Orkla Brands comprises companies in the detergents, personal care, snacks, confectionery, biscuits, household textiles, dietary supplements and health products segments. Based on solid, long-standing traditions, the companies develop, manufacture and market leading branded consumer goods that have a strong identity and position, both in terms of consumer loyalty and among retailers. Orkla Brands comprises Orkla’s most advertising and marketing-intensive products.
Orkla Brands’ product portfolio includes strong, well-known brands such as Jif, Omo and Define (Lilleborg), Stratos and Nidar Favoritter (Confectionery), Ballerina and Café Cookies (Biscuits), Möllers Dobbel and Gerimax (Dietary Supplements and Health Products), OLW and KiMs (Snacks) and LaMote (Household Textiles).
Orkla Brands’ strategy is to focus and concentrate innovation and market support on strong brands. Orkla Brands intends to further develop the Nordic region as its domestic market and expand in selected markets in Eastern Europe. In 2005, 93 % of operating revenues came from the Nordic market. Orkla Brands’ companies largely hold Number 1 positions on the markets in which they operate. Lilleborg has an agreement with Unilever concerning detergents, personal care products and cosmetics for the Norwegian market. The agreement was originally signed in 1958 and was last renegotiated in 1995. Under the renegotiated agreement, cooperation will continue as before in accordance with the same business principles until 2014. Chips and Collett Pharma were incorporated into Orkla Brands in 2005. As of 31 December 2005, Orkla Brands had a workforce equivalent to 3,142 man-years.
Orkla Brands’ operating revenues amounted to NOK 6,336 million in 2005, equivalent to underlying1
growth of 1 %. Household Textiles continued to report declining revenues, while the results for the other businesses were on a par with or slightly higher than in 2004. Several successful new launches contributed
to growth, but there was stronger competition
from private labels. This particularly applied to the Swedish markets. Systematic, targeted efforts are still being made to increase innovation, which is regarded as the main source of profit growth and the best means of dealing with increased competition. Operating profit before amortisation amounted to
NOK 1,049 million, compared with NOK 951 million
in 2004. The improvement was ascribable to expansion. Only Lilleborg Professional and Dietary Supplements and Health Products achieved underlying
profit growth. The largest decline was related to Confectionery, due to higher raw material costs, and Biscuits, due to difficult market conditions in Sweden. Chips was consolidated from 1 March 2005 and profit from this business was somewhat weaker than anticipated, mainly due to weaker sales for the Swedish snacks business. Collett Pharma was consolidated
from 1 October 2005. It will be important to realise synergy gains from these acquisitions.
The continued focus on innovation resulted in several launches of new products in 2005, the most comprehensive of which was Sunsilk from Lilleborg. Other important launches included Cookie Bites (Biscuits), Stratos Nøtter (Confectionery) and KiMs Delivio Chips (Snacks).
Lilleborg is the leading producer and marketer of branded consumer goods for cleaning and personal care in Norway. Despite tougher competition and pressure on prices from private labels, sales were on a par with 2004. Growth in the hair care category continued in 2005 as a result of the launch of the new Sunsilk hair care range. At the same time the company experienced a drop in export sales to Unilever. This situation will intensify in 2006, although work is in progress on alternative export possibilities. Operating profit was somewhat lower in 2005 than in the previous year, mainly due to higher purchasing costs for laundry detergents. All in all, market shares were strengthened slightly.
Lilleborg Professional is Norway’s leading total supplier of cleaning and hygiene systems for the professional market. Lilleborg Professional’s operating revenues were 4 % higher than in 2004. Operating profit was on a par with the previous year.
Operating revenues for Confectionery were 1 % higher than in 2004. The main innovations were Nidar Favoritter Mørkerød (Nidar Favourites Dark Red) and Stratos Nøtter (Stratos Nuts). However, lower margins due to higher cocoa and almond prices, higher internal cost deviations/scrap, reductions in prices for seasonal retail sales and insufficient provisions for discounts in 2004 had a significant negative impact on profit. Market share increased by one percentage point.
There was a 1 % underlying1 decline in operating revenues for the Biscuits business compared with 2004. Although this was largely related to the Swedish market, there was also a slight drop in revenues in Finland. The decline in operating revenues was ascribable to tougher competition from private labels in Sweden, although the Ballerina “election” led to a temporary increase in sales. Falling sales and higher advertising investments resulted in lower profit. Market shares were somewhat weaker in Sweden and Finland but increased slightly in Norway. The sales functions for the biscuits and snacks businesses in Sweden have been merged in the same way as in Norway, which has had a short-term negative impact on sales.
Orkla formerly controlled 40 % of the Chips Scandinavian Company (CSC), which consisted of the snacks businesses in Norway, Denmark and Sweden and the natural snacks companies Parrots in Sweden and Trope in Denmark. The remaining 60 % was controlled by Chips Ab, which also runs a snacks business in Finland. In 2005 Orkla took over all the shares in Chips Ab and the company was consolidated from 1 March 2005. In addition to its snacks activities in the Nordic region, Chips is also involved in snacks in the Baltic States and Russia. Chips also has interests in the food sector, selling its own branded products in Finland and Sweden, and owns a wholesale company in Finland.
The Snacks business posted underlying1 growth of 1 % compared with 2004. The companies in Denmark and Norway achieved satisfactory growth in terms of revenues, while revenues in Sweden declined slightly due to increased competition from private labels. Profit was on a par with 2004. Chips confirmed its position as market leader in the Snacks segment in the Nordic region and increased its market shares by one percentage point during the year.
Underlying1 operating revenues for Household Textiles were 11 % lower than in 2004. They declined in all countries, but mainly in Sweden. Weaker distribution (Sweden) and the reduced effect of previous campaigns are the main reasons for the decline. Due to the long-term weak performance of this business, write-downs totalling NOK 115 million were made in the second quarter, mainly related to goodwill. An entirely new product range was launched in February 2006 featuring two “new” brands: Pierre Robert and AXE.
This business consists of Peter Möller and Collett Pharma, which have been merged under the name MöllerCollett. Collett Pharma was consolidated in the financial statements from 1 October 2005. This acquisition was an important element of efforts to establish a Nordic position in the Dietary Supplements and Health Products category.
Underlying1 operating revenues for Dietary Supplements and Health Products were 8 % higher than in 2004. The business maintained its strong position on the Norwegian market. Peter Möller launched three varieties of the “Godt For” (Good For) range in 2005, of which “Godt For Leddene” (Good For Joints) made the strongest contribution to top-line growth. Export sales, especially to Finland and the USA, continued to grow in 2005. Peter Möller launched some of its products on the Swedish market in 2005. All in all, market shares for this category were maintained in 2005.
Work is in progress on further integration of Peter Möller and Collett Pharma in order to realise potential synergies, primarily in the fields of sales and manufacturing.
1 Excluding acquisitions, divestments and currency translation effects
KiMs Delivio is a tasty success for people with a sense for that extra something
