The business area was established on 18 February 2008, when the managements and organisations of the former businesses Orkla Foods and Orkla Brands were amalgamated. A total of 83 % of sales derive from the Nordic market (including the Baltic States). At year-end, Orkla Brands had 13,845 employees, 38 % of whom were employed in companies outside the Nordic region and the Baltic States. The business area is divided into four business units: Orkla Foods Nordic, Orkla Brands Nordic, Orkla Brands International and Orkla Food Ingredients.
Key elements of the multi-local model are value creation and local management, insight and innovation, as well as synergies and the spread of best practices. This article gives a more detailed description of these elements, and concludes with an example from one of Orkla Brands' businesses in Russia.
Value creation and local management
At
year-end, Orkla Brands consisted of a total of 69 operational companies. Responsibility for value creation and decisions related to core business activities lies at the local level in the individual companies.
The operational companies all share a number of common characteristics:
- Responsibility for own results
- Local management and value chain
- Insight into local markets, consumers and customers
- Strong, owned brands or concepts, most of which have been on the market for a long time
- No. 1 or No. 2 positions (mainly)
- Good sales organisations with good customer relationships
Insight and innovation
Strong brands and powerful innovations provide the foundation for growth in sales and profitability over time. To achieve these goals, the main focus is on establishing deep insight into local consumer and customer needs and developing brands and concepts that meet these needs. Orkla Brands therefore regards unrivalled local insight as the basis for creating added value for consumers, customers and thereby for, Orkla.
Orkla Brands leverages this local insight to identify business opportunities. The Group creates and develops its leading positions locally in constant, direct competition with international players.
Examples of innovations that have made the products significant for both consumers, the retail trade and Orkla Brands:
- Grandiosa is the clear market leader in frozen pizza in Norway. Since Grandiosa was launched in 1980, some 374 million product units have been sold. Over the years, a number of new Grandiosa products and varieties have been developed that are adapted to local consumer demands. As a result, the brand has grown very strongly. In 2008, sales of Grandiosa products to consumers totalled NOK 781 million.
- Define is the clear market leader for hair care products in Norway, where the major competitors are global manufacturers. Define was launched in 2001, based on deep insight into consumer needs and close cooperation with Norwegian hairdressers, and since then around 27 million units have been sold. In 2008, sales of Define products to consumers totalled NOK 233 million. Orkla Brands focuses strongly on the development of new Define products.
Synergies and the spread of best practices
Inter-company synergies will be exploited through the use of shared, high quality, cost-effective support systems and the spread of best practices throughout the organisation. Human resource development primarily takes place in the line organisation, but in-house academies have also been established in Orkla and Orkla Brands which cover the main links of the value chain.
For several years now, there has been a strong focus on rationalising production operations. This work has consisted partly of continuously improving operations at all factories, and partly of major improvement and redesign projects supported by central project staff. Efforts to increase the efficiency of production lines and production structure will continue.
Orkla Brands has established common, cost-effective support functions in fields such as marketing and sales, purchasing and food safety:
- Corporate Development Marketing & Sales supports the line organisation's innovation and sales activities, and facilitates transfer of experience across businesses. Normative guidelines and implementation programmes are established for key areas such as innovation, advertising development, brand-building and sales.
- Orkla Brands Purchasing was established to carry out purchasing of key raw materials for all the individual companies. Purchases can thus be coordinated to achieve larger volumes, and best practices are established in strategic purchasing activities. At the same time, expertise and experience are transferred between the companies in Orkla Brands.
- Food safety is one of several building blocks for creating and maintaining confidence in the brands and concepts. To ensure stable, high standards of food safety at all factories, Orkla Brands has developed its own food safety standard, based on the British Retail Consortium standard. Further, in 2008, a comprehensive approval and audit system for food safety was developed which will also apply to Orkla Brands' suppliers.
In the months and years ahead, the multi-local model will be developed with the following objectives:
- High, durable value creation by delivering products that consumers and retailers «cannot do without».
- Growth both by increasing revenues in existing businesses and through acquisitions. This growth will primarily take place in the markets in which Orkla Brands currently operates.
- Continuous focus on cost-effectiveness throughout the value chain.
The operational companies will receive support and guidance from Orkla Brands' management to ensure that these ambitions are realised. Most importantly, expertise must be further strengthened by training and developing human resources. Inter-company exchanges of employees will play a vital role in this process.