Annual Report 2019 SUSTAINABILITY REPORT INCLUDED Use of interactive PDF This is an interactive PDF of Orkla´s Annual Report. Here are some explanations for using the navigation system. Sustainability Orkla Board of Directors Contents Sustainability Environmental engagement STEIN ERIK HAGEN Click on the Sustainable sourcing names for Nutrition and wellness info Safe products Chapters Care for people and society Flip through chapters or go to the contents page. Some pages have clickable elements that make Some pages have clickable elements that make navigation easier. navigation easier. Chapter summary Sustainable growth Sustainability 03 Environmental engagement Sustainable sourcing Introduction to Orkla Nutrition and wellness Safe products Message from the CEO Care for people and society 01 About Orkla Orkla Business Areas Orkla Foods Orkla Confectionery & Snacks Orkla Care Orkla Food Ingredients Orkla Consumer and Financial Investments Financial statements Annual Financial Statements Group 04 Notes Group Annual Financial Statements Orkla ASA Notes Orkla ASA Declaration from the Board of Directors Independent Auditor’s Report Historical Key Figures Alternative Performance Measures (APM) Board of Directors’ Additional information report Share information 02 Board of Directors’ report Add. info for valuation purposes Corporate Governance 05 The Orkla Board of Directors The Group Executive Board Governing bodies and elected representatives Group Directory Chapter 1 Sustainable growth with strong local brands In 2019 Orkla strengthened its position as a leading branded consumer goods company through organic growth and several acquisitions. We focused even more strongly on sustainability and saw growth for plant-based products. Jaan Ivar Semlitsch 01President and CEO 5 Message from the CEO Our vision is to be “Your friend in everyday life”, which means that House as my new place of work in August when I took up my we aim to meet consumer desires and needs with strong local duties as Orkla President and CEO. In my first few months, I have brands that respond to current trends. A growing number of our tried to visit as many of our businesses as possible. I have greatly launches are designed to satisfy demand for more eco-friendly appreciated these visits, through which I have become better grocery products, healthier food and plant-based products. We acquainted with the different parts of the Group and, not least, strive to inspire and delight, and we want to be where consumers with so many capable, competent and engaged employees. want to be. When I was given the job, I said that it was a dream come true In the past year, we have made a number of acquisitions in line and now, at the end of my first six months, I can only say that it with our strategy of growing in new channels. By purchasing has been even more exciting, challenging, inspiring, educational, Kotipizza, Lecora and Easyfood we strengthened our position motivating and fun than I could possibly have imagined. Every in the out-of-home segment. In the health drink segment, we day, I feel an enthusiasm, a sense of humility and great pleasure acquired 43.5 per cent of the Captain Kombucha brand, and we at being given the opportunity to head a group like Orkla, with so took over 20 per cent of Nói Síríus, an Icelandic chocolate and many competent people and strong local brands. confectionery manufacturer that holds several number one positions in the local market. Our strategy of being a leading branded consumer goods com- pany remains unchanged. We will continue to grow within our The purchases of Vamo, Zeelandia, Kanakis, Bo Risberg Import core areas and will seek to achieve growth both organically and and Confection by Design complemented Orkla Food through acquisitions. To succeed, we need to reduce the com- Ingredients’ position as supplier of ingredients and accessories plexity of our operations and prioritise the activities that create to the bakery and ice cream market. value, by strengthening our portfolio in high-growth categories, channels and geographies. A highlight in Orkla’s history was also marked in 2019 when Orkla House, the main base of the Nordic region’s largest In the past few months, we have made organisational changes branded consumer goods company, was completed in March. in Group functions in order to ensure that we are optimally More than 900 Orkla employees moved into a state-of-the-art equipped to face an increasingly difficult competitive situation. office building constructed to high environmental standards and offering a wide range of services for the general public. Our operational activities will be strengthened, and Orkla’s business areas will be given an even clearer mandate and I myself had the pleasure and honour of experiencing Orkla responsibilities. 