLY SUPPLY EMPLOYEES
SHARE- HOLDERS SHARE AND AND SHARE
- MANCE PERFOR FINANCIAL FINANCIAL RISKS
Goal STATEMENT CORPORATE CORPORATE No GOVERNANCE Oer Artificial alternatives Flavorings (NAF) with
(NAC) REPORTS
or Colors FINANCIAL less sugar NAFNAC LESS SUGAR & No Artificial Flavorings & by 2020 SUGAR-FREE No Artificial Colors ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 22 Brand, category and product development
Cloetta’s consumer promise
Less sugar Natural raw materials Nuts – full of nutrients In response to the increasing demand Artificial colorants and flavorings will Nuts are a natural source of many for products with less sugar and be entirely replaced by natural fruit and beneficial nutrients and also contain sugar-free products, Cloetta offers plant extracts during 2020. This means antioxidants. Cashew nuts are rich in products with less sugar. Cloetta’s long- that all other unnecessary additives will iron, folic acid and zinc. Peanuts are term goal is that all our major brands be removed. The Jelly Bean Factory rich in protein and contain high levels will be able to offer both sugar-free and is an example of a product that only of vitamin B3. Almonds are rich in low-sugar alternatives. contains natural ingredients. vitamin E and pistachios are very rich in antioxidants.
High quality and product safety High quality and product safety are pre-requisites for food production and are strictly adhered to in every step of Clear declaration Better dental health Cloetta’s manufacturing process, from of ingredients, and with xylitol inspection of raw materials to finished certification The sweetener xylitol, which has fewer products. Good quality raw materials, calories than natural sugar, is extracted Cloetta works continuously to develop correct handling and well-controlled from various deciduous trees and responsible and clear information about processes create the right flavor, maize. Xylitol prevents caries and is the contents of the products via pack- appearance and texture and eliminate found in several of Cloetta’s chewing ages and our website. If the product any risks to consumers. Cloetta also gum products, such as Jenkki and contains ingredients that are certified endeavors to reduce its direct negative Mynthon, and in the pastille Läkerol by third parties, this is also stated on climate impact by using resources more Dents. the packaging, as well as on the website. efficiently.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Brand, category and product development 23
WORDS WORDS FR O M TH E PRESIDENT
Strategic product development A N D
Strategic product development includes the expansion into new segments (pure GOALS innovations) but also product extensions as launch of new flavors and textures. STRATEGIES
Strategic initiatives also include the product adaptation to new geographical - markets and the pricing strategies with potential changes in packaging sizes. MARKET THECON FECTI O N ERY - B R A N D, VELOPMENT CAT EG O RY & Strategic product Innovation and trends The most significant costs in product DE PRODUCT Product development is a key driver for the development arise in the product launch development strength of Cloetta’s brands and enables phase. They are primarily associated with during the year differentiation in the market. Cloetta’s inno- marketing activities, but also with ensuring vation work and optimization of the product efficient manufacturing. M A I N MARKETS development process create the conditions CLOETTA’S for new product launches and re-launches. A focus on taste Fashion and trends are present in all Packaging and marketing can tempt con- sectors, including confectionery, where they sumers to try a new product, but if the taste are primarily related to colors, packaging, doesn’t measure up to expectations there CHAIN SUPPLY SUPPLY flavors and ingredients. Identifying the is rarely a second purchase. It is therefore trends that could be significant to Cloetta critical that the new products launched by is of major importance. Knowledge about Cloetta meet consumer requirements and market trends and consumer behavior is expectations. When Cloetta develops new Plopp Almond + Bridge necessary for the development of successful products, the focus is on taste and texture. product innovations. Before a product is launched, it undergoes Market analysis, trend monitoring both internal and external taste tests via EMPLOYEES and interaction with consumers in social consumer panels that assess factors such as
media provide the marketing department flavor, texture and overall impression. with valuable data for analysis of changes in To systematically gather consumer feedback, Cloetta uses a consumer panel that consumption patterns. SHARE- HOLDERS Natural ingredients and consideration regularly provides feedback and ideas online AND SHARE for environmental and ethical matters are after receiving product samples to their
factors that are increasingly affecting the homes. The ideas received are extremely - confectionery market. Cloetta continuously valuable to Cloetta’s innovation work. reviews all products and questions their in- Without approval from the consumer MANCE PERFOR
gredients. For example, sweeteners and fruit panel, products are not released on the FINANCIAL flavorings have been replaced with stevia market. A large database of earlier tests and Gott&Blandat 30% less sugar and fruit juice. Stevia is used in Läkerol and reference values facilitates the necessary (original, sour and Liquorice) xylitol is used in Läkerol Dents, Jenkki and assessment. Mynthon. Cloetta has an ambition to launch sugar-free or lower-sugar alternatives for Launches in new markets RISKS all major brands. Examples of products A product that is successful in one market launched include Red Band 30% less sugar can be launched in another market under Tupla Mint Finland and Gott & Blandat 30% less sugar, and an existing local brand. For Cloetta, with its Venco liquorice with zero sugar, sweetened many brands in different markets, econo- with Stevia. mies of scale in production can be utilized STATEMENT effectively by matching brands. CORPORATE GOVERNANCE GOVERNANCE Product development process Some examples include: An effective product development process • Sportlife Mints from the Netherlands sold is essential for profitable growth. Product as Mynthon ZipMint in Finland. development is steered by combining market • Polly from Sweden sold as Pops in Norway. REPORTS
opportunities and consumer behavior with FINANCIAL existing brands.
