Cloetta eyes ‘munchy’ brand acquistions after Q4 sales growth

By Douglas Yu

- Last updated on GMT

Cloetta has initiated a strategic review for its struggling business in Italy.  Photo: Cloetta
Cloetta has initiated a strategic review for its struggling business in Italy. Photo: Cloetta

Related tags Confectionery

Swedish confectioner Cloetta has reported 3.8% net sales growth in Q4 and +3.1% for the full year as it looks to acquire impulse brands consumed between meals.

The company’s sales in the quarter increased in Sweden, Denmark, the Netherlands and in export markets, but declined in Finland, Italy, Norway, Germany and the UK, according to a release. 

Finnish business expected to grow after the abolition of confectionery tax

“The positive sales trend in Sweden was driven by pick-and-mix and seasonal products and the Netherlands saw rising sales of chewing gum and sugar confectionery. Sales increase in Denmark was driven by sugar confectionery and pastilles,”​ Cloetta said.

However, in Finland, sales decreased substantially due to “de-stocking in the trade prior to abolition of the confectionery tax in January 2017”.

Key figures

• Net sales – SEK 1.68bn ($192.4m) +3.8%
• Profit/loss for the period – SEK –420m (-$48m)
Full year 2016
• Net sales – SEK 5.85bn +3.1%
• Profit/loss for the period – SEK –191m (-$21.8m)

“Overall, the abolition of the confectionery tax should support organic growth in Finland during 2017,”​ the company added.

“We have also been able to increase operating profit, adjusted and generate a strong cash flow. Furthermore, I am particularly happy that we were able to meet one of Cloetta’s financial objectives during the quarter,”​ Cloetta’s interim president and CEO Danko Maras commented on the earnings results.

Cloetta’s former CEO David Nuutinen​ left the company for “private reasons”​ in August last year, and the newly appointed head Henri de Sauvage Nolting​ will assume the position on Feb 15, 2017, ConfectioneryNews previously reported.

Cloetta reviewing Italian business

Cloetta’s latest annual reports shows that Italy​ is the largest confectionery market by value of sales of the countries where the company is active. The country also represents 12% of Cloetta’s overall sales, said the company’s spokesman, Jacob Broberg.

In 2015, Cloetta increased prices on seasonal sales in Q4 substantially, particularly for the nut confectionery brand Sperlari Nougat, due to “very pricy nuts process,”​ Broberg said.

“Due to the price increase, we lost volume and sales in Q4, 2015. In 2016, prices on nuts came down substantially and we therefore decided to decrease prices on seasonal product by 10% to 15% to regain the volumes that we lost in 2015.”

“With the price decrease we regained volumes, but they did not fully compensate for the price decrease,”​ he added.

“In addition, the Italian macro-economic situation has been much more challenging than on most of our other markets.”

Cloetta is now conducting a strategic review of its Italian business in which “a potential divestment could be an outcome,”​ Broberg said.

“We have not said that we shall divest [Cloetta’s business in Italy] … The whole idea of having a strategic review is to come up with a strategy going forward.”

The Italian business performance contributed to a loss of SEK 191m ($21.8m) for the full year for the group. Cloetta was also forced to pay rent retrospectively for a warehouse it closed in 2013 in Norrköping, Sweden, after losing a court case, which also contributed to the loss.

‘Munchy moments’ strategy for acquisitions

Acquisitions​ will be among Cloetta’s key strategies in 2017 to reach its sales growth target of 1% to 2%, Broberg previously told ConfectioneryNews.

He said the company starts with its “munchy moments”​ strategy when it looks for acquisitions.

“This means that it should be products that are predominantly consumed in-between meals. They should be impulse, branded and fit our route to market,”​ Broberg added.

“Acquisitions can then be complementary, meaning we acquire products, brands and technologies that we do not have. It can be synergistic, meaning we can achieve synergies within production, sales, administration and procurement or it can be that we are entering a new market.”

Cloetta also recently opened its first online store in China through Alibaba’s Tmall Global​ to expand its Asian market. 

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