Scandinavian meat group HKScan plans to focus on product development and brand building in order to grow the proportion of sales it generates from added value products. Katy Askew spoke to Magnus Sjohlm, VP of business development, at this year’s Anuga to find out more about the company’s new-found focus on NPD.
HKScan is in the midst of a turnaround process that has seen it reorganise its corporate functions in order to strip costs out of the business. The company has said it is on-track to beat EUR20m (US$26.1m) in targetted cost savings during 2013 and recently set itself the ambitious goal of matching these savings in 2014.
However, reducing its cost base is just one plank of HKScan’s efforts to improve profitability. Equally important is the firm’s growing focus on NPD and brand building, HKScan vice president of business development Magnus Sjohlm tells just food.
The first stage of this process has seen HKScan work to leverage its strong local brands, including Scan in Sweden and HK in Finland. Measures have included a country of origin promise, introduced in July, that looked to reassure consumers that meat sold across HKScan’s main markets would be produced from local sources.
“We have been working with – are still working with – promises on our domestic brands. We will continue to push that and emphasise the core of the brands. At the same time, we are trying to get costs out of our system because there is a lot of competition out there and we would like to be as cost competitive as possible,” Sjohlm said.
“We came to the conclusion that the main brands, the strong domestic brands, are so tightly linked to the origin of the meat that it would be stupid to try and change that. We decided to keep that and focus on the core of the brand and try to build from there. That means we need to support the strength of the brands but also further develop the offering inside that.”
Sjohlm concedes that HKScan has “not been very innovative” in the past. But, as the struggling company looks to turn its fortunes around, it has increased its focus on R&D and the development of a value-added offering.
“We are constantly developing our range. We are focusing on certain categories – sandwich toppings, deli meats and cold cuts are really one of our key categories… We are staying in the categories we are already present in and developing our offering within those. We are launching a number of new products each year, but the big leapfrog innovation I would say is omega 3 pork.
“Omega 3 pork started in Finland, where we were doing a lot of research into how can we raise the pigs in a different way. How can you change the fat composition? We came to the conclusion that if we change the way we feed the pigs the fat composition also follows. If you give them a lot of unsaturated fatty acids you also change the fat composition in the pork. We came up with a solution that increases the omega 3 content in the pork fat. We go from 62-68% unsaturated fatty acids in the pork.”
Sjohlm says HKScan is communicating two key benefits of omega 3 pork to consumers. “It has, of course, some nice health effects. But also a very positive side effect which is the fat becomes softer – it tastes better, it goes into the meat and becomes more juicy and succulent. The health aspect and the improved taste are really two key things here.”
The omega 3 pork was launched two years ago in Finland and rolled out to Sweden last year. “It has taken off quite well – according to plan – but it is also really a good growth platform to continue building from,” Sjohlm observes.
“The main markets for that are Finland and Sweden, but we are also looking for other international markets to target – that is in the works now,” he adds.
Developing HKScan’s international branding and growing its export business is the next phase of the group’s branded development, Sjohlm reveals.
“Our main export brand HKScan…. The international brand offering we will use in the future is the second step of our brand journey,” he suggests.
The company intends to grow branded sales in export markets such as the UK, where the group currently supplies Swedish meatballs into a number of the retail multiples. “We hope to grow our branded sales in the UK. We will start with the Swedish meatballs and then move into adjacent categories to that – like the mince meat categories in a wider sense.”
HKScan’s reorganisation drive has largely focused on cost reduction. However, a number of changes at a group-level are improving coordination between the company’s disparate business units and this is already having a positive impact on R&D and brand building, Sjohlm claims.
“Previously, everything was driven as a multi-local company. We are adding another layer at the group level. Looking at how we can be more efficient but also taking the brand knowledge and the product and the offerings to potentially travel across the countries. We have started to see small benefits already from working from a group perspective on R&D, we will see much much more in the future,” he predicts.
As the drive to build HKScan’s strong regional brands, boost its value-added offering and develop its export markets gathers pace, the firm should reap rewards in terms of improved margins, Sjohlm concludes. “Raw meat is very attractive because it is a high volume business. But it is also in general quite low margin, so we need to identify the focus where there is margin to be made, we have very strong brands that we can utilise.”
Click here for just-food’s recent interview with HKScan CEO Hannu Kottonen to learn more about the group’s cost-cutting drive.