Malaco Moustache ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 24 Brand, category and product development
Marketing Innovation Consumer & brand marketing Innovation - product development
• Who? 1 • Internal and external Target 1 fact gathering • Why? Trends group • When? • Collaboration • What? • Technological development
The path to 2 2 a new product Technical Consumers • Needs solutions • Preferences – collaboration Role in existing product • Ideas • between Marketing & lines • Feelings Innovation • Exchanges between factories
3 3 Product Concept solution
• Evaluation • Product development • Market surveys • Packaging • Packaging solution
Package design In addition to tasting good and being afforda- Hologram ble for the consumer, a new product must be commercially attractive to the retail trade The Jelly Bean Factory and be part of a category strategy reflecting local consumer expectations. Its weight, – brand building packaging and distribution are adapted to at airports the various sales channels and markets. With Cloetta’s most international brand, The Jelly the right packaging, many of the products Bean Factory, is sold from its home country that are strong in one market can also secure of Ireland to markets as far away as China. a good position in a new market. The brand is sold in several channels, major Package sizes are often associated with markets, food stores, department stores pricing strategies for different customer and also airports, where travellers love to categories and markets. Changing a package take the brand home or to their destination size is therefore a strategic decision for how to enjoy the lovely flavors. In 2019, a brand can be further developed in order to a holographic display was created, to reach new customers and, thereby, also new generate traveller interest in The Jelly Bean Factory and provide information about the consumers. benefits it offers. Travel retail For many years Cloetta has had substantial sales to ferry lines, charter tour operators and airports, referred to as Travel Retail. Well-known brands and unique packag- es in terms of both appearance and size are two of the most important competitive tools in this market.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Brand, category and product development 25
WORDS WORDS FR O M TH E PRESIDENT
A N D GOALS GOALS STRATEGIES - MARKET THECON FECTI O N ERY - B R A N D, VELOPMENT CAT EG O RY & PRODUCT DE PRODUCT
M A I N MARKETS CLOETTA’S CLOETTA’S CHAIN SUPPLY SUPPLY Brand and category leadership Confectionery is the most impulse-driven category in retail. Consequently, good EMPLOYEES availability and visibility in stores, alongside strong brands with high recognition and loyalty, are critical to confectionery sales. Cloetta’s continuous development and care of its brands, together with a strong sales force, are therefore of vital SHARE- HOLDERS importance. AND SHARE
- MANCE PERFOR
Brand management awareness, preference and emotional Category development FINANCIAL Cloetta’s ten largest brands account for connection to Cloetta’s products. When Confectionery is a very important and profit- around 49 per cent (49) of the Group’s sales. combined with in-store activities and visi- able category in grocery retail. Hence, cate- Read more about the leading brands on pages bility, marketing communication stimulates gory development and category management 30–33. product trial, cements loyalty and increases are key levers in developing penetration and For each brand there is an individual overall demand for products. loyalty through consumer experience and RISKS development plan aimed at continuously up- Cloetta’s marketing is based on each service. Profitable growth for both Cloetta dating and developing the brand. To ensure brand’s strategy and position. Market- and its customers is supported by always strong and sustainable consumer connection ing is often characterized by images and having the best facts and insights. with our brands, activities such as impactful emotion-creating brand advertisements, and relevant communication, new flavors sponsorship and events directed at selected Category vision and strategy STATEMENT and line extension, package development target groups. A long-term category vision supports the CORPORATE GOVERNANCE GOVERNANCE and marketing campaigns are considered key One overarching ambition is to ensure development of the confectionery shelf, the drivers for growth. that the marketing investments Cloetta assortment and consumer experience both makes are effective. This involves identifying today and in the future. Powerful brands and Marketing communication the factors that influence and create consum- a differentiated product portfolio that fits REPORTS
Effective and well-planned marketing com- er impressions, which must be carefully de- today’s and future consumer and customer FINANCIAL munication across relevant touch-points, veloped and planned ahead of each campaign needs are important parts of the category
shaped by the audience profile and behavior, based on the defined performance objectives. vision. Thus, any category strategy in sup- is the key driver for building consumer See campaign examples on page 29. port of this vision must be built on solid and ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 26 Brand, category and product development
Examples of new relevant insights on consumers and how they other concept suppliers. Read more on page shop in the store. 10. flavors during the year Through the Parrots brand, Cloetta is New flavors also a leading pick & mix player in the natu- Launching new and attractive product ral snacks market in Sweden and Finland. variants or flavors, in segments where there is consumer demand, strengthens Cloetta’s Package development offering to both customers and consumers. An important part of Cloetta’s brand man- Since successful product innovations agement consists of package development to inspire trial of both the new product and the provide the best consumer experience. The original product, good seasonal products and packaging material must perform several innovations normally lead to incremental functions, including protecting the product sales. on its route to the consumer, enabling easy handling of the product, providing product Pick & mix information and communicating the brand. Juleskum Polka Cloetta is the leading concept supplier in the Package development also includes retail pick & mix category in the Nordic region and packaging for various sales channels. the UK. This means that the Group offers Cloetta’s goal is that all packaging will retailers a total concept in pick & mix, under be reusable or recyclable by no later than the brands Candyking, Karamellkungen, 2025. Read more on page 48. Parrots and Karkkikatu. The concept consists of products, Visibility in stores fixtures and merchandizing as well as in- One decisive success factor for consumer store and logistics services. A customer can sales is good exposure in the store, thus, how choose from different concepts containing the retail trade perceives Cloetta’s new prod- between 16 and 200 articles. The assortment ucts and innovations is a crucial factor. Cus- consists of chocolates, gummy candy, hard- tomers must consider products to be needed, Gott & Blandat Fizzypop & Co boiled candy, toffee, foam, liquorice and easy to handle and profitable for retail. natural snacks that the consumer can pick in Cloetta has a large, trend-setting and bags or cups. Today, pick & mix accounts for innovative sales force in its core markets. 27 per cent (28) of the Group’s sales. Through good retail trade relations and Cloetta also provides the pick & mix extensive knowledge about the industry, concept under the private labels of certain market and products, Cloetta can present at- Läkerol Raspberry Liquorice retailers, and also sells pick & mix candy to tractive sales solutions that support the cus-
Further develop core brands
Awareness and loyalty Development Availability
Tools for strengthening Tools for strengthening Tools for strengthening the brands the brands the brands • Impactful, visible and effective • New flavors, innovations and • A large competent sales force brand communication. seasonal products to respond supports retail. to relevant consumer needs. • Consumer focus: valuable • Cloetta offers the retail trade insights drive relevance. • Package development to a complete product range to make the product visible and satisfy consumer freedom of Challenges also to adapt to different sales choice. • Leverage technology to channels. improve consumer services Challenges and experience. Challenges • Continuously identifying new • Further coordination between channels through which to • Be visible wherever the markets and brands will cre- reach consumers. consumer is: optimise goals ate opportunities, economies for marketing and sales • Developing sales solutions of scale and cost synergies. campaigns. that suit different customer categories.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Brand, category and product development 27 tomers’ business objectives and create added line channel consumers do not walk through Cloetta uses tools to track specific value for both Cloetta and the customer. the shopping aisle the same way as they do brands in different media and performs WORDS WORDS
The most important part of the sales offline. To bridge this gap Cloetta constantly general brand performance measurement FR O M TH E PRESIDENT force’s day-to-day work consists of helping develops new marketing tools to get noticed (e.g. brand consideration and preference). the individual retailers display Cloetta’s and end up in a shopping cart. However, the The most important method for gauging
products to achieve higher turnover rates positive side is that it has never been easier the success of marketing investments for and margins in the store. Through the sales to become part of a non-food shopping fast moving consumer products, such as A N D organization’s category knowledge and mission. Cross-border marketplaces offer Cloetta’s, is always immediate reactions GOALS strong in-store presence, Cloetta can reach new opportunities to cross-sell Cloetta’s during sales. STRATEGIES out with campaigns, monitor local compli- products in combination with goods from ance with centrally negotiated listings and completely different categories such as books Protection of - distribution agreements, and ensure good and outdoor gear. intellectual property rights visibility on the store shelves, in the checkout Cloetta’s e-commerce strategy is fo- To prevent infringement of Cloetta’s intel- MARKET lines and in other places. Read more on page cused on growth through a dynamic channel lectual property rights, the company uses a THECON FECTI O N ERY 28. that matches our strong offline shares in special monitoring service, which provides - online trade. Online sales of confectionery alerts about applications for both national Sales-promotional activities are still lower than for other consumer and international registration of brands that Cloetta typically combines marketing activ- product categories, but they are growing at are identical to, or can be confused with, ities with in-store campaigns. New products double-digit pace. In line with the European Cloetta’s key brands. B R A N D, VELOPMENT CAT EG O RY & are normally given sales support through trend, the e-commerce maturity of Cloetta’s For example, Kexchoklad’s chequered DE PRODUCT campaigns, events, in-store activities and ad- key markets is varied. For instance, online pattern has been design-protected for many vertisements to reach consumers as quickly grocery spend per capita in the Netherlands years and the name “Kexchoklad” has been as possible. is double that of Finland. This means that trademarked since 2004. Cloetta will set clear priorities for where and M A I N MARKETS E-commerce how to drive e-commerce projects, such as CLOETTA’S E-commerce is one of the key focus areas through mobile image optimization, e-trade for Cloetta with its products being sold marketing activation and limited-to-online across a wide-range of online players from product development.
