The company hinted at price changes during an earnings call for its third quarter (Q3) results.
The firm’s Q3 sales grew 9.1% to SEK 1.3bn ($176m) while net profit was up 1.2% to SEK 87m ($11.8m).
Cloetta CEO Bengt Baron said during the call last week: “The changes on individual raw materials costs need to be transferred or translated into pricing changes over the coming years and tracked going forward because it has been quite volatile.” But he refused to confirm whether product prices would generally rise or fall.
Jacob Broberg, svP communications & investor relations told ConfectioneryNews that price increases might be necessary for chocolate products if cocoa prices continued to increase . The company introduced chocolate price increases for Sweden three months ago.
‘Needs to be done and will be done’
Baron said that fluctuations in raw materials had not greatly impacted the business because while cocoa hazelnut and almonds prices rose, sugar prices fell. However, he said that certain products were affected by the changing commodity costs and may justify a pricing rethink.
“Savings should be given back to the consumer and increases in costs need to be charged to the consumer…price changes will be necessary going forward on an individual basis. It sometimes is a bumpy road, but it is something that needs to be done and will be done.”
Cloetta secures forward raw material contracts six to nine months in advance. Danko Maras, CFO said that this meant Cloetta’s response via wholesale price changes lagged behind rises in commodity costs.
Acquisitions and restructuring
Cloetta Q3 sales growth was driven by its recent acquisitions. Cloetta acquired Aran Candy owners of the Jelly Bean factory brand for $21.1m in May. Cloetta also recently sealed deals for Swedish dried nuts market leader Nutisal and FTF Sweets UK, owner of the British candy brand Goody Good Stuff. Only three years ago it closed a $1bn merger with Dutch confectioner Leaf .
“We feel it was a solid quarter. We are especially satisfied with the profit development and the restructuring that we’ve been working on over the past three years is coming to an end on time and as planned,” said Baron.
The company completed its restructuring program that began following the merger with Leaf. The final act was to insource chocolate brand Tupla to Cloetta’s Ljungsbro factory.
Hot summer and lost contract
Cloetta’s sales fell in Sweden and Norway during the quarter Norwegian sales were impacted by a lost pick-and-mix contract and warmer summer weather hit sales in Sweden.
“There was an extremely hot summer and one of the things you don’t consume when it’s a hot summer is chocolate and Sweden is a market where Cloetta has its biggest presence in chocolate,” said Baron.
Finland’s macroeconomic environment also impacted consumer spending. “We saw a shrinking market, not dramatically, but it is under pressure without a doubt,” said Baron. The firm introduced its Cloetta chocolate brand moved into the Finnish market during the quarter.
Baron added: “We had a conflict in the Netherlands with one of the major customers, which impacted sales a little bit, but that has since been resolved.”