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New Cloetta becomes biggest player in Scandinavia and overtakes Kraft in Sweden – analyst

By Oliver Nieburg , 20-Dec-2011

Swedish confectioners Cloetta and Leaf have sealed a €753m merger making it the largest confectionery company in Scandinavia, according to an analyst from Euromonitor.

In an interview with ConfectioneryNews.com, Euromonitor’s senior research analyst in Scandinavia, Pasi Hannonen, said the merger would see the new company knock Kraft from its perch at the top of the Swedish confectionery market and help it become the eighth biggest confectioner in Western Europe.

“The new Cloetta will definitely be the biggest in the Scandinavian market”, he said.

According to Euromonitor figures before the merger in 2010, Leaf had a 2% market share within Western Europe, just inside the top ten, while Cloetta had just a 1% share and was within the top 20 in retail value sales.

Hannonen said the merger sees the companies take a combined 3% share, making it the eighth largest confectioner in Western Europe.

Sweden

According to Hannonen, Sweden is “where this merger will change the market the most”.

Kraft is currently the market leader in the country with a 24% share based upon retail value sales in 2010 from Euromonitor.

Before the merger, Leaf and Cloetta held a 13% and 14% share respectively. The merger would see it overtake Kraft with a 27% share, said Hannonen

“It has a good chance to be the biggest confectionery firm in Sweden,” he said, adding that this could happen as early as next year.

Finland

Euromonitor retail value sales figures from 2010 show that Leaf was the second largest player in Finland with a 21% market share.

The market leader is Fazer, a company which demerged with Cloetta in 2008 following what Hannonen called “an unsuccessful marriage” that ended when Cloetta did not share Fazer’s interest in Eastern European markets.

Hannonen said that since Cloetta had just a 1% market share in Finland, the new merged company would have only a limited impact on Fazer’s dominance, which has brands that are well-established on the market.

“Competition will intensify, but the gap is quite wide,” he said.

The Finnish government reintroduced a so-called sweets tax at the start of this year that had previously been scrapped in 2000. Hannonen said that volumes in Finland had been decreasing since it was introduced.

Other markets

In Denmark, Leaf held a 9% market share making it the fourth largest confectioner based on retail value sales. Following the merger the two companies take a collective 11% share.

Together, Cloetta and Leaf have only marginally increased their market share in Norway to 10%, but this is still some way off market leaders Kraft and Orkla.

Strategy: heritage brands and new export markets

Cloetta said in its release that the new company would “focus on strong local heritage brands”.

Hannonen thought this a sound strategy as he said many of the two company’s products were unexportable to other markets.

He said, for example, that while Leaf held half of the Finnish gum market, its gum products were virtually unknown outside Finland.

Cloetta also said in its release that it was looking at “cross border initiatives”.

Hannonen said that some brands from Leaf’s side may be exportable to new markets, such as its Mynthon brand, health sweets purporting to be good for the throat, and Ahlgrens Bilar, traditional Swedish car shaped confectionery.

He added that a major challenge for the new Cloetta was that there was little margin for growth in Scandinavian as sugar confectionery consumption was already above average for Western Europe meaning there would be more room for growth outside Scandinavia.

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