“Brick & Clicks” (e.g. ICA.se and AH.nl), CHAIN SUPPLY SUPPLY “Pure Play” (e.g. Mathem.se and PicNic.nl), Measurement tools “Cross-border Marketplaces” (e.g. Amazon) Effective marketing is dependent on con- to its own e-commerce shop in Finland tinuous monitoring and analysis of changes (www.ksylitolikauppa.fi). Confectionery is in consumer patterns. In-depth knowledge known as an impulse-purchase category, to of consumer behavior and media trends is which arrival of online shopping brings both essential for successful product development EMPLOYEES challenges and new opportunities. In an on- and marketing.
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Categories in which Cloetta is a market leader - MANCE PERFOR FINANCIAL FINANCIAL
Finland Pastilles Sweden Candy Pastilles Chewing gum The Netherlands Candy Pick & mix Pastilles Chocolate bars Candy RISKS Chocolate bags Chewing gum Pick & mix STATEMENT CORPORATE CORPORATE
Denmark GOVERNANCE Pastilles Norway Candy Pastilles Pick & mix Candy United Kingdom Pick & mix Pick & mix REPORTS FINANCIAL FINANCIAL
ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 28 Brand, category and product development
Success factors for the sales organization
Good relations with Good visibility for Boost sales customers at a central Cloetta’s products To increase sales, Cloetta’s products need to be wherever consumers are. The High visibility in stores, particularly at and local level task for Cloetta’s sales organization is the checkout stands, is vital for growth in Through good relations with the retail therefore to increase display space and sales. In order to increase the visibility of trade and in-depth knowledge of the sales in existing stores and also seek new Cloetta’s products, the sales force works industry, market and products, Cloetta non-traditional sales points for selected actively to increase the number of display can present attractive sales solutions parts of the product range. points in the stores. that support each customer’s business objectives.
Ensure compliance Effective sales cam- The right products for with customer paigns in cooperation the right customer agreements with customers Selling the right products to the right customer generates profitability for both The sales force ensures compliance with Marketing campaigns are typically com- Cloetta and for the customer. Cloetta’s central agreements and that the agreed bined with sales promotional activities in sales force is well located and effective, range of products is found in the stores. stores. The sales force helps retailers to which provides good opportunities for a display these in the best way. presence at many different sales points.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Brand, category and product development 29
Impactful campaigns WORDS WORDS FR O M TH E PRESIDENT
A N D GOALS GOALS STRATEGIES - MARKET THECON FECTI O N ERY - B R A N D, VELOPMENT CAT EG O RY & Skipper’s Pipes in the DE PRODUCT
2019 Danish election There is a general tendency in society for Aakkoset politicians and people to speak more than M A I N
– brand re-launch they listen. Ahead of the Danish election, MARKETS CLOETTA’S CLOETTA’S The classic Finnish candy bag Aakkoset has the ambition for Skipper’s Pipe was to make undergone a comprehensive re-positioning people’s ears bigger and their mouths and brand upgrade during the year, encom- smaller, i.e. encourage people to listen more. passing new packaging design and broad Which was the background to the message: communication. The new distinctive identity Stik Piben ind (stick a pipe in your mouth). CHAIN was launched in spring as a multi-channel Politicians received Skipper’s pipes and SUPPLY strategy including high impact presence postcards with the message “Stik piben ind” at Helsinki railway station. Communication which was supported by a campaign web achieved significant attention value and site, print advertising, outdoor posters, post- Malaco Gott & Blandat was well liked, contributing to record-high cards with pipe stickers in cafés and train salty liquorice 30% less market share during summer. stations, digital screens in city centers and activities in social media. In total, 55,000 EMPLOYEES sugar pipes were handed out as samples. New choices continue to support growth in the core markets. Sweden’s most popular mixed bag range, Gott & Blandat, gave the consumer new choices with the launch of a SHARE- new mixed bag of salty liquorice with 30% HOLDERS SHARE AND AND SHARE less sugar. The launch was supported by media campaigns and visibility in stores. - MANCE PERFOR FINANCIAL FINANCIAL
Venco – continued RISKS success for the Netherland’s number one liquorice brand In 2019 Cloetta continued to build on the STATEMENT story of the Venco brand. The objective CORPORATE GOVERNANCE GOVERNANCE was to both further strengthen the “Typical Dutch” brand positioning, and also to build Läkerol relaunch – Anytime, Anywhere a new position within sugar-free liquorice. Läkerol is the refreshingly tasty pastille, that you can allow yourself to enjoy anytime, any- The campaign built on communications in where. This year’s campaign for Läkerol set out to re-establish Läkerol in consumers’ minds 2018 which included this new message. The and make the brand more relevant in consumers’ everyday life. TV campaigns combined with REPORTS campaign was rolled out through all relevant campaigns in other media reached consumers, driving increased awareness of the brand. FINANCIAL media channels; TV, online video and social In Norway Läkerol launched the world’s biggest pastille box which successfully created a lot
media, combined with in-store sampling, of awareness around the brand. In Sweden Läkerol took part in the pink ribbon campaign, displays and promotions. driving significant consumer interest in the brand and the campaign itself. ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 30 Brand, category and product development
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 purpose: “We believe in the Power of True Joy”.
Ahlgrens bilar is a car-shaped foam that a large majority of the Swedes love and enjoy. The original flavor and elegant design have remained unchanged since 1953, when Ahlgrens’ candy factory decided to try to manufac- ture marshmallows. The result was not as expected; instead it turned out to be 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. Sold in: Sweden, Norway, Denmark, Poland, Thailand and the US.
Aakkoset has been a beloved Finnish candy bag classic since 1970. It has a bold, diamond-patterned design and clever, playful messaging. Aakkoset translates to “alphabets” and the Bridge slogan “literally good” encapsulates Aakkoset’s positioning is a candy mix that was created in 1966 as the ultimate indulgence for sweet cravings. when some employees were playing the Sold in: Finland and travel retail. card game 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 Candyking/Karamellkungen varied delicious flavours in a bag; including allows you to put together the most delicious sweets on the market chocolate-coated hazelnuts, liquorice and lets you mix things your way. Sour, sweet and salty. Hard, soft sticks and peppermint drops. and chewy. The original brand, Candyking, in Sweden known as Sold in: Sweden, Norway and Denmark. Karamellkungen, has been developed over 30 years. Sold in: Sweden, Denmark, Norway, Finland, the UK, Ireland, Poland and the Baltics.
