Cloetta Fazer turns to core brands as profits slide
can turnaround flagging Polish sales, despite posting disappointing
2004 operating profits, Tom Armitage reports.
Earlier this week the company posted 2004 fourth quarter operating profits of €12.5 million - a 35.6 per cent decrease on the previous year's €19.4 million figure.
"The drop in fourth quarter earnings is mainly due to an increase in marketing activities, which is part of the group's strategy to strengthen the position of our prioritised brands," said Karsten Slotte, Cloetta Fazer's CEO.
The fourth quarter announcement concluded what has been a disappointing year for Cloetta Fazer, which has seen a 7.8 slump in operating profits from €42.7 to €39.7 million and a net sales decline from €332.1 million to €331.3 million - representing a 0.2 per cent decrease.
The company also conceded that although sales of its top twelve best-selling confectionery brands were up 5 per cent in 2004, there had been an overall sales decline (in value terms) of around 3.5 per cent, from last year's €105.6 million against 2004's €101.9 million.
Cloetta Fazer said, however, that sales of its Dumle confectionery brand had increased by an impressive 28 per cent across the Swedish and Finnish markets, while its Kexchoklad and Fazer Blue brands had both "generated robust growth" across Sweden and Finland respectively.
Despite an overall sales decline for confectionery products across the saturated Nordic region (where the company has a market share of approximately 22 per cent), Slotte said its strategy to channel investment into its core brands had "enabled us to expand our share of the Swedish and Finnish markets and raise combined sales of our top twelve brands in both relative and absolute terms".
Fazer Polska, Cloetta Fazer's Polish division, however, failed to turnaround flagging sales, pinning yet another drop in annual operating profits on restructuring costs and a number of fixed asset write downs.
In recent years the company has increased its stake in the Polish chocolate market to approximately 10 per cent, largely through increased sales of its leading confectionery brand Dumle.
Last year Slotte outlined Cloetta Fazer's ambition to consolidate Poland's fragmented confectionery sector, but subsequent market saturation stemming from increased overseas and domestic competition has left it somewhat compromised.
Polish consumption of chocolate, however, is still relatively low at around 5-6 kg per person per year (compared to 12-13 kg in the UK), reflecting its relative under-development and substantial growth potential.
