Capital Markets Day 2019 Cloetta positioned for profitable growth 2 Cloetta Capital Markets Day 2018 Agenda • Welcome Jacob Broberg, SVP Corporate Communications & IR • Cloetta positioned for profitable growth Henri de Sauvage-Nolting, President and CEO • From volume focus to sustainable value creation Oskari Vidman, Chief Pick & Mix Officer • Building consumer centric growth Thomas Biesterfeldt, CMO • The Perfect factory Marcel Mensink, President Operations • Financial strategy and road to 14% Frans Rydén, CFO • Q&A • Summary Henri de Sauvage-Nolting Cloetta positioned for profitable growth Henri de Sauvage-Nolting, President and CEO 4 This is Cloetta 6.2 5 We bring a smile to your Munchy Moments 6 Cloetta’s strengths Strong brand/category positions and pick & mix scale in North Western Europe Cloetta’s strategic strengths Market Category position Chewing Pick & Candy Pastilles Chocolate • Strong leading local brands gum mix • Core markets in growing North 1 1 2 - 1 Western Europe 2 4 • Strong European leader in pick & 1 1 1 mix 1 2 3 - 1 • Scale benefits in North Western Europe vs local competition 2 1 3 - 1 • Route to market scale in core markets 1 - - 2 - • Locally tailored innovation - - - - 1 Based on Cloetta market share in respective category in 2018. 7 Strong heritage brands liked and trusted by our consumers Local Global Balance Local Global 8 Growth in Branded Confectionery market Value growth: Cloetta needs to step up in premiumization CAGR 1,6% 70 140 Index 60 120 50 100 SEKbn 40 80 30 60 20 40 10 20 160 gr 140 gr 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total market value* Index market value growth *Source: Datamonitor/ Mintel Markets: Sweden, Denmark, Norway, Finland and Netherlands 9 Focus on core markets and core categories From acquiring new munchy moment categories to organic growth CORE INTERNATIONAL 10 Core strategy: Organic growth and 14% EBIT From acquisition growth to organic growth 2018: Shift to organic growth • Consumer as boss 2017: Structure change • New management • Disposal of Italy • ONE Cloetta • Acquisition Candyking • Organic growth 2014: Harmonization • Overload moulded factory • Sharpened strategy on the network road to 14% • One ERP system • Factory rationalization & 2012: New company LEAN • Merger Cloetta-LEAF • Smaller acquisitions • Listed on Stock market • HQ in Stockholm 11 Cloetta Core Strategy “To bring a smile to your Munchy Moments” • Zero tolerance for accidents • Drive cost saving activities – • Strengthen the equity of our ”VIP+” core brands • Create “One Cloetta” • Embed ”Perfect Factory” and Lean • Focus on core categories and • Strengthen brand and category in the supply chain core markets, double international management competence • Insource production • Fewer and stronger innovations • CSR to drive consumer agenda Drive growth Drive to drive valorization growth Fund • Improve profitability in pick & mix • Create a winning culture • Create value concepts and • Improve marketing efficiency and • Develop, attract and retain penetration in pick & mix internal systems and processes Facilitate growth Facilitate skilled leaders and employees • Selective acquisitions on core categories and markets Target: Organic Sales growth in line with market and EBIT margin, adjusted – at least 14% 12 Key Business Priorities Cloetta to organic growth and 14% EBIT margin, adjusted • Branded business grew +1,5% at 14%+ EBIT in 2018 Branded growth • Four consecutive quarters of growth in 2018 Pick & mix • Pick & mix delivers 1-2% EBIT margin • Solve profitability issues in Sweden ~ SEK -60m EBIT to sustainable in 2018 value • Synergy realization and insourcing Reduce costs • Value Improvement Program+ and • Factory efficiency improvements drive efficiency 13 Cloetta Branded Business is growing Brands are 72% of total Cloetta sales 3% 2,4% 2% 1,6% 1,3% 1,4% 1% 0,6% 0,0% 0,1% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -1% 2016 2017 -0,8% 2018 -2% -2,4% -3% -2,7% -3,1% -4% -4,0% -5% 14 Unique position, fitting consumer trends Competitive position vs global and very local players Leading Platforms International Local across Brands Brands brands Local Multiple markets 15 Responsible growth Offering informed choice for consumer • Consumer as boss • NAF/NAC • Increased resource efficiency • Responsible sourcing of raw material (UTZ) • Employee development and health • Plastic reduction • “Choice for you” strategy 16 Offering consumers the choice Functional & Indulgence conscious 23 % of Sales 17 Sustainable value creation in pick & mix Short term 2019 & 2020 • Turn around EBIT in pick & mix in Sweden from ~SEK -60m in 2018 to average pick & mix EBIT • Contract and price models being re-developed • Cut cost in warehousing and distribution set-up in Sweden • Continue