Center has been around since 1941 when the roll was first launched in Sweden. Center is the tasty roll at the center of attention – just unroll a piece and enjoy! Sold in: Sweden, Norway, Denmark, Estonia and Finland.
Chewits has a strong brand heritage, launched in the UK in 1965 as a chewy sweet for children. Known for its unique chewy texture, the range of delicious fruity chews are individually wrapped in stick packs, sold in multi-packs and sharing bags. 2019 saw the Familie Guf launch of a new colorful pack design with “Chewie is a well-known and beloved brand in Denmark and is the best-selling the Chewitsaurus” the cheeky dino who likes to product within Cloetta Denmark. Familie Guf is a very inclusive brand chew. Newest to the range are Chewits Juicy Bites, and celebrates all different kinds of families with the slogan: ”Candy for liquid-filled bon-bons with a juicy strawberry flavour. all kinds of families.” Even the mix of candy in the bag is diverse, consist- Sold in: the UK, Ireland, Norway, Finland, ing of both sweet and salty liquorice, wine gums, foam, caramel etc. the Baltics, Russia and Belarus. Sold in: Denmark and Sweden.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Brand, category and product development 31
WORDS WORDS FR O M TH E PRESIDENT The Jelly Bean Factory
offers 36 different flavors of gourmet jelly beans, made from 100 per cent natural flavors and fruit
juices. Free from gluten, gelatine and nuts. The A N D GOALS GOALS Jelly Bean Factory was established in 1998 in Ireland. Every day over 12 million gourmet jelly STRATEGIES beans are manufactured in the factory in Dublin,
packaged in a wide range of playful formats. - “The most juicy, mouth-watering jelly beans on the planet.” Jenkki is the market-leading chewing
Sold in: around 50 countries worldwide, mainly MARKET gum brand in Finland, where it was THECON in the UK, Sweden, Germany, the Netherlands, FECTI O N ERY Switzerland, Austria, the Baltics, Russia, Canada, launched in 1951. Since 1975 the
the US, Cyprus, Portugal, Spain, Israel, China, brand has been sweetened with the - Singapore, Australia and New Zealand. dental innovation xylitol, and has thus become a smart tooth-friendly habit for Finns: a breath freshener
and a nice little treat- B R A N D, VELOPMENT ment after each meal. CAT EG O RY & PRODUCT DE PRODUCT Sold in: Finland and Estonia.
M A I N MARKETS Juleskum CLOETTA’S is the original that has become a natural part of the Swedish Christmas tradition. Cloetta started making marshmallow Santas as early as the 1930s. Each year a limited edition is released, this year with a “polkagris” taste. Although Juleskum is only sold CHAIN
around Christmas, it is the third largest-selling candy bag in SUPPLY Sweden on an annual basis. Sold in: Sweden, Norway and Denmark. EMPLOYEES
King The De Vries family started producing peppermint in 1902, and from 1922 under the SHARE-
brand name King. Over time, the brand has HOLDERS evolved from a simple throat lozenge into a AND SHARE modern breath freshener. Today, after nearly
100 years, it still contains the same secret - peppermint blend that makes King so loved by many Dutch consumers.
Sold in: the Netherlands, Belarus, Belgium, MANCE PERFOR
Canada, Lithuania, Suriname, the UK and FINANCIAL Kexchoklad the US. 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 fill up their energy reserves. RISKS Sold in: Sweden, Denmark and the Baltics.
Lonka STATEMENT CORPORATE CORPORATE
are soft and delicious sweets made with passion and high quality. GOVERNANCE Since the first Lonka factory opened in 1920 in the Netherlands, Lonka has been providing consumers with traditional favorites like caramel, fudge, soft nougat and chocolate. Lonka products make coffee and tea moments more indulgent. Sold in: Benelux, Sweden, Denmark, Germany, the UK, Spain, Switzer- REPORTS land, France, South Korea, Latvia, Singapore and South Africa. FINANCIAL
ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 32 Brand, category and product development
New design 2019! Läkerol is a classic brand and the tastiest refresher for all occasions – “anytime and anywhere.” The first box was sold in 1909. In 2019 the brand was given a design make-over and an extensive media cam- paign supported the re-launch. Läkerol comes in a variety of flavors and is perfect when you want to soothe your throat, freshen your breath or just fancy something tasty. Läkerol YUP is the fresh and soft pastille sprinkled with a thin layer of xylitol crystals, with the perfect balance of sweet and sour. Läkerol Dents is the most delicious way to take care of your teeth. Läkerol makes people talk. Sold in: Sweden, Norway, Denmark, Finland, Germany, Benelux, Switzerland, the US, Singapore, Suriname, India, Hong Kong and Lebanon.
Mynthon is the leading pastille brand in Finland, where it was launched in 1976. Fresh and effective is the essence of the brand. Mynthon consists of chewy, hard and com- pressed pastilles in a variety of tasty flavors. In 2012, chewing gum was also launched under the brand. Sold in: Finland, Malaco Norway, Germany, offers a wide variety of confectionery products. the Baltics and The name Malaco comes from the first letters of the Belarus. company name Malmö Lakrits Compani, founded in 1934. Over the years, many new products have been launched under the brand, such as Gott & Blandat, TV MIX, Aakkoset, Familie Guf, Lagerman Konfekt and Kick. Quite simply – Saturday all week long. Sold in: Sweden, Denmark, Finland, the Baltics, Germany, Israel, Italy, Malta, Russia, Thailand, the UK and the US.
Nutisal is the Group’s nut expert as of 2014. The business started in a shop in Beirut, Lebanon. Back in 1948, a unique ‘dry-roasting’ method Plopp was developed for roasting without oil. Nutisal is the bar for indulging yourself or someone close to your took this technology to Europe and created a heart. Originally introduced in 1949 Plopp is loved by many range of dry-roasted mixes that was launched for its good milk chocolate and its sweet liquid toffee filling. In in 2007. Since no oil is used in the process, the 2018, Plopp expanded its brand by launching milk chocolate consumer can enjoy the genuine taste of nuts. tablets with exciting flavors from the candy, chocolate and Sold in: Sweden, Denmark, Finland, the snacks portfolio. Netherlands, Switzerland, Suriname, Italy and Sold in: Sweden. Latvia.
