Fazer Group grew in 2006 by acquiring new companies in Russia, Norway and Latvia- The Group's turnover exceeded EUR 1 milliard, the operating profit was over EUR 40 million. The equity ratio was 64 per cent. Fazer Amicas result was better, it renewed its concepts and expanded by acquisitions. Fazer Bakeries exceeded its targets, grew its market shares and launched new innovative products. Candyking increased its turnover and got significant new customer accounts. A decision was made to create a new separate division out of Fazer’s bakery operations in Russia.
Fazer Group’s turnover increased by 8.4 per cent to EUR 1,068.7 million. In 2005, the turnover was EUR 986.3 million. The Group’s operating profit was EUR 40.7 million compared with EUR 38.2 million the year before. The operating profit from the Group’s three divisions’ operations was EUR 32.1 million, nearly 40 per cent better than in 2005, when it was EUR 23.0 million. The share of Cloetta Fazer and other affiliated companies towards the result was EUR 6.7 million (6.4 M€ in 2005) and that of non-recurring items EUR 1.9 million (8.8 M€).
‘The growth and development strategy of the Group was to a large extent implemented according to plan during the year, and divisions succeeded in several market areas in placing themselves well, given the prevailing conditions and developments. Both the growth in turnover and the operative result exceeded the targets’, says Group President Berndt Brunow.
The operational environment was characterized by continued consolidation in retail and higher prices for raw materials. For example, the price of grain increased considerably. Significantly, a large number of the company’s catering service contracts were re-negotiated during the year. The public debate on nutrition and health continued above all in Sweden, but also increased in Finland. There was a considerable increase in wages and salaries in the Baltic States. In Russia, the value of the consumption in daily consumer products increased considerably.
Fazer’s strong economy and investments boosted growth
The Group’s financial position remained strong. The equity ratio of Fazer Group remained strong and was 64 per cent (63 per cent). During the year, the Group invested EUR 58.1 million in acquisitions in contract catering in Latvia, Norway and Russia and in modernizing bakery lines especially in Russia. The acquisitions and investments brought Fazer remarkably stronger positions in these markets. The average capital employed during 2006 was 489.0 M€. The capital employed within the Group's divisions totalled EUR 458.0 million and EUR 31.0 million were tied to other operations.
Fazer Amica had a year of better results, new concepts and expansion through acquisitions
Fazer Amica is the leading contract catering company in the Nordic countries and the Baltic region. In 2006, Fazer Amica’s turnover grew by 3.4 per cent and was EUR 513.0 million, and the company considerably improved its operating profit. Fazer Amica invested a lot in developing its operation – in creating new concepts, brand renewal, developing IT infrastructure and increasing its operations through acquisitions. Staff and student restaurants operating under the Amica brand were renewed in all countries. New Fazer-branded café-restaurants were opened in Sweden and Finland. The division acquired several new customers, for example the financial group SEB and a number of public schools in Helsinki. In Denmark, an agreement was made for 13 new staff restaurants for the company Novo Nordisk, and newly acquired Norwegian customers include staff restaurants in companies such as Wikborg Rein and Klaveness.
Fazer Bakeries exceeded targets and grew market share
Fazer Bakeries is the leading bakery company in the Baltic Sea region. In 2006, Fazer Bakeries’ turnover grew by 14 per cent and was EUR 427.1 million, and the operating profit exceeded the target mainly thanks to successful innovative new products and the strong development in St. Petersburg. Turnover grew strongly especially in the Russian and Baltic states’ markets. Towards the end of the year, the sales of Fazer Bakeries in Finland increased thanks to several novel products. Profitability improved considerably in Finland compared with the previous year as a result of an extensive efficiency drive. In 2006, Fazer Bakeries invested especially in product development and brands satisfying consumers’ and customers’ wishes. This was reflected as growing market shares in all markets.
Candyking increased turnover and acquired significant new customer accounts
Candyking’s sales considerably exceeded the figures for 2005 and turnover grew from EUR 115.4 million to EUR 125.9 million, whereas the financial results were not up to the previous year’s standard, mainly due to higher non-recurring costs that were incurred in conjunction with implementing the reformed visual identity and as a result of rapid growth in the UK.