to insource Candyking volumes • Drive merchandising efficiency • Harmonize assortment 18 Sustainable value creation in pick & mix Medium term • Drive penetration in Finland, Denmark, Norway and the UK • Develop pick & mix category and brand offering • Develop concepts to fit all markets • Create “Shop in Shop” concept to get more value • E-commerce: – Scale e-commerce – ‘In-store theatre’ needs 19 Well-stocked road-map to deliver targeted 14% EBIT margin EBIT margin, % Other value enhancing initiatives Reduce indirects • New and shared best • New program using practices, including on Perfect Factory ZBB methodology revenue management, • Cost efficiency through net productivity, portfolio ≥ 14,0% Branded growth Cloetta Leading and mix management • Scale and speed in Performance Program innovation • Continued insourcing Pick & mix portfolio • Marketing Return including Italian volumes • Candyking synergies on Investment • Pick & mix margin 10,9% turn-around • From volume to value creation Value Improvement Program+ 2018 Mid-term From volume focus to sustainable value creation Oskari Vidman, Chief Pick & Mix Officer 21 Pick & mix – this is how it works Service concept not only selling individual products and brands Selling services Assortment Fixtures Merchandisers • Wide range of products • Play an important role in • Fill up products into • Consumer preferences a successful pick & mix fixtures vary by market concept: • Keep fixtures fresh and • Mainly products from ‒ Branding clean candy and chocolate perspective + categories ‒ How products are displayed 22 Pick & mix strengths Norway Finland 23% 17% ►Geographical spread UK Sweden • Very strong position in the Nordic countries 30% • High share of total confectionary consumption 1% Denmark 10% ►Consumer trend: Individualization • Pick & mix concept catering to consumers seeking to satisfy individual needs • Consumers choosing products and services individually Pick & mix share of confectionery market volume 23 Cloetta’s pick & mix sales by market Norway Finland 6 % 18 % Sweden Denmark 38 % 16 % The UK 17 % Other markets 5 % 24 Four pick & mix business models Bulk • Full concept covers everything from branding, 24% assortment and fixtures to merchandising • Trade own concept is similar to full concept but with Business Full concept a retailers own branding 55% Hybrid models • In Hybrid models e.g. merchandising can be 7% handled by the customer themselves Trade own • Bulk business is products sold to someone else’s 14% pick & mix solution 25 Candyking acquisition Synergies from insourcing and commercial operations • Most of the synergies from commercial operations delivered during 2018 • Insourcing in line with plan • ERP system integration in UK SEKm Accumulated synergy realization 120 • Sweden pick & mix turn-around to profit 100 100 80 80 60 55 40 20 0 2018 2019* 2020* *Planned 26 Sweden pick & mix turn-around to profit Need to address the ~ SEK 60m loss in 2018 • Harmonize product portfolio and manage tail-end to cut cost • Renegotiate or exit low margin contracts • Move campaigns from volume focus to profit as well • Re-develop contract and price models • Drive merchandizing efficiency through e.g. improved route-planning • Optimize distribution model to cut cost 27 Pick & mix Strategy From volume focus to sustainable value creation • Offer consumers the best experience in retail trade • Drive category development together with the customer • Deliver innovative products, packages and fixtures • Be the most effective supplier when it comes to merchandising and the efficient supply of goods 28 Pick & mix Strategy From volume focus to sustainable value creation • Fix Sweden profitability • Unique know-how in the category • Competitive advantage by providing concept solutions to trade and strengthening branding into USP • Channel strategy • Innovative fixture solutions • Efficiency from consolidated execution with branded business Building consumer centric growth Thomas Biesterfeldt, CMO Confectionary: an attractive market with positive emotions Marketing: leveraging capabilities to win 30 The consumer value The power of true joy! 31 Positive & fun category 92% of consumers have positive associations with candy Taste-related Needs-related Social-related Positive emotional fun enjoy life “reward myself Tasty Hygge brings happiness cheer me up togetherness, “can really look celebrate family forward achievement” to eating it!” Sweet Together-time all the colors makes me enjoyment happier Source: Insite Consulting, 2018. 32 Consumer Trends in motion… Conscious consumers Individualization Local relevancy Best agers 50+ High tech – high touch Digitalization – want it now 33 … and Cloetta in good position Local brand heritage Pick & mix “Nordic way of life” #Socialization