Fazer Group’s strategic cornerstones for profitable growth are leading brands, a winning operating model and expansion in higher value products and services and in growing markets. The Group carried out valuable organisational changes from 2013 into early 2014.
Despite a tough market situation, Fazer continued to grow in 2013. However, profitability decreased from the previous year’s level due to layoffs and cost cutting initiatives in customer companies in the food service area. Volatile raw material prices and increasing price competition especially in the bakery business also had an impact on results. Regardless, Fazer continues to strive to achieve its strategic objective of profitable growth.
“Fazer Group is currently focusing on three areas to better respond to the present market situation and pursue profitable growth. These are operational excellence including quality and safety, increased accountability, and efficiency improvement. The different businesses will place an increased emphasis on these areas when implementing strategy,” states Jouni Grönroos, CFO and Deputy CEO of Fazer Group.
Expanding in higher value products and services is one of Fazer’s strategic cornerstones. Fazer continues to seek innovation based on customer understanding and consumer insight to increase its profitability and shareholder value.
Fazer’s vision is to be the best choice. The company aims to provide consumers with products and services that enable their responsible lifestyles. For this reason, the Group takes a strategic approach to corporate responsibility, managing it actively as a part of daily work. Read more about Fazer’s Corporate Responsibility Programme on page 26.
New organisational structure
As of March of this year, the Fazer Group will consist of three Business Areas and two Business Units with full profit and loss responsibility. These are Fazer Bakery, Fazer Confectionery, Fazer Food Services, Fazer Cafés and Fazer Mill & Mixes.
The purpose of the renewed organisational structure is to ensure Fazer’s ability to operate efficiently, with clear roles and accountabilities among its employees. The new structure is designed to enhance consumer and customer focus, enable faster decision-making and improve strategy execution capabilities.
The members of the Group Management team are the President and CEO, the heads of the three Business Areas, and the heads of the Finance, Legal, Communications & Branding, Strategy & Business Development, and Human Resources functions.
The bakery business
Fazer’s growth strategy also addresses expansion into new products and categories. The common innovation process in the bakery business is growing increasingly important in effectively targeting product development. In line with the strategic emphasis on operational excellence, cross-border innovation will play an even stronger role in ongoing efforts to expand Fazer’s portfolio with competitive new products.
In an intensely competitive environment for the bakery business, the most significant development in 2013 was the rapid growth of the bake-off category in the Finnish market. The consumption of in-store bake-off products has nearly doubled, drastically reducing the demand for pre-packed fresh bread. To meet this trend, the bakery business has concentrated on developing the bake-off and frozen product categories with the aim to become one of the leaders in this area. It also continues to advance its shop-in-shop bakeries and bakery shops business. The combination of these elements along with Fazer’s well-developed packaged fresh bread category enables Fazer to provide its customers with a holistic offering.
Bakery sales increased considerably in the important growth market of Moscow during 2013. Throughout the years Russia has been one of the most important investment areas for the Group. Considerable efficiency improvements took place during the year including a remarkable increase in flexibility as a result of the modern multiline that was installed in the Moscow bakery at the end of 2012. The multiline enables the production of several types of products. It also reduced transportation between St Petersburg and Moscow by roughly 50 per cent in 2013.
The confectionery business
The confectionery business continues to seek growth in Finland and in the Nordic and Baltic regions, as well as in the travel trade through a clearly defined portfolio of brands with high international growth potential. In Sweden the focus on leading confectionery brands such as Karl Fazer was highly successful during the year. A select offering also generated better brand awareness among consumers.
The confectionery business established a target for 50 per cent of its growth to come from outside of Fazer’s home markets within the next five years. The Fazer Magic, which was developed in cooperation with frequent travellers, will be sold mainly at international airports, on ferries and in selected cafés and department stores all around the world.
Fazer’s work is inspired by its mission to create taste sensations. The successful launch of the biscuit offering during the year supported the strategy of expanding into new products, enabling Fazer to double its market share in Finland. Well-known Fazer confectionery brands introduced to the biscuit shelves in 2013 were Julia, Marianne and Suffeli. The new offering travelled beyond Finland with the launch of Geisha biscuit novelties in Sweden and Estonia. The biscuit business is a good example of growth and expansion achieved through innovation and product development. Fazer continues to pursue similar opportunities in other categories.
The food service business
The strategy development efforts seek to define ways to grow in selected segments with targeted food service offerings. It is equally important to develop new business offerings. Fazer sees new opportunities in responding to consumers’ changing behaviour by satisfying their needs beyond lunch within its restaurants’ operations, for instance through takeaway and catering solutions.
The new takeaway concept is one innovative solution that allows consumers to either purchase packaged ready meals on site or order fresh food online, which they can conveniently pick up at the restaurant. Currently being piloted in Finland and Sweden, the concept has received strong interest from customers in the Nordics.
In 2013 Fazer continued its growth through the acquisition of Skandinavisk Mat Invest (SMI) in Norway. Through the acquisition, Fazer more than doubled its food service business in Norway. The integration of Scandinavian Facility Management AB (SFAB) in Sweden was also completed successfully. Through this the business strengthened its position in the market, gained procurement synergies and benefited from economies of scale.
The service experience is an inseparable part of the food service solutions offering. During 2014 efforts will be strengthened to secure operational excellence in the service provided in order to bring value to both clients and guests.
Sustainability, health and well-being are all important parts of Fazer Food Services’ business. In 2013 Fazer Food Services took several initiatives in the area, for instance, to reduce food waste and to increase transparency of the origin of food and the proportion of organic food in its offering. Sustainability and well-being will continue to be key themes in offering development to meet future guest needs.
Fazer Cafés successfully launched its new Café concept in 2013, renewing four and opening one new unit. The business unit’s strategy concentrates on leveraging the benefits of the new quality-focused concept and strengthening the bond between Fazer and consumers by offering a unique Fazer experience.
Fazer Mill & Mixes
The strategy of Fazer Mill & Mixes is to focus on its strong current flour mill business and international growth in value added products. In 2013, the oat mill investment in Lahti was finalised. The ramp-up of the new mill, which provides both Fazer’s own bakeries and other customers with high quality oat products, is an important focus area in 2014.