Polly was launched in 1965 and is the leading brand of bagged chocolate on the Swedish market. It’s Pops impossible to eat just one. Polly is delightfully chewy Pops are one of Norway’s foam drops, covered with chocolate. The original is best-kept and tastiest secrets flavored with vanilla, arrack and butter toffee. Polly is – bags of light and airy choco- also the candy that surprises, for example Polly with late bites. Pops is fun to share, a taste of Ahlgrens bilar. perfect for the weekend Sold in: Sweden, Finland, Denmark and Poland. treat and enjoyed by the whole family. Sold in: Norway.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Brand, category and product development 33
Red Band has roots going back to 1928. Since its start, the Red Band WORDS WORDS FR O M TH E
brand has built up a leading position in the Dutch and German PRESIDENT confectionery markets with a promise to deliver fun, quality and pleasure. The classic Wine Gum Mix, the original Drop
Fruit Duo’s 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 A N D
version, the 30% less sugar and the vegetarian version. GOALS
Sold in: the Netherlands, Belgium, Austria, Switzerland, the Sisu STRATEGIES Baltics, Canada, France, Ireland, Kosovo, Suriname and was launched in Finland in 1928 and it is a Taiwan. liquorice pastille flavoured with a secret Sisu - aroma. Sisu is named after the true nature of the Finnish people. The word ‘sisu’ means guts, endurance or relentless courage. For MARKET the Finns, Sisu is part of the Finnish spirit THECON FECTI O N ERY that no other brand can replace. With Sisu,
you can do it. Sisu comes in several flavors - Skipper’s Pipes packaged in boxes. was established in 1920 and is a Sold in: Finland. unique product due to its pipe shape and pink or yellow sprinkles on top, B R A N D, resembling embers. Today there are two different versions; sweet or salty liquorice. The origi- VELOPMENT CAT EG O RY & nal liquorice pipe has been a great success and is iconic for thousands of Danes, and is proba- DE PRODUCT bly one of the most photographed pieces of candy! The pipe is 80% hand-made and packed.
Sold in: Denmark, Sweden, Norway, Finland, Greenland, The Faroe Islands and Estonia. M A I N MARKETS Sportlife CLOETTA’S 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’s brand positioning is “unex- CHAIN pected freshness” and has an international brand profile. In SUPPLY 2015 Sportlife launched its best-selling flavors in tubs. Sportlunch Sold in: The Netherlands, Belgium and Suriname. is a crispy wafer generously coated with pure milk chocolate in easily breakable pieces. Sportlunch was launched in Sweden in 1937, under the name “Mellanmål” and the name was changed to Sport- lunch in 1996.
Sold in: Sweden, Norway, Estonia and Lithuania. EMPLOYEES
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- MANCE
Tupla PERFOR FINANCIAL FINANCIAL was launched in 1960 and is the number one chocolate bar in Finland. Tupla means ´double´ in Finnish and Tupla original contains two pieces that are filled with energy and easy to share. The original Tupla has a cocoa nougat filling covered with milk chocolate, with a twist of saltiness and roasted almonds. The taste and texture of Tupla is fuel for the body and attitude. Tupla comes in different flavors and sizes, and since 2015 also as a sport bar Tupla+, which contains protein.
Sold in: Finland, the Baltics and Russia. RISKS Venco was launched as early as 1878 and is the leading liquorice brand in the Netherlands. STATEMENT Venco has ‘a passion CORPORATE GOVERNANCE GOVERNANCE for liquorice’, which is TV mix delivered in a wide range of unique, iconic and top-selling has been an important part of Finnish weekend items like chalk and honey liquorice. When the Dutch think candy since 1989. It is the most versatile mixed of liquorice, they think of Venco. In 2019 Venco launched bag combining best-selling pick & mix candy with a sugar-free range with three different flavors: Sweet, Salt
exciting novelties. Perfect for sharing with your and Honey. These sugar-free products are packed in small- REPORTS FINANCIAL FINANCIAL friends and family. er bags than the normal Venco products and the packaging Sold in: Finland. is re-sealable.
Sold in: the Netherlands, Belgium, Germany, Israel, South Africa and Suriname. ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 34 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 include Sweden, Finland, the Netherlands, Denmark, the UK, Germany and Norway.
Main markets – countries where Cloetta has its own • organization. Sweden Finland Countries where Cloetta’s products are sold • primarily through distribution agreements. • Share of Cloetta’s sales. Norway 31% 21% 5% UK The 7% Netherlands 10% Denmark 14% Germany 6%
International Markets 6% Market size and growth rates have been calculated based on new data to Cloetta for 2019, comparative figures have also been adjusted.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Cloetta’s main markets 35
WORDS WORDS FR O M TH E PRESIDENT
Sweden
A N D Sweden is the largest single market in the Nordic region, with around one third GOALS of the total confectionery consumption. The total market grew in 2019. STRATEGIES - MARKET THECON FECTI O N ERY
Share of Population Top-selling brands - Cloetta’s sales B R A N D, VELOPMENT CAT EG O RY & 10.2 DE PRODUCT 31% million
SWEDEN M A I N MARKETS CLOETTA’S CLOETTA’S Market size Cloetta’s largest CAGR Cloetta’s presence customers 2014–2019 Candy Chocolate CHAIN
Axfood, SUPPLY Consumer sales Pastilles
Coop, ICA, Source: Nielsen of approx. Chewing gum Bergendahls SEK 16bn Nuts and Privab 1.6% Pick & mix EMPLOYEES
Cloetta’s sales and competitors Categories, Sweden
In Sweden Cloetta is the market leader in candy and pastilles, Confectionery market excl. pick & mix Mondelez (including the Marabou brand) in chocolate and Wrigley’s Chewing gum 11% u in chewing gum. Overall, Cloetta is the second largest player in the SHARE- t Candy and pastilles 34% HOLDERS Swedish market for packaged confectionery, with a share of around AND SHARE
23 per cent (23). Mondelez has approximately 30 per cent (30) of the market. The retail chains’ private labels have a share of around 3 per - cent (5) of the confectionery market and 43 per cent (42) within nuts. Pick & mix, an important category that accounts for 30 per cent MANCE PERFOR of the total market, is not included in the market shares above, but FINANCIAL through contracts with retailers Bergendahls and ÖoB, the acqui- Chocolate 55%u sition of Candyking and sales of candy to other pick & mix players, Source: Global data Cloetta is the market leader in this category.
Sales channels Largest players, Sweden RISKS The Swedish grocery retail trade is concentrated and increasingly Confectionery market excl. pick & mix centrally controlled, but with good opportunities for influence at the local store level. The task for Cloetta’s sales force is to ensure distri- Others 40%u t Cloetta 23% bution as well as placement and space in the stores in accordance with the central agreements, and also to provide the trade with support in STATEMENT CORPORATE CORPORATE implementing campaigns and launches. The pick & mix concepts are GOVERNANCE handled by a dedicated sales and merchandizing organization. #2 The service trade is a vital sales channel. In recent years, alterna- tive sales channels like building supply stores, movie theatres, arenas, t Mondelez 30% etc., have become increasingly important. REPORTS Fazer 7% p Source: Global data FINANCIAL Organization
In Sweden, there are a total of around 300 employees including the sales and merchandizing organization and the office in Malmö. ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 36 Cloetta’s main markets
Finland
Finland is the third largest market in the Nordic region, with around one fifth of the region’s total confectionery consumption. The Finnish market grew in 2019.
