The operating environment for FMCG companies is changing rapidly, setting demands for us to respond to new needs. The market is growing through distinctly different established categories, on-trend categories and foodtech, while eCommerce is emerging as a significant alternative to traditional trade. At the same time, the focus on good-for-me, personalisation, transparency and sustainability continue to be strong.
The food industry plays a part in everyone’s life, everywhere in the world. As global trends, economics and politics impact consumer behaviour, we closely monitor changes in our market environment to provide the products and services people need and desire.
Positive economic development in markets despite global uncertainty
The general economic situation in Europe continued positive, but in many markets, growth slowed down. Brexit and the trade disputes between the US and China caused uncertainty in the global economy.
In Finland, economic development continued on a positive track. GDP growth for 2019 is estimated at 1.5 per cent (1.7 per cent in 2018). The unemployment rate decreased slightly from the previous year. Private consumption has declined somewhat, regardless of increased purchasing power.
The growth of the Swedish economy was slow but is expected to recover due to an increase in domestic consumption and improving export. The growth pace will, however, remain below potential. Salaries increased moderately, and inflation is expected to decrease further.
Russia’