Norway-based food group Orkla Brands is looking to new products to boost volumes as it looks to push through price hikes to combat rising raw material costs.
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Orkla Brands, which has food businesses in Scandinavia, the Baltic states, Russia and India, admitted its sales volumes had been “weak” in the first half of 2009, although it had seen some improvement during the second quarter of the year.
Torkild Nordberg, executive vice president for Orkla Brands, admitted that the business, a unit of Norwegian aluminium-to-energy conglomerate Orkla, had wanted to see volumes rise faster but pointed to a challenging market in the Nordic region.
“We wish that there had been more growth, of course. We’re seeing that the markets are having a volume decline but there is not much that we can do about that,” Nordberg told reporters as Orkla published its half-year results.
“But, one very central point is that we ensure that over time we also have good volume growth but at the moment the market is not helping us, not even in our immediate proximity. We see that there’s a decline in the Nordic countries, in the grocery market of 3 or 4%.”
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By GlobalDataSpeaking to just-food after the results presentation, a spokesman for Orkla Brands said the company would not look to lower prices to increase volumes as the cost of buying selected commodities was rising.
“We will look for opportunities to increase prices because, in the second quarter, we saw increases in raw material prices in the countries that we are in,” the spokesman said. “The increased raw material prices in, for instance, sugar, cocoa and dairy, have to be compensated by increaded prices for our branded consumer goods. However, we will also still strive to reduce our own cost base.”
In a bid to boost sales volumes, Orkla Brands, which accounts for over 40% of Orkla’s group turnover, would look to roll out new products in the second half of the year.
“The challenge is to be better at innovation across all categories, even if we have several a few, big innovations coming up,” he added.
Orkla Brands is divided into four business units – Orkla Foods Nordic, Orkla Brands Nordic, Orkla Brands International and Orkla Food Ingredients.
The sluggish nature of the region’s grocery market weighed on sales at Orkla Foods Nordic, which saw revenues dip 0.2% to NOK4.72bn. EBITA, however, was up 6.6% at NOK450m.
Outside the Nordic region, Orkla Brands International posted a 15.3% fall in turnover to NOK890m. The business, however, swung into the black, posting EBITA of NOK1m, against a loss of NOK57m a year ago.
The Orkla Brands spokesman insisted the group’s operations in the developing markets of Russia and India were profitable. Its Russian businesses, he claimed, had benefited from expansion into new regions.
“In Russia, we have two companies – Krupskaya and SladCo, which are both in the chocolate and confectionery business. Both are targeting local markets with new innovations and Krupskaya especially has succeeded in developing new markets, particularly in the north-west,” he said.
The spokesman added: “Our businesses in India and Russia are making profits at a low level but we are happy with their direction, especially Krupskaya.”
