Cloetta’s newly appointed President and CEO, Katarina Tell, has announced a suspension of investment plans for a new confectionery facility in the Netherlands. The Sweden-based owner of the popular Candy King pick-and-mix brand is currently engaged in a comprehensive “reassessment” of the project and is considering “alternative options to secure a more efficient manufacturing structure.”
The decision to pause construction was influenced by the “increased risk relating to energy supply,” as the project is still in the regulatory approval phase. Initially unveiled in 2022, the development plan coincided with the company’s announcement of the closure of three of its facilities—one in Turnhout, Belgium, and two in Roosendaal, Netherlands.
The exact location of the new site has not been publicly disclosed but, Cloetta indicated that the facility would be situated near its existing operations in the Netherlands.
Katarina Tell succeeded long-standing President and CEO Henri de Sauvage-Nolting at the beginning of September after he retired in January, following a strategic move to streamline the pick-and-mix portfolio to optimize costs in 2023.
As the greenfield project remains in its early stages, investments have so far been moderately limited. Tell emphasized, “There remain opportunities in our existing manufacturing network to compensate for the volumes planned to be produced by the greenfield [site] in the mid-term.” She further noted, “This is the right time to reassess if there are better alternatives to secure a more efficient manufacturing structure to support Cloetta’s long-term profitable organic growth and environmental footprint.”
The review and assessment of alternative options are slated for completion by the end of the first quarter of next year. Morten Falkenberg, chairman of the company that owns the Sportlife chewing gum brand, addressed the industry’s current challenges, stating that Cloetta, like many food manufacturers, is facing “exceptional inflation and increased geopolitical uncertainty, along with new energy supply issues in Europe.”
Despite these challenges, Cloetta has reported an uptick in sales and profits for the second quarter and year-to-date, underscoring resilience within the food and beverage industry. Specifically, sales for the April-to-June period increased by 2%, amounting to Skr2.04 billion ($201.3 million). Adjusted operating profit surged by 16.2% to Skr222 million, while net income rose by 12.3% to Skr82 million.
Over the first six months of the year, sales climbed 4.1% to Skr4.1 billion, with adjusted operating profit showing a year-on-year increase of 5.9% at Skr414 million. Notably, net profit experienced a robust 37% increase to Skr189 million.
Having joined Cloetta in 2018, Tell advanced through the ranks, eventually becoming the president of the business in Sweden. She contributed insights during the commentary on the second-quarter results, highlighting the new site’s potential to enhance growth capacity and significantly lower costs while also reducing greenhouse gas emissions. “When operational, the production facility will create capacity for growth and significantly reduce costs, while also reducing greenhouse gas emissions,” Tell noted.
The company’s long-term profitability targets include maintaining a medium-term EBIT margin of 5-7% for its pick-and-mix segment, which is its largest revenue contributor. Moreover, Cloetta aims for a long-term net debt to EBITDA ratio of 2.5 times, which currently stands at 1.8 times as of the close of the second quarter. The EBIT margin was recorded at 7.7%, down by 1.4 percentage points.
In conclusion, Cloetta’s strategic reevaluation amid current challenges reflects trends within the food and drink business, particularly in adapting to consumer demands and energy supply volatility. The company’s actions will be closely watched as it navigates these complexities in the fast-evolving food and beverage industry.
