FAQ on Cloetta

  1. Why don’t you sell product X or Y anymore, and do you have any plans to launch product Z?
  2. How will you meet your margin target?
  3. When will you meet your 14 per cent margin target for adjusted operating profit?
  4. What is your pricing strategy?
  5. Do you plan to make additional acquisitions, and if so, in which countries?
  6. Will you use the strong cash flow for acquisitions, to reduce debt or to pay dividends to the shareholders?
  7. How is Cloetta affected by the ongoing debates about sugar, health and childhood obesity?
  8. How big is the risk that various sugar taxes will be introduced, and how will that affect you?
  9. Why do you use palm oil in your products?

 

1. Why don’t you sell product X or Y anymore, and do you have any plans to launch product Z?

If we no longer sell a product, this is unfortunately often due to insufficient demand for the product in question. In certain cases, it could also be because the product’s profitability has been too low or even negative. The launch of new product types can sometimes be difficult if we lack a brand that can carry them, at the same time that the necessary marketing investments would be so high that the products wouldn’t be profitable.

2. How will you meet your margin target?

Profitable growth and increased cost efficiency will contribute to higher earnings. The integration of Candyking will create substantial synergies and we are currently also implementing the Lean 2020 programme in the supply chain that will help to boost profitability.

3. When will you meet your 14 per cent margin target for adjusted operating profit?

In the last few years we have gradually strengthened our margin, although it declined in 2017 due to the inclusion of Candyking and a lower EBIT as a result of lower production volumes. Our EBIT margin target remains intact, but we have never set a specific timeline for reaching the target.

4. What is your pricing strategy?

We adjust our prices based mainly on fluctuations in raw material costs and exchange rates. This means that over time, Cloetta will hopefully avoid the impact of cost trends on raw materials.
Sometimes we also adjust prices in connection with initiatives such as new product launches or changes in packages.

5. Do you plan to make additional acquisitions, and if so, in which countries?

We aim to pursue acquisitions that are consistent with our Munchy Moments strategy. This means that we acquire companies with impulse-driven brands that are well suited to our categories and our distribution chain.

6. Will you use the strong cash flow for acquisitions, to reduce debt or to pay dividends to the shareholders?

In 2017 we reached our targeted net debt/EBITDA ratio of 2.5x and we feel that we have the capacity for both acquisitions and share dividends. The dividend payout ratio should be 40 – 60 per cent of net profit. However, we see no reason to reduce the net debt/EBITDA ratio to a level much lower than 2.5x.

7. How is Cloetta affected by the ongoing debates about sugar, health and childhood obesity?

The major challenge in this context is hidden sugar, i.e. the sugar hidden in everyday food products like breakfast cereals, yoghurt, bread, etc., and to a certain extent also carbonated beverages. The discussion should focus on consumption of these “sugar traps”. Cloetta’s products are among the most honest, since all consumers are aware that they contain sugar. Furthermore, for those seeking an alternative to products with sugar, Cloetta offers options such as nuts, chewing gum with xylitol and pastilles. In addition, we are developing candy with lower sugar and no sugar.

8. How big is the risk that various sugar taxes will be introduced, and how will that affect you?

In general, we have to reckon with the possibility that different countries will both introduce and abolish sugar and confectionery taxes from time to time. When different taxes are introduced it naturally affects our sales, but only to a fairly minor extent since our products are of a type that consumers want, and can afford, to treat themselves to despite price increases.

9. Why do you use palm oil in your products?

As of 2018, we will have eliminated palm oil from all products with the exception of certain chocolate and fudge products and some products from the recently acquired Candyking. In those products where there is no satisfactory alternative to palm oil, mainly chocolate, we will use RSPO-segregated palm oil.

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