Share of Population Top-selling brands Cloetta’s sales 5.5 21% million FINLAND
Market size Cloetta’s largest CAGR Cloetta’s presence customers 2014–2019 Candy Chocolate Consumer sales Pastilles S-Group, Kesko of approx. Chewing gum and Tokmanni Nuts Source: SOK SEK 12bn 3.2% Pick & mix
Cloetta’s sales and competitors Categories, Finland Cloetta is the second largest player in the Finnish market, with a share Confectionery market excl. pick & mix of around 25 per cent (25) of packaged confectionery. The market Chewing gum 7% q leader is Fazer, with approximately 40 per cent (40) of the confection- t Candy and pastilles 45% ery market. The private labels of retail chains have a share of around 8 per cent (8) of confectionery sales in the Finnish market. Cloetta is the market leader in pick & mix which represents about 10 per cent of the total market value.
Sales channels The Finnish grocery retail trade is dominated by two players, Kesko Chocolate 48%p and S-Group. Lidl has a larger share of retail trade compared to the Source: Global data other Nordic countries with 10 per cent. Finland has the most central- ized purchasing of all the Nordic region markets which enables new products to achieve wide distribution and become quickly available to Largest players, Finland consumers. Confectionery market excl. pick & mix
Organization Others 29%u t Cloetta 25% In Finland, there are around 200 employees in the sales and mer- chandizing organization and at the office in Turku. Cloetta Finland has one of the strongest sales organizations in the country, with 130 people in field sales, visiting stores every day. #2 Mondelez t Fazer 40% 6%u
Source: Global data
<< Back to contents Cloetta Annual and Sustainability Report 2019 Cloetta’s main markets 37
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The Netherlands
A N D The Netherlands is the sixth largest confectionery market in Western Europe. The GOALS Dutch market grew slightly in 2019 mainly driven by chocolate, candy and pastilles. STRATEGIES - MARKET THECON FECTI O N ERY
Share of Population Top-selling brands - Cloetta’s sales B R A N D, VELOPMENT CAT EG O RY & 17.1 DE PRODUCT
14% million NETHERLANDS M A I N MARKETS CLOETTA’S CLOETTA’S Market size Cloetta’s largest CAGR Cloetta’s presence customers 2014–2019 Candy Albert Heijn, Chocolate CHAIN Consumer sales Superunie, Pastilles SUPPLY of approx. Jumbo Chewing gum
Nuts Source: IRI SEK 25bn Supermarkten 4.4% and Maxxam Pick & mix EMPLOYEES
Cloetta’s sales and competitors Categories, the Netherlands
Cloetta is the largest player in the candy category in Holland with Confectionery market a market share of 21 per cent (20), and the second largest player in
the chewing gum market with a market share of 30 per cent (30). SHARE-
Chewing gum 14% u t Candy and pastilles 43% HOLDERS This has enabled the company to build strong relationships with the AND SHARE
Dutch retail trade. Cloetta’s share in the overall chocolate and sugar confectionery market is 10 per cent (10). The private labels of retail - chains have a share of around 9 per cent (9) of confectionery sales in the Dutch market. MANCE PERFOR FINANCIAL FINANCIAL Sales channels Chocolate 43%u The grocery retail trade is concentrated around a few major players. Source: Global data Primarily centralized purchasing allows for wide and rapid distribu- tion of new products that are launched. RISKS The hard discount retail chains have increased their share of the Largest players, the Netherlands market during the year, with a high proportion of private labels. Other Confectionery market important channels for confectionery are pharmacy and out-of-home. q Cloetta 10% Online grocery shopping has a stronger position in the Nether- Others 72%u lands than in any other of Cloetta’s main markets, despite the fact that t Perfetti 11% overall e-commerce is lagging in the Netherlands. STATEMENT CORPORATE CORPORATE t Mondelez 7% GOVERNANCE Organization #2 Cloetta has around 85 employees in the commercial organization at the office in Oosterhout mainly focusing on the Dutch market. The Oosterhout office also supports the Cloetta International Markets REPORTS division through back-office and support activities including demand, Source: Global data FINANCIAL customer service, marketing, business controlling and finance &
accounting. ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 38 Cloetta’s main markets
Denmark
Denmark accounts for around a quarter of the Nordic region’s total confectionery consumption. The confectionery market grew during the year.
Share of Population Top-selling brands Cloetta’s sales 5.8 10% million DENMARK
Market size Cloetta’s largest CAGR Cloetta’s presence customers 2014–2019 Candy Chocolate Consumer sales Coop, Salling Pastilles Source: Nielsen of approx. Group and Chewing gum Nuts Reitan SEK 11bn 2.5% Pick & mix
Cloetta’s sales and competitors Categories, Denmark Cloetta is the second largest player in the Danish market for candy Confectionery market excl. pick & mix and pastilles, with a market share of around 19 per cent (19). Haribo Chewing gum 7% q is the market leader with around 25 per cent (24). The private labels t Candy and pastilles 45% of retail chains have a market share of around 9 per cent (6). Cloetta is the leading pick & mix player in Denmark and has strong positions in both candy and nuts.
Sales channels Chocolate The grocery trade in Denmark is moving towards increasing cen- 48%u tralization, albeit with a combination of centrally driven chains and a more decentralized approach than in the other Nordic countries. Source: Global data Extensive efforts are therefore required at an individual store level to achieve distribution and sales of in-store display racks. Growth in the discount channel has ceased and new channels such as non-food Largest players, Denmark outlets and DIY stores are growing in importance. Candy and pastilles excl. pick & mix
Organization Others 42%u t Cloetta 19% In Denmark, there are around 100 employees at the offices in Brøndby and Randers and in the sales and merchandizing organization. #2
t Haribo 25%
Toms 14% p Source: Global data
<< Back to contents Cloetta Annual and Sustainability Report 2019 Cloetta’s main markets 39
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UK Germany
The UK is the second largest market Germany is the largest market in A N D in Western Europe and accounts for Western Europe and accounts for GOALS STRATEGIES 7 per cent of Cloetta’s sales. It is a market 6 per cent of Cloetta’s sales. The market characterized by fierce competition from is characterized by its large proportion - all international confectionery companies. of discounters and hard discounters. MARKET THECON FECTI O N ERY
Market size Market size - B R A N D, VELOPMENT Consumer sales CAT EG O RY &
Consumer sales DE PRODUCT of approx. of approx.
