Norwegian consumer goods group Orkla is preparing to take on multinational food giants in the Nordic markets through the development of its “multi-local” strategy.
Speaking at the Consumer Analyst Group of Europe (CAGE) conference earlier this week (19 March), Orkla president and CEO Åge Korsvold suggested the group’s “multi-local” approach meant taking the best attributes of a multinational corporation and applying them on a local scale.
While Orkla is the largest regional player in the Nordics, Korsvold emphasised the group still has “many competitors” that “have much more resources”.
“In virtually every category this is the picture: we have a very large market share and, relatively speaking, the multinationals will have a much smaller market share. What makes us different from the multinational companies with which we complete is actually our local size… Local scale in terms of sales force, merchandising, activity in the shop and it gives us unique synergies in media spending,” Korsvold claimed. “A very important part of the change process that we need to undergo over the next few years is to use that [local] size – on the cost side, on the revenue side and on the skills side.”
The conglomerate is in the process of selling off its non-core activities, such as interests in aluminium processing, as it looks to transform itself into a consumer-facing FMCG group. Orkla has made progress in selling off a number of non-core activities in 2012 and options for how to reinvest the cash are under consideration, Korsvold revealed.
However, Orkla’s transformation must reach beyond simply focusing its business. The group must also improve the operational performance of its core, Korsvold continued. “Our consumer goods business needs to be improved. We need to improve practices and we need to operate that business differently. There is a change process on its way to improve performance.”
The initial thrust of this “change process” will be for Orkla to “extract synergies across companies and across the categories in which we operate”, Korsvold said. Orkla operates a number of different businesses across five key areas: food, confectionery and snacks, home & personal care, food ingredients, and international (focused on Russia, eastern Europe). Consumer food operations generate about 60% of sales.
In order to boost profitability, Orkla plans to take complexity out of its model, which will begin in 2013 by “rebuilding the corporate centre” of the company, Korsvold said.
Orkla aims to become the leading player in Nordic food markets, where it already generates 80% of sales. “Our competitive position is strong in Norway, we have a reasonably strong position in Sweden, we still need to improve our position in Finland and Denmark to achieve our objective of being the strongest competitor, and really a challenger, in the Nordics,” Korsvold suggested.
According to his assessment, Orkla has “very strong brands and local positions”, mostly number one and number two positions in the categories and markets in which it operates. In some categories – such as snacks – Orkla is the number one player in all Nordic markets, in others the group is only present in one or two of the markets. “There are opportunities to grow through feed in acquisitions or organic expansion into geographies where we are not,” Korsvold said.
Speaking to just-food on the sidelines of the event, Orkla SVP of investor relations Rune Helland suggested Orkla has a competitive advantage over the multinational players because, while they have more overall resources at their command, Orkla is investing more in the Nordic markets.
However, Orkla is far from complacent. “At the moment, there is little attention from the multinationals on the Nordic markets. But they will realise one day that these are good markets to operate in. When they do, we must be ready for that,” Helland said.