2015 was challenging for Fazer Bakery, but focus on consumer insight, strong brands and innovative novelties – together with savings in operating expenses – helped to keep the results on target.
However, raw material costs increased more than was predicted. The devaluation of the rouble had a significant impact on Fazer’s raw material costs in Russia, and it weakened consumer purchasing power, with consumption shifting from premium to mid-priced breads. The bakery business also saw increasing price pressure in the Finnish marketplace. Major retailers began campaigning on price, and profitability in categories such as bread was inevitably affected.
Nevertheless, the year was not without its highlights. Sales of pre-packed bread increased in Sweden, a category which had been in decline in this market. This was supported both by Fazer Bakery’s strong novelties and a gradual shift in its offering towards the organic ingredients particularly favoured by Swedish consumers. The shop-in-shop business in Finland performed an excellent turnaround, and is now enjoying profitable growth.
The previously announced closures of Fazer’s bakeries in Tallinn, Estonia and Ulvila and Hyvinkää in Finland were completed in 2015, while collaboration negotiations concerning the Group’s Vantaa bakery concluded with the decision to reduce personnel by 40.
Strategic refinement with the goal of category leadership
Consumer behaviour in the current economic climate is shaping the marketplace for Fazer Bakery’s products, as is intense price competition. While growth in the bakery market is small, areas of opportunity do remain, and the business area’s strategy has been refined to emphasise these.
Fazer’s target is to be the category leader in bakery, with an offering which is irresistible to the consumer and, therefore, irreplaceable for the customer.
Achieving this will require certain key investments, and to reach its targets Fazer Bakery is prioritising sustainable profitability in its home markets, particularly Sweden and the Baltic countries. Refinement of the product portfolio in these markets was executed in 2015, identifying those categories upon which future efforts will focus. These decisions will continue to guide Fazer Bakery’s actions in 2016.
During 2015, the business area oversaw the successful rollout of its bake-off concept in Russia. Fazer aims to capture further opportunities in the Russian frozen bakery market, which is enjoying excellent growth. This may well require an increase in capacity, and options are being explored to enable this. The market for frozen in Finland, on the other hand, contains some deeply invested competition, and therefore efficiency and Fazer’s continued ability to produce local favourites are priorities to ensure competitiveness.
Good progress was also made in the strategic initiative of front-end development, under which several key recruitments were made, and a number of projects to advance Fazer Bakery at the point of sale were put into motion.
The modern consumer is a health-conscious one
Fazer Bakery relies on consumer insight to guide product development and the continuing relevance of its offering. In 2015, Fazer’s sensitivity to consumer trends and strong role as an innovator within this category were best evidenced by the debut of several new products in the health and well-being category.
The ‘Fazer Rotfruktsbröd’ root vegetable breads, launched in Sweden during 2015, are a case in point. These products bring naturally nutritious root vegetables to the bread shelves for the health-conscious consumer, and, with their eyecatching packaging, are also positioned in relation to the latest culinary trends.
Another strong example is the ‘Energiya zdorov’ya’ (‘Health Energy’) range of breads launched in Russia, containing five products which each emphasise distinct health-related properties and ingredients.
Finnish rye supply secured, and safety in focus
Consumer insight has underlined the importance of locally sourced produce, and it has therefore been a strong ambition of Fazer Bakery to secure the supply of Finnish rye flour for its products sold in Finland. With rye cultivation at a relatively low level in the country, this has not been easy. In 2015, thanks to hard work across the value chain over a number of years, Fazer was able to secure its domestic rye flour supply in Finland until well into 2017.
Another focus for the entire Group in 2015 was safety in the workplace. Fazer Bakery has a strong record for improving safety, but nevertheless targets constant improvement in this area. In 2015, its lost-time accident frequency (LTAF) rate showed a 25 per cent reduction. Such strong development would not be possible without constant attention.
“While in some ways the bakery market has never been more challenging,” says Petri Kujala, Managing Director of this business area, “we remain attentive to what consumer behaviour is telling us. By focusing carefully, we can locate and achieve growth in the longer term.”