SEK 83bn SEK 109bn
UK GERMANY M A I N MARKETS CLOETTA’S CLOETTA’S Cloetta’s largest Top-selling brands Cloetta’s largest Top-selling brands customers customers Candyking Red Band The Jelly Bean Factory The Jelly Bean Factory Chewits Lonka CHAIN SUPPLY SUPPLY Source: Global Data Global Source: Lonka Lekkerland, Nutisal Source:Global Data Hancocks, Edeka, Kaufland, Wilko’s and Metro and Tesco Rewe EMPLOYEES
Cloetta’s sales Cloetta’s position and organization Cloetta is the market leader in pick & mix in the UK with the Candy- Cloetta is primarily active with the wine gum and liquorice brand king concept. However, pick & mix is still a very small segment of the Red Band and the premium brand The Jelly Bean Factory. Lonka
confectionery market in the UK. In addition, Cloetta is a strong niche and Nutisal are also sold in Germany. Through its strong heritage in SHARE- HOLDERS player with the premium brand The Jelly Bean Factory. Cloetta also wine gum and liquorice products, Cloetta Germany has built a sus- AND SHARE
sells the Chewits brand to multiple channels and Lonka to discount tainable position with a candy portfolio covering different segments
and Cash & Carry in the UK. in the market. The Red Band premium standing pouch product line - The Candyking concept is sold and delivered direct-to-trade is clearly seen as a differentiator by both the German consumer and whereas a distributor model is used for Chewits and Lonka. The Jelly trade buyers. MANCE PERFOR Bean Factory is distributed via multiple distributors. FINANCIAL Organization Organization Cloetta has its own small organization in Bocholt, Germany with 12 Both the pick & mix business and the branded packaged products employees. The office takes care of customer contact and the brands, business are commercially managed out of Cloetta’s office in Fare- and also has direct contact with all the large customer groups, which RISKS ham. Cloetta has a sales and merchandizing team of approximately are supplied directly out of the logistics center in central Germany. 130 people. To ensure full country service coverage, Cloetta Germany works with 6 different agents and over 60 sales representatives representing Cloetta. STATEMENT CORPORATE CORPORATE GOVERNANCE GOVERNANCE REPORTS FINANCIAL FINANCIAL
ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 40 Cloetta’s main markets
Norway International Markets Norway is the smallest market in the International Markets accounted for Nordic region, with just under a fifth of the 6 per cent of Cloetta’s sales in 2019. region’s total confectionery consumption and accounts for 5 per cent of Cloetta’s sales. The volumes in the Norwegian con- fectionery market increased in 2019. Market size
Consumer sales of approx. SEK 13bn NORWAY
Cloetta’s largest Top-selling brands Cloetta’s largest Top-selling brands customers distributors Red Band The Jelly Bean Factory Continental Läkerol Coop, Sweets (Belgium), Source: Nielsen NorgesGruppen Tosuta (Canada) and Rema 1000 and Spiwag (Switzerland)
Cloetta’s sales and competitors Cloetta’s sales Cloetta is the third largest player in the Norwegian confectionery International Markets consist primarily of sales to countries where market, with a market share of 8 per cent (9). The market leaders are Cloetta does not have its own sales and marketing organization, a Mondelez with 37 per cent (38) and Nidar (owned by Orkla) with 22 total of more than 50 markets. Sales to International Markets are per cent (22). Cloetta is the leading player in the candy category and split into four regions, Americas, Asia-Pacific (APAC), Middle East Cloetta is also the leading pick & mix concept provider with approxi- and Europe (including Africa). mately one third of the market. The main markets are Switzerland, the Baltics, Canada, USA, In 2019, the sugar tax was reduced back to the level it was at prior Middle East and Hong Kong/Singapore. In these markets Cloetta to the 2018 increase. This has had a positive effect on the confection- focuses on three categories, candy, chocolate (indulgent) and pas- ery market in Norway with increased volumes. tilles, which encompass six strategic Cloetta brands including The Jelly Bean Factory, Red Band and Läkerol plus some strong regional Organization Cloetta brands. In Norway, Cloetta has around 65 employees at the office in Høvik just outside of Oslo and in the sales and merchandizing organization. Organization All markets within International Markets are serviced by external distributors managed out of regional hubs, which Cloetta has in APAC, the Baltics and Switzerland. A new hub for Middle East has Largest players, Norway been established in Dubai. All other distributors are managed by Confectionery market excl. pick & mix local Cloetta staff in Oosterhout, The Netherlands. q Cloetta 8% Others 18%u
Brynhild 7%u Conaxess #3 8%u
t Mondelez 37%
Nidar (Orkla) 22% p Source: Global data
<< Back to contents Cloetta Annual and Sustainability Report 2019 Supply chain 41
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Supply chain A N D GOALS GOALS STRATEGIES - MARKET THECON Cloetta has a total of eight factories, located in Sweden, Slovakia, the Netherlands, FECTI O N ERY - Belgium and Ireland. The company produced a total of approximately 106,000 tonnes of candy, chocolate, chewing gum, pastilles and nuts in 2019. B R A N D, VELOPMENT CAT EG O RY & PRODUCT DE PRODUCT
M A I N MARKETS CLOETTA’S CLOETTA’S During 2019, the supply chain organiza- and safety work is focused on two areas. workplace safety and employee health. As an tion was re-organized into five functions: Firstly, Cloetta is working to reduce physical example, a new Head of Health and Safety manufacturing, technology, supply chain, risks in its factories and other places of work, has been recruited to accelerate Cloetta’s strategy development and the support or- and the second focus is on promoting a safety efforts in the area.
ganization. These functions are responsible mindset. CHAIN SUPPLY SUPPLY for manufacturing, technology, safety, the In 2019 Cloetta continued to reduce the environment, planning, logistics, purchas- risks by investing in safety systems for ma- ing, quality, value engineering and project chine isolation and through new routines for management. chemicals management. The company also Lost Time Incident Rate (LTIR) Furthermore, Cloetta started a new worked on strengthening the safety mindset (LTIR is absence due to an incident (for more Leading Performance program during the through its Hearts and Minds program. than 24 hours) per 1,000,000 hours worked.) EMPLOYEES year, with a vision to create the Perfect Fac- During the year, the Total Incident Rate Number 10 tory. The program is a continuation of the (TIR) reduced by 30 per cent from 133.7 to previous Lean 2020 program and will im- 94.3. Despite this, the Lost Time Incident Target prove efficiency even further, reduce waste Rate (LTIR), which is absence due to an 8 2019 and leftovers, as well as create increased injury, increased from 6.2 to 6.7. This means SHARE- HOLDERS flexibility and capacity in the factories. The that the 2019 target of 5.0 was not achieved. 6 AND SHARE
program involves improving Operational In all instances the employees returned to
Excellence, as well as strategic investments work in their full capacity. 4 - to modernize the factory network. Cloetta is naturally not satisfied with
this result and is determined to drive health 2 MANCE PERFOR Health and safety and safety even harder. The underlying FINANCIAL Health and safety in the workplace are fun- causes have been analysed and Cloetta has 0 damental to Cloetta. The company’s health dedicated more resources to strengthening 2017 2018 2019 RISKS STATEMENT CORPORATE CORPORATE 106 GOVERNANCE thousand tonnes REPORTS
1,680 FINANCIAL produced FACTORY
2019 8 EMPLOYEES ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 42 Supply chain