Sales and the result in Sweden increased considerably in spite of the fact that the confectionery market in Sweden decreased by 5 per cent during the year. The unit made a partnership agreement with ICA, which considerably increased the turnover of the last tertial. In the UK, the increase in volume continued, and a sales agreement with the Woolworths department store chain was signed in August. Due to this, the UK is expected to become Candyking’s second-largest market next to Sweden within the foreseeable future.
Fazer grew and developed in main markets Finland, Sweden and Russia
Fazer’s operations are very local and labour intense. The company wants to participate in developing the adjacent communities. Of course, it is also in Fazer’s interest that the localities where it operates maintain their vitality and activity. Local success requires understanding the local taste and consumption habits, customer oriented activities and skilled personnel.
Fazer utilizes its strong brand in Finland
In Finland, Fazer has 900 restaurants, 11 bakeries, a flour mill and 1,600 Pick & Mix sales outlets. The Group has nearly 6,300 employees in Finland. Turnover here, in the Group’s biggest market, grew by 3.4 per cent and was EUR 514 million.
Fazer is one of the most valued brands in Finland. In a brand survey conducted by the Markkinointi & Mainonta magazine and Taloustutkimus, Fazer Blue won a shared first place and Fazer came fifth. Among the one hundred strongest brands there were five brands belonging to Fazer Group. Utilizing and developing strong brands showed in Fazer Amica’s staff restaurants and café-restaurants and in the new product launches of Fazer Bakeries.
Fazer grew market shares in Sweden
In Sweden, Fazer has 300 restaurants, two bakeries and 1,500 Pick & Mix sales outlets. The Group employs 2,630 people and its turnover is EUR 280 million. The development in Sweden has been very positive. Fazer Amica acquired several new customers, its skilled personnel did well in different contests and the company created a new service concept for Åhlens, among others.
The market share of Fazer Bakeries grew despite the fact that the market in general is not growing. A new handling and dosing system was installed in the Lidköping bakery, which addresses the increased demand for wholemeal bread. The value of the investment was SEK 63 million (c. EUR 7 million). Candyking’s sales in Sweden grew by nine per cent despite the difficult market situation.
Fazer is growing in Russia
Fazer is the biggest bakery company in Russia. It has five bakeries in Russia with 3,500 employees. During the past three years, Fazer’s bakery operations in Russia have grown at an average rate of 39 per cent per year, and today they constitute 14 per cent of the Group’s turnover. In November, Fazer bought the Russian catering company Abela Service CIS in St. Petersburg. With this deal, in accordance with its strategy, Fazer Amica launched its operations in the food service business in Russia, too.
Fazer Group renews its organisational structure and the bakery operations in Russia will form a new separate division - Fazer Russia. The Group’s CFO Harri-Pekka Kaukonen has been nominated Managing Director of Fazer Russia as of 1 April 2007. “According to our strategy, Russia is one of our main growth areas, and our target is to continue growing both through acquisitions and organic growth”, says Group President Berndt Brunow.
Customer oriented operations and understanding trends
Fazer operates in fields where understanding consumers’ and customers’ needs and developing operations according to trends are fundamental prerequisites for successful business. The most significant trends affecting Fazer’s business are holistic well-being, individuality – the consumer’s quest for freedom of choice – and above all, the importance of innovations, products and services which create added value to customers and consumers. At the same time, tightening competition requires very efficient and comprehensive operations.
”During the past few years, we have invested a lot in more efficient operations, developing our know-how, cooperation and a comprehensive brand strategy”, states Berndt Brunow. As a result of this work, our internal efficiency has considerably increased especially in sourcing and IT. Healthiness, quality and safety are the key elements of all our operations. We published last year the Group’s nutritional policy and we continuously develop services and tasty products which are healthy as well. An example of this is the “Må Gott”, freely translating as “Feel good” concept introduced by Fazer Amica restaurants in Sweden and Norway, and the cholesterol and blood pressure reducing Ruisihme bread by Fazer Bakeries.
Innovations are created in an environment where there is a lot of interaction. Among Fazer’s innovations are the renewed concept of the traditional Karl Fazer Café and Fazer cafés, the new look of Amica staff restaurants, the new visual identity of Candyking, and the numerous successful new product launches of Fazer Bakeries. Examples of these renewals are Fazer Ruistoast, which was elected the Finnish Product of the Year 2006, and Candyking’s new cardboard package which is both environmentally friendly and less expensive.
