Slide 1: Turnaround case with significant potential
Turnaround case with significant potential Christer Åberg EVP & CEO, Orkla Confectionery & Snacks
Slide 2: Turnaround case with significant potential
Turnaround case with significant potential • Weakening results in recent years (especially 2013) – a turnaround case • Fundamentally stable markets, leading market positions and strong heritage brands • Potential to turnaround the business through clear revenue & cost initiatives 76
Slide 3: One of the largest Nordic confectionery & snacks companies
One of the largest Nordic confectionery & snacks companies Net revenue 2012: NOK 4.8 bn. Confectionery Snacks Biscuits NOK 1.8 bn. (37 %) NOK 2.2 bn. (46 %) NOK 0.8 bn. (17 %) • Chocolate confectionery • Potato chips • Sweet biscuits • Sugar confectionery • Cheese snacks • Savory / food biscuits • P
Slide 4: Norway and Sweden are the largest markets
Norway and Sweden are the largest markets Revenues (NOK bn.) per company and share of total Orkla C&S revenues NOK 2 bn. (41 %) NOK 0.8 bn. (17 %) Confectionery: NOK 1,200m Confectionery: NOK 350m Snacks: NOK 470m Snacks: NOK 410m Biscuits: NOK 300m Biscuits: NOK 60m NOK 1.1 bn. (22 %) NOK 0.2 bn. (
Slide 5: Local #1 brands with long heritage – over 90 years
Local # 1 brands with long heritage – over 90 years Top 5 brands (revenues) per category Confectionery Snacks Biscuits (1936) (1965) (1963) • # 2 milk chocolate in NO • # 1 snacks brand in DK, # 2 in NO • # 1 biscuit brand in SE (1988) (1967) (1968) • Unique sweet & salty combination • # 1 snacks br
Slide 6: Strong positions… but competition is increasing
Strong positions… but competition is increasing Market share vs. nearest competitor and PL (largest markets) Country Orkla Competitor Private Label Confect. NO 30 % 35 % (Mondelez) 2% EST (Kalev) 38 % 10 % (Fazer) NA SE 36 % 18 % (Estrella) 23 % Snacks DK (KiMs) 45 % 8 % (Frito Lay) 25 % NO 29 % 32
Slide 7: 2% stable market growth despite health trends
2 % stable market growth despite health trends Retail volume (‘000 tonnes) indulgence1 categories, Nordic countries The 90’s: The 00’s: 2013: Low fat diets Glycemic Index Clean Eating & Superfoods Bodies of supermodels like Kate Low Carb High Fat Less sugar & high protein Moss are worshiped “Strong
Slide 8: Per capita consumption in the Nordics among the highest in Europe
Per capita consumption in the Nordics among the highest in Europe - but still potential to grow Per capita consumption (kg) 2012 Orkla not present Orkla home market Confectionery 13.3 11.7 11.2 10.9 10.8 10.8 10.8 10.4 10.3 8.4 8.0 8.0 6.6 6.0 5.7 5.6 5.2 5.0 4.4 4.3 3.2 3.0 2.3 2.3 GER IRL FIN AUS
Slide 9: Local brands based on deep consumer insight are winners
Local brands based on deep consumer insight are winners Market characteristics Orkla competitive advantages Deep local consumer understanding Mainly local • Local organizations & value chain that can easily meet local needs preferences • E.g. chocolate taste, snacks spices & salt levels Local # 1 br
Slide 10: Weakened top and bottom line development in recent years
Weakened top and bottom line development in recent years Organic sales growth1 RTM EBIT (NOK million) EBIT margin (adjusted)2 2.5% 17.8% 18.0% 900 1.8% 15.9% 16.4% 15.4% 1.4% 800 0.5% 700 600 500 -3.6% Q4 Q4 Q4 Q4 2009 2010 2011 2012 RTM H1 2009 2010 2011 2012 H1 2013 2009 2010 2011 2012 2013 84 1.
Slide 11: What has caused this drop in results?
What has caused this drop in results? • Not enough focus on core business (# 1 and # 2 positions) and too many small scale innovations - while competition step-up • Nordic retailers now at European Private Label levels (snacks & biscuits in all markets except Norway) • Margin pressure – combination
Slide 12: Reaching our targets 2016
Reaching our targets 2016 Organic growth 2-4 % • Turnaround will require clear revenue growth and cost reducing initiatives • Improvement will be gradual EBIT margin > 16.5 % 86
Slide 13: Growing the top line - Overall
Growing the top line - Overall Must-Win Battles Actions • Back to growth on our core business – local # 1 and # 2 positions Regain focus • Further focus on where and how we make brand investments on core • Simplify brand portfolio and overall assortment • Increased cross-country & cross-category foc
Slide 14: Growing the top line – Innovation with focus on core
Growing the top line – Innovation with focus on core Example: Stratos – # 2 chocolate brand in Norway • Core product: Milk chocolate with air bubbles • Launched in 1936 Different formats: Small & big Different taste variants: Crunchy, in Across categories: bars, rolls, bags, mini bars etc. mixed bag
Slide 15: Growing the top line - The Baltic markets
Growing the top line - The Baltic markets Three very different markets: Estonia, Latvia, Lithuania • Different nationalities, languages, history, religions, national sports… • Different taste preferences, cuisine etc. Orkla C&S’s strength: Respond to local consumer and market specifics • Consumers’
Slide 16: Growing the top line – Attractive Baltic economies
Growing the top line – Attractive Baltic economies Real GDP growth (annual change, %) Latvia Lithuania Estonia 8.3% 5.9% 5.5% 5.6% 4.2% 3.6% 3.3% 3.2% 3.0% 3.0% 1.5% -0.9% 2010 2011 2012 2013E • Baltic economies among the fastest growing in EU • Category growth above economic growth (5-7 % historic
Slide 17: Growing the top line - Make Baltics really matter
Growing the top line - Make Baltics really matter • Net revenues (2012): NOK 240 million (+ 40 % 2010-12) • Key markets: Estonia • # 1 (38 % share) within confectionery (chocolate & sugar) • # 1 within biscuits (11 % share) • Net revenues (2012): NOK 85 million (+ 10 % 2010-12) • Key markets: Latvia
Slide 18: Cut costs by NOK 300 million in 2014-16
Cut costs by NOK 300 million in 2014-16 • Reduce overhead costs and improve go-to-market edge (2013-16) – Integration of companies in Norway, Sweden & Finland – from 7 to 3 (NOK 50-70 million) – Significant reduction of senior leadership & changes were required • Improve product cost & value (2014-1
Slide 19: Turnaround case with significant potential
Turnaround case with significant potential Gradual improvements towards 2016 target • 2-4 % organic growth • >16.5 % EBIT margin Growing the top line • Regain focus on our local core # 1 and # 2 positions • Fewer and more focused innovations – further initiatives across categories • One face to the