Management systems methods are essential for manufacturing outlines requirements to manage product Cloetta has a central management system to high-quality confectionery. safety, integrity, legal compliance and qual- ensure standardized working methods in its Continuous efforts are made to ensure ity, and the operational controls in the food operations. Each production unit has a local- that products meet the requirements and industry. ly adapted management system that is linked expectations of consumers and retailers. To support and facilitate compliance to the central system. Central policies, goals with BRC and EU regulations, Cloetta has and procedures are broken down and imple- Quality and safety of raw materials also developed its own Good Manufacturing mented at a factory level. Suppliers are selected, evaluated and Practice (GMP) Manual, aligned and updat- The management systems cover the approved against a defined set of criteria. ed with the best reference standards in the workplace environment, quality, product The performance of suppliers is monitored food industry, which is being implemented in safety and the environment. These systems through a risk-based supplier audit program all factories. Internal independent auditors are based on international standards (BRC carried out by a specially trained audit team. monitor that implementation is effective. Global Standard for Food Safety, ISO 14001 A risk-based control plan is used to check Each factory receives an audit score and for the environment), recurring risk assess- that raw material is delivered in conform- requirements for improvement plans along ments and continuous improvements. ance with the specifications and EU regula- with new target scores to be achieved for One important aspect of this working tion requirements. continuous improvement. method is a systematized meeting structure Cloetta also has a Food Safety & Fraud for monitoring of results against targets, to Team to ensure timely knowledge of emerg- Products detect both deviations and proposals for im- ing risks from the supply chain. The team For each product there is a detailed spec- provement. Goals and results are visualized implements measures to prevent undesirable ification of the flavor, aroma, appearance, on screens in the factories, to provide knowl- effects on products and the brands. texture and package. A central sensory panel edge about the current situation, which helps carries out training and adaptation across to raise awareness and engagement of the Manufacturing the Cloetta factories to ensure that qualified employees. Actions can be taken immediate- Management of food safety in manufactur- tasters are in place to monitor the perfor- ly in the event of deviations and systematic ing is based on the HACCP method (Hazard mance and conformity of the products. follow-up enables proactive improvements. Analysis Critical Control Points) whereby Cloetta’s tracking system enables Read about Cloetta’s environmental risks of chemical, biological, microbiological, tracing of all raw materials from suppliers work on pages 48–49. and physical contaminants are identified through all stages of manufacturing and and managed to eliminate and minimize any product shipping to the customers, and vice Quality and product safety conceivable risks to consumers. versa. Cloetta places rigorous demands on quality All of Cloetta’s factories are certified Cloetta has established a detailed pro- and product safety. First-class raw materials according to the BRC Global Standard for cess which enables rapid recall of a product and correct treatment and processing Food Safety, an international standard that from the market if needed.
<< Back to contents Cloetta Annual and Sustainability Report 2019 Supply chain 43
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Vision for the Perfect Factory through
Cloetta’s Leading Performance Program A N D GOALS GOALS (CLPP) STRATEGIES - In 2019 Cloetta took the next step towards its vision for the Perfect Factory. MARKET Through cross-functional teams and high participation from the factory floor, THECON FECTI O N ERY
reliability has improved, and the amount of waste and leftovers has further - decreased. B R A N D, VELOPMENT CAT EG O RY & PRODUCT DE PRODUCT
M A I N MARKETS CLOETTA’S CLOETTA’S CHAIN SUPPLY SUPPLY EMPLOYEES
SHARE- HOLDERS SHARE AND AND SHARE
- MANCE PERFOR FINANCIAL FINANCIAL RISKS
• Team-centric, activity-based • Reliable equipment that is pro- • Engaged, visible leadership team staffing. actively maintained based on that reinforces the desired culture defined standards and repaired with regular performance dialogue • Engaged, cross-trained employ- efficiently when down. and improvement measures. STATEMENT ees, relentlessly driving improve- CORPORATE GOVERNANCE GOVERNANCE ment using Lean tools. • Digitalized information visualization from every line. Real-time metrics • Stable processes operated with and continuous dialogue so as to up-to-date standard work instruc- correct gaps between current and tions. Use of statistical process REPORTS target performance. FINANCIAL control to ensure predictability and to identify and correct deviations.
ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 44 Supply chain
Complaints, feedback per million contacts the relevant factory. The factory factories will take place in 2020. The system consumer units sold uses the information from complaints to will also provide data for financial planning Number systematically identify root causes and and long-term sales and production planning Goal 2019 10 <7.6 eliminate them. to ensure that all functions in the Group are coordinated. Cloetta works continuously 8 Planning and logistics to optimize its flows and working methods, Effective production planning leads to less both internally and externally, together with
6 capital being tied up in the form of invento- customers and suppliers. ries of both raw materials and finished prod- ucts, while also increasing service levels. Purchasing 4 Delivery accuracy is one of the most critical Cloetta’s largest cost items in production are parameters for the retail trade. To ensure a raw materials and packaging. 2 high level of service and effective utilization Cloetta collaborates closely with its of the network of factories, Cloetta has de- largest raw material suppliers, among other 0 veloped a process for the entire supply chain, things through automated order and delivery 2017 2018 2019 from raw materials to customers. processes that are adapted to raw material In 2019, Cloetta commenced a project consumption in each factory. Consumer and customer feedback to implement a new planning system for Cloetta’s range includes products that Feedback from individual consumers is the supply chain, which will encompass the are produced by other manufacturers. extremely valuable in Cloetta’s pursuit of planning processes from demand forecast- External production is only outsourced to continuous improvement. ing in all markets, service and inventory manufacturers with the same high-quality Each market has a Consumer Service optimization, delivery planning, scheduling standards that are applied to production in unit that receives, evaluates and responds and integration of third-party suppliers. The Cloetta’s own factories. External manufac- to feedback and complaints. In the event of system was implemented as a pilot at the turers are evaluated and tested regularly. quality defects, Consumer Service always end of 2019 and roll-out to all markets and
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Success factors for manufacturing
A N D GOALS GOALS STRATEGIES - MARKET THECON Employee health Flexibility Cost efficiency FECTI O N ERY and safety A production line is often used for several Cloetta’s sales are based on large - different products. Rapid changeovers volumes. Cost efficiency is necessary in A healthy and safe workplace environ- and cleaning are vital for high machine order to stay competitive. ment is a fundamental right for each em-
capacity utilization. Flexibility also B R A N D, ployee. Being and feeling safe at work is VELOPMENT CAT EG O RY &
means that each employee knows how to DE PRODUCT essential in order to develop and perform work on more than one line. well in the workplace.
M A I N MARKETS CLOETTA’S CLOETTA’S CHAIN SUPPLY SUPPLY EMPLOYEES
SHARE- HOLDERS SHARE AND AND SHARE
- MANCE PERFOR FINANCIAL FINANCIAL RISKS
Delivery accuracy High and Engaged employees Good production planning is essential consistent quality Good communication about processes for effective production and low ware- and goals creates engaged employees The goal is to always deliver safe prod-
housing costs, and also for delivery who understand the business and how STATEMENT CORPORATE CORPORATE
ucts with the required flavor, appearance GOVERNANCE accuracy to the customers. their work contributes to the Group’s and texture. overall results. REPORTS FINANCIAL FINANCIAL
ABILITY SUSTAIN- Cloetta Annual and Sustainability Report 2019 << Back to contents 46 Supply chain
Factories
Production at eight factories