Great work tastes at Fazer
Personnel are Fazer’s most important asset. ‘We must live up to the expectations of customers and consumers every day - the daily bread or lunch cannot be skipped and delivered the next day as a double helping. This means that well-motivated, committed and competent employees are a vital prerequisite for our success’, stresses Group President Berndt Brunow.
Fazer Group wants to provide attractive jobs for competent people. Results of the annual personnel survey show that work satisfaction at Fazer has been clearly above the European average. The results in many areas have also improved from previous years. A common personnel strategy was drawn up for Fazer Group in 2006. Clearly the biggest challenges for the entire Fazer Group will in the coming years be the availability of skilled personnel in all countries of operation, and the ability of current personnel to cope with their work. Fazer has during the past few years invested a lot in active dialogue and the well-being of its personnel.
During 2006, the first part of the common personnel data system Fazer Arc was implemented in Finland. The implementation work will continue in other countries in 2007. Fazer Arc simplifies the maintenance and collection of personal data, makes the recruitment process more efficient and provides a tool for the systematic development of personnel.
During 2006, the number of Fazer Group employees averaged 13,147 (12,427 in 2005), and at 31.12.2006, this figure had increased to 15,276 (14,776 in 2005). The increase is among other things attributable to the growth of Fazer Amica in Denmark and the Baltic States, as well as to the growth of Fazer Bakeries primarily in the Baltic States and Russia.
Fazer published Corporate Responsibility report
‘Responsibly conducted operations have always been part of the tradition of Fazer Group and it is a vital part of Fazer Group’s corporate culture. Fazer wants to be an active and visible part of society and to bear its share of responsibility in social matters’, states Group President Berndt Brunow.
A comprehensive corporate responsibility project was completed in 2006 and the Group published its first corporate responsibility report. The policy defines what is included in economic responsibility, social responsibility and environmental responsibility and how they are monitored and implemented in the Group. The corporate responsibility report that is focused on the operations in Finland was prepared in compliance with GRI (Global Reporting Initiative) instructions regarding the reporting of corporate responsibility. The report will be further developed in the coming years to cover geographically all Fazer countries.
Positive outlook for 2007
The remarkably ameliorated result and volume growth of 2006 create a solid ground for the further development of operations according to the Group’s strategy of growth and development. The growth prospects for 2007 are good, although intense competition means increasingly hard pressure on margins. In most of our markets, we shall not be able to pass on the increasing raw material and personnel costs in full to the prices of our products and services.
‘The Group's investments in the development of core competencies, its continued focus on better internal efficiency and the positive growth in most operations are, however, expected to allow an improvement in the results from 2006. The results of the first two months exceed our expectations’, says Group President Berndt Brunow.
Annual Review 2006
Fazer’s new Annual Review presents the events of year 2006 and the themes well-being, individualism and innovations in a world of taste sensations.
Annual Review 2006 is available on Fazer Group’s website www.fazergroup.com. You can order a printed version of the Annual Review from katja.steinby (at) fazer.fi or through our website.
You can find additional information on Fazer’s nutrition policy on Fazer Group’s website www.fazergroup.com / About Fazer Group / Company material.
There is a link to Fazer’s image bank from the Group’s website. The image bank holds recent pictures of the members of the Group Management team and Board of Directors.
Berndt Brunow, Group President, tel +358 20 555 3170
Ulrika Romantschuk, SVP, Communications, tel +358 40 566 4246
Fazer Group originates from a family business founded in 1891. Today the Group offers meals, bakery products and confectionery and operates in a total of nine countries. Its operations are based on passion for customer, quality excellence and team spirit. The Group operates in three divisions, which are all committed to offering taste sensations: Fazer Amica, Fazer Bakeries and Candyking. Fazer Amica is a leading contract catering company in the Nordic and the Baltic countries, offering customers delicious food and tailor-made service solutions. The company operates in the Nordic countries, Estonia, Latvia and Russia. Fazer Bakeries offers fresh and tasty bakery products and operates in Finland, Sweden, Russia, Estonia, Latvia and Lithuania. Candyking is a pioneer and a market leader in the pick & mix confectionery business in the Nordic countries, the United Kingdom and the Baltic states. Fazer’s most important associated company is Cloetta Fazer AB, which is the leading confectionery company in the Nordic countries. Fazer Group‘s turnover for 2006 was over one milliard euros. The Group employs c 15,300 people.