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 they wouldn’t be profitable.

2. How will you meet your margin target?

Profitable growth will contribute to higher earnings. Our aim is to grow in line with the market while at the same time focusing on growth in pick & mix, where we see good potential. We can also consider additional acquisitions. We are currently implementing the Lean 2020 programme in the supply chain that will help to boost profitability. Furthermore, we are committed to driving profitability in our past acquisitions. Lastly, we have deployed a joint ERP system throughout the Group that will create better conditions for strengthening profitability.

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

In recent years we have successively strengthened our margin and in 2016 achieved a level of 13.0, which is an improvement compared to earlier years. However, we have not 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 for 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 distribution chain.

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

In 2016 we met our targeted net debt/EBITDA ratio of 2.5x and now 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 cereal, 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, 30 per cent of Cloetta’s products are sugar-free. So for those seeking an alternative to products with sugar, Cloetta offers options such as nuts, chewing gum with xylitol, pastilles and sugar-free candy.

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?

Our ambition is to eliminate palm oil fromall products with the exception of certain chocolate and fudge products during 2018 at the latest. In those products where there is no satisfactory alternative to palm oil, mainly chocolate confectionery, we use RSPOsegregated, GreenPalm-certified palm oil.

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