Operational risks

Demand for Cloetta’s well known brands is driven by the consumers’ association of these with positive values. If Cloetta or any of the Group’s partners takes any measures in conflict with the values represented by the brands, the Cloetta brands could be damaged.

Cloetta has a proactive approach by implementing a Code of Conduct, ethical guidelines and routines.

Cloetta uses several raw materials originating from countries with an increased risk of social, ethical and human rights violations. Further, extreme weather conditions caused by climate change could negatively affect supply and political instability can have a negative impact on costs.

As far as possible, Cloetta endeavours to include supplier codes of conduct in all agreements.

Cloetta has evaluated all raw material groups and prioritized them based on climate, social and human rights related risks and Cloetta’s ability to address these risks.

Cloetta purchases UTZ-certified cocoa for its entire range of chocolate products.

Most products, aside from parts of the chocolate and fudge range, are free from palm oil (parts of the range from the recently acquired Candyking are not yet free from palm oil).

During the year, Cloetta started to buy segregated palm oil in accordance with RSPO principles for the entire range of chocolate and fudge products. Certification of Cloetta’s factories according to this standard will take place in 2019.

During 2018 Cloetta changed to sustainable and traceable shea butter.

Cloetta is a member of Bonsucro, which is a multi-stakeholder initiative that works to achieve a sustainable sugarcane industry.

Handling of food products places high demands on traceability, hygiene and safety. In a worst-case scenario, inadequate control can lead to contamination or allergic reactions.

Deficiencies in handling of food products can lead to lower confidence in Cloetta and the Group’s brands.

Cloetta works with first-class raw materials and in accordance with international quality standards. Analyses through chemical and physical tests are performed on both raw materials and finished products. Issues of importance for product safety are gathered in special policies and there are plans for information or product recalls in the event of deficiencies.

Assets such as factories and production equipment can be seriously damaged, for  example in the event of a fire or power outage. Product recalls can give rise to substantial costs, resulting from both direct costs and of damage to Cloetta’s reputation.

Cloetta has an insurance programme for property and liability risks, and works systematically to reduce the risk of incidents and to have robust contingency plans in place to limit the effects of any incidents.

To optimize efficiency, Cloetta continuously monitors capacity utilization in production. Moving production from one factory to another is a complex process that can result in disruptions and delays in production, which can in turn lead to delivery problems.

Cloetta has an experienced and efficient organization with well-established routines for handling relocation of production lines.

To a large extent, Cloetta’s future is dependent on its capacity to recruit, retain and develop competent senior executives and other key staff.

Cloetta occasionally reorganizes and streamlines its operations, which in the short term may have an impact on its performance.

Cloetta endeavours to continue to be an attractive employer.

Employee development and follow-up plans, together with market-based and competitive compensation, contribute to Cloetta’s ability to recruit and retain employees.

Cloetta has a strong and experienced organization that is well equipped to handle organizational changes.

Environmental risks arise mainly through water and energy consumption, wastewater emissions, raw material and packaging waste, production waste and transports.

Cloetta sets environmental requirements for its production, regularly monitors the company’s impact on the environment and carries out systematic measures to reduce its environmental impact.