A modern sustainable food company

Fazer’s focus, in the coming years, will be on speeding up our transformation to become a modern sustainable food company with a joint direction. In 2018, we started important actions to implement our new strategy. Financially, our operating result fell behind previous year even if the net sales were at 2017 levels.

Life today is fast-paced. People’s criteria for making choices have changed. We as a company are expected to understand what people want before they’ve even asked for it. For Fazer, it means that we shall become smarter, faster; to understand where consumer behaviour is evolving and to act upon it; to innovate across our categories, collaborating to uncover our potential in the market. Developing these capabilities will impact our way of working and our culture.

Trends are heavily shaping the world of food. New proteins and plant-based substitutes for meat are increasing in popularity. The climate impact of food production is being actively discussed, and many are willing to reduce their meat consumption. Fazer Lifestyle Foods is directly targeting this sustainable, health-conscious lifestyle and it will have a significant role in our geographical expansion beyond the Nordics. Vegetables and oats are at the innovative core of sustainable snacking, and bakery products that enhance well-being as well as artisanal products continue to attract consumers. Flexible eating habits shape the offering of Fazer Food Services, too. In Fazer Confectionery, we have combined classics with innovations, resulting in successful tablet launches. The launch of the online Fazer Candy Store demonstrates on the other hand our enhanced attention to consumer-convenience. In Fazer Retail, we focus on strengthening our direct-to-consumer offering and the unique Fazer experience.

In 2018, we began implementing our new strategy. We are heading towards our joint strategic goal backed by a strengthened consumer focus and a renewed Fazer brand positioning. We emphasize value creation through portfolio choices, continued operational excellence and structural improvements. We invest in the development and renewal of our products and business portfolio, based on deep consumer insight and research. We target growth within our selected categories and will reach new customers in Northern Europe and other selected markets with an offering based on strong brands in growing categories. Fazer Lifestyle Foods’ products, together with chocolate, will lead the way to international markets.

We continue to concentrate on delivering our strategy, with an emphasis on future proofing for a digitalised world, our highperformance culture as well as our safety culture. We are committed to improving our performance with strategic initiatives in all our businesses and geographies. We have set the bar high and will focus on execution. We leverage deep customer insight and close cooperation with the scientific community to create new, attractive products and solutions. We innovate through collaboration, creating added value for customers and partners alike.

The investment in a new factory in Lahti, Finland, which will utilise state-of-the-art technology to produce xylitol from oat hulls – a side stream of the oat milling process – marks a further step on the way towards enhanced sustainability and circular economy through innovation. The works on the site in Lahti have already been started.

With our renewed Fazer brand, we will ensure that Fazer will be meaningfully different in the eyes of the consumer also in the future. ‘Northern Magic. Made Real.’ is unique and forward-looking; it is an ambitious promise that builds on our heritage and reaches out to the future, enabling Fazer’s ambition of strong expansion in Northern Europe and beyond. In addition to excellent products and services, there is a growing consumer need for brands to stand for a deeper purpose and to demonstrate values, attitudes and actions that do good for society. We want consumers to choose Fazer. Our renewed brand helps us better communicate who we are, what we offer and what we stand for.

We have defined a new Sustainability Approach to take a stronger stand and to deliver concrete actions. It is aligned with Fazer’s mission, strategy and the renewed Fazer brand. The new Sustainability Approach consists of four Core goals: 1) 50% less emissions, 2) 50% less food waste, 3) 100% sustainably sourced, and 4) More plant-based. We know that how we grow, produce and consume food has a significant impact on the environment, on society and on our well-being. With food, we can make a difference. We are committed to the principles of the UN Global Compact and by working towards reaching our core goals by 2030 we contribute to the Sustainable Development Goals.

To support Fazer’s transformation into a modern sustainable food company, Fazer’s research and innovation unit Fazer Lab invited everyone at Fazer to come up with ideas at the first ever Fazer Innovation Challenge in spring 2018. The challenge attracted 110 ideas and culminated with 24 innovator teams joining the final pitching event. The teams were working on a wide range of ideas, and the first outcome, an artisan bread baked with hemp, is already available for consumers in Finland. We value cooperation with external partners, aiming to increase our knowledge and innovate across categories. We believe in open and agile innovation and, during the year, we have collaborated on the development of renewable and recyclable packaging materials, among others.

In 2018, the economies in many of Fazer’s key markets continued to develop favourably. The Finnish economy saw growth supported by private consumption and favourable development in employment as well as slow inflation. Also, the Swedish economy witnessed steady growth in 2018. The labour market continued to be tight, but wage growth was quite stable, and inflation remained at a normal level. On the other hand, the Russian economy continued to face the threat of sanctions and challenges caused by internal reforms, although their effects are buffered by strong macroeconomic indicators and a cautious monetary policy. The country’s unemployment rate remained low, while the risk of inflation increased.

In all markets, competition is fierce and has further increased. Fazer is, however, well equipped to strengthen its positions on its home markets and to grow in Northern Europe and beyond.

In Fazer Bakery, both the Finnish and the Baltic units showed strong development. The triumph of in-store bakeries in Finland continued with new bakeries being opened and new products added to the offering. In Russia, Fazer received a record number of awards for quality and innovation. Unfortunately, consumers’ weakening purchasing power had a negative effect on volumes and business performance in Russia. In Sweden, the performance issues continued, but towards the end of the year, improvements could be seen.

In Fazer Confectionery, all commercial units delivered a good result. Fazer Confectionery promoted international growth by signing a deal with a distributor in China and by starting to build an organisation in the USA.

The launch of the re-designed Fazer Yosa products marked the start of Fazer Lifestyle Foods’ stronger presence on store shelves across the Nordics. The creation of Fazer Retail opened new possibilities for cross-unit cooperation and stronger direct-toconsumer business opportunities.

Fazer Food Services’ performance was on a good level, especially in Denmark and in Finland. New concepts and ideas, reflecting current trends and flexible eating habits, have been tested in Fazer Food Services, and at the end of the year, we celebrated the success of the Swedish and Finnish Fazer Culinary Teams which won double victory in the Culinary World Cup: Fazer Team Sweden was number 1 and Fazer Team Finland number 2.

The Fazer Experience visitor centre has been steadily growing in popularity. The centre drew over 200,000 visitors in 2018. Fazer Experience is a unique place where everybody can experience Fazer in their own way. It’s a destination that interests people, and many visitors keep returning. Every interaction promotes continuous development, dialogue and a better understanding of consumer needs.

At Fazer, we aim high and dare to think big. We have grown stronger as a company and the market sees us in a new light – as being more progressive and forward-looking. This is the result of the work of all our great people. Together, we will develop the company further and continue its success.

Finally, I’d like to thank all our partners and stakeholders for their engagement and support in 2018.

Christoph Vitzthum
President & CEO