Cloetta has kicked off 2024 with more pricing as the Sweden-based confectionery maker continues to face higher costs from sugar and cocoa.
President and CEO Henri de Sauvage-Nolting indicated this morning (26 January) that further pricing may follow this fiscal year, with strength in the euro against the Swedish and Norwegian currencies another cost factor.
“I expect to continue to see pricing-driven growth in 2024,” de Sauvage-Nolting said as he presented last year’s results.
“We have taken extra pricing already in Q1, in most countries as per 1 February, and all the deals are done. So that like we did in ‘22 and ’23, we get the absolute coverage for any adverse effects in raw materials or for currency.”
The CEO, who announced his September departure from the Candyking confectionery brand owner yesterday, noted that despite the price increases initiated in 2023, volumes were “relatively stable”.
Finance chief Frans Ryden added: “We’ve been really fortunate to be able to keep most of our volumes and being able to buck this trend in the market,” an aspect he put down to Cloetta only “taking fair pricing”.
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Publicly-listed Cloetta, which also counts The Jelly Bean Factory confectionery brand and Sportlife chewing gum line in its portfolio, said annual revenue surpassed the Skr8bn ($767.7m) mark for the first time.
Sales rose 20.8% on a reported basis through December to Skr8.3bn and were up 15.7% in organic terms. Fourth-quarter sales increased 14.5% and 11.7%, respectively, to Skr2.2bn.
Split between Cloetta’s branded and pick-and-mix business, the former, which accounts for around 75% of group sales, posted organic growth of 11.1% and 14.1% over the quarter and the year. Pick-and-mix was up 13.6% and 20.7%, respectively.
Cloetta said pricing was SKr0.20 in quarter four and SKr0.87 for the year. Volumes, taken together with product mix, fell SKr0.16 and SKr0.26 over the two reporting periods.
“The raw materials are up 20 öre so we raised our prices 20 ore, which means that we lose on the margin that we cover for profitability,” de Sauvage-Nolting said.
“And most of that of course is coming from pricing but also strong cost control, which together are offsetting the higher input costs.”
The business also felt the effects of the collapse of the DIY and home-care chain Wilko in the UK last year, where the company sold its products in-store.
“If I exclude the impact of the lost Wilko volumes, we did continue to do well versus that market, [but] our volumes are still somewhat down though, about 1% to 2%,” Ryden explained.
“Within that, pick-and-mix is doing better than branded, and that excludes UK pick-and-mix again, whereas branded packages [were] down about 2%.”
Elsewhere in the results, adjusted operating profit rose 9.3% to Skr200m in the quarter and was up 15.6% at Skr799m for the year, another milestone in value terms, Cloetta said.
As de Sauvage-Nolting noted, the adjusted operating profit margin dropped 40 and 50 basis points over the two reporting periods to 9.2% and 9.6%, respectively.
Ryden said: “Eventually, once cost starts to come down, we should see an equal and opposite positive effect on our margins. And so far, sugar and cocoa remain very high and we are not yet at a point where we believe that prices should be lowered.”
He added, with respect to the currency impact: “While the stronger euro helps when we are translating our foreign-made sales and foreign-earned profits to the resulting Swedish krona, it also means that input cost goes up relative to the Swedish krona and Norwegian krone as we earn when we produce products and sell them on those markets.”
Cloetta’s net profits still rose, increasing 27.8% to Skr138m for the quarter and 58.9% for 2023 to Skr437m.