The Nordic confectionery market has been stagnating for several years - market analysts Euromonitor predict growth of just 0.9 per cent this year for Sweden, Norway and Finland, with sales likely to reach €2.77 billion - and companies have been forced to cut down on the number of brands they produce in order to cut spiralling costs.
Cloetta Fazer is no exception, deciding over the last four years to focus on 15 or so top brands (Fazer Blå, Dumle, Kexchoklad, Geisha, Polly, Center, ässät, Pantteri, Marianne, Fazermint, Bridgeblandning, Tyrkisk Peber, Liqueur Fills, Plopp and Sportlunch). As a result, production volumes over that period fell by 5,000 tons, despite increased sales of the leading brands, and the production became centred on a handful of production facilities.
These five production plants (Ljungsbro and Norrköping in Sweden, Vantaa and Lappeenranta in Finland and Gdansk in Poland) together produced around 66,000 tonnes chocolate and sugar confectionery in 2003. Chocolate confectionery is mainly produced in Ljungsbro, Vantaa and Gdansk, while the plants in Norrköping and Lappeenranta mainly produce sugar confectionery.
The plant at Norrköping, the smallest in the group with a capacity of 5,800 tons per annum, makes just one of the top Cloetta Fazer brands, Polly, and was always the most likely to be closed down once the company began a review of its production facilities in the spring.
The facility, which employs 100 people, is due to be closed at the end of 2005 or start of 2006, and production of Polly will be moved to the factory in Ljungsbro, outside Linköping, taking 10 staff with it.
"Ever tougher competition on the market results in increased demand for cost efficiency to be able to maintain long-term profitability," said Cloetta Fazer's CEO Karsten Slotte. "This, therefore, requires us to focus our production processes on fewer, larger units."
The closure of the facility is expected to produce an annual cost saving of around SK20 million, although one-off costs associated with the closure are estimated at SK95 million, of which SK65 million come from asset write downs. The company will also have to invest SK50 million in updating production facilities at the plant to which production is being moved.
Cloetta Fazer is the Nordic region's leading confectionery company, with a market share of around 22 per cent, and sales in 2003 of SK3.0 billion. Other leading Nordic region confectionery companies include Kraft and Malaco Leaf, with shares of around 20 per cent and 15 per cent respectively.