6 Message from the CEO Sustainability has become a natural part of our business model, and we have drawn up criteria for our definition of sustainability products. In the past year, we have introduced climate impact labelling on TORO soup packets, launched crisps in recyclable packets and focused on plant-based products. We are committed to helping to solve the global health and sustainability challenges and to supporting the UN’s Global Goals. Through strong innovations, based on local consumer insight, we will continue to make each day better with local, sustainable brands. 7 About Orkla Orkla ASA is listed on the Oslo Stock Exchange and its A leading branded headquarters is in Oslo. consumer goods company mobilising for sustainable growth Orkla is a leading supplier of local branded goods with strong market positions based on local insight and presence and a sustainable business model. Orkla’s strategic objective is to strengthen its position as a leading branded consumer goods company in the Nordics, Baltics, Cen- tral Europe, India and other selected markets. Innovations based on the Group’s unique local customer and consumer insight are an important growth driver. Orkla’s business model revolves around taking leading positions in smaller markets. This gives the Group sufficient scale to exploit economies of scale and share best practices and resources, while also responding effectively to local consumer preferences through flexibility, local innovation and proximity to the market. In this way, Orkla will strengthen its long-term competitiveness and preserve its local presence. Vision, values and mission Orkla’s vision is to be “your friend in everyday life”. This vision is under- Orkla has worked systematically for many years to develop pinned by the values “brave”, “trustworthy” and “inspiring”. Orkla’s mission healthier products, with a more sustainable value chain that is to improve everyday life with local, sustainable and enjoyable local promotes public health and has a smaller ecological footprint. brands. 8 About Orkla Leading positions in selected Orkla’s ten largest categories Key figures markets Snacks Ready meals Operating EBIT Leader in the Nordics and Baltics Dehydrated casseroles, soups and sauces revenues (adj.) Orkla is the leading branded consumer goods Confectionery company in the Nordic and Baltic regions. Sauces and flavourings 43.6 5.1 Hygiene NOK billion NOK billion Unique customer and consumer insight Pizza Orkla is known for branded consumer Bread toppings products that hold #1 or strong #2 positions. Biscuits EBIT (adj.) Earnings Wash and cleaning margin per share Orkla’s products are sold in over 11.7% 3.84 NOK 100 countries. Number of Breakdown of sales revenues employees by geographical region¹ 18 348 Norway 27% Nordics ex. Norway 42% Baltics 5% Rest of Europe 23% Rest of world 4% ¹Excluding internal sales and other operating revenues. All alternative performance measures (APM) are presented on page 227. 9 About Orkla and consumer insight will be a main growth driver. Goals and strategy • Selected products will to a greater degree be launched in several of the Group’s markets. Sustainable, long-term value creation is Orkla’s first • Orkla will strengthen its presence in emerging sales priority channels and focus more targeted efforts on exporting Orkla’s aim is to strengthen the Group’s long-term com- selected branded goods. petitiveness and create higher growth and profitability, while • Incr eased investment in plant-based products based on preserving Orkla’s strong local presence. established positions will create growth opportunities. • Priority will be given to developing and strengthening Orkla’s strategic objective is to strengthen its position as a customer relationships, with a shared goal of profitable leading supplier of branded consumer goods and services in growth. the Nordics, Baltics, Central Europe, India and other selected markets. Improved profitability through simplification and improved operational efficiency throughout the value chain In line with the Group’s strategy and financial targets, activ- • Orkla will increase emphasis on exploiting economies of ities that drive organic growth and improve profitability are scale, reducing the complexity of its portfolio and creating prioritised. Bold investments that build on already strong cross-Group synergies. The Group will also extract syn- positions will spur organic growth. ergies through the integration of acquired companies. • Pr oduction will be concentrated on fewer production units Through acquisitions, Orkla will develop its operations in its where appropriate. Existing units will be further optimised, home markets and within selected geographical areas chan- for instance