Confectionery takeover will provide Baltic expansion platform, says Orkla

By Jane Byrne

- Last updated on GMT

Related tags: Global chocolate market, Global confectionery market, Europe, Estonia, Latvia

Norwegian group Orkla said the purchase of Kalev Chocolate Factory by its subsidiary Felix Abba will bolster the group’s expansion efforts in Estonia and neighbouring countries.

The deal, subject to approval from Estonian officials, includes a facility in Juri and business units for production of cookies and flour mixes in Estonia.

Kalev has annual net sales of around €28m and 386 employees.

"This acquisition is an important step in the expansion of our confectionery business,​as it gives us good growth and value creation possibilities in the Estonian market and provides a platform for expanding confectionery in Finland and the Baltic region,"​ said Clas Göran Hagström, managing director Orkla Foods Fenno-Baltic.

Supported by supplier migration, Eastern Europe has gained ground in the global chocolate market as health concerns eat into the Western European share, according to a recent report.

Chris Brockman, an analyst with Leatherhead Food International said that strategically, the acquisition is significant for a Norwegian company and it will provide Orkla with a strong foothold in the Baltic region.
There are definite similarities between the Estonia, Latvian and Lithuania markets, and all three have weathered the economic recession relatively well - together they offer an attractive region for some of the larger players to exploit in terms of confectionery or chocolate sales,” ​he continued.

In analysis of the global confectionery market last autumn, Leatherhead Food Research said annual sales of chocolate in Western Europe increased 2.2 per cent in dollar terms between 2004 and 2008 but by contrast, Central and Eastern European sales rose 9.1 per cent annually between 2004 and 2008, making it the fastest growing chocolate market in the world.

Explaining the figures for Western Europe, the report stated: “Volume growth has been rather limited in recent years, due to factors such as health concerns and people switching to healthier snacks.”

Brockman told ConfectioneryNews.com that he expects further consolidation within the Central and Eastern European markets, including the Baltic region, as he said there are still a lot of second tier domestic confectionery firms in that geography that could provide growth opportunities for some of the multinationals.

Meanwhile Norwegian conglomerate Orkla said this week that it expects its consumer goods business Orkla Brands to continue to deliver after quarterly profits from the unit rose nearly 20 per cent.

Orkla, whose consumer food business includes products such as chocolate and pizza, said EBITA from Orkla Brands rose 19.5 per cent to NOK624m (US$102.8m) in the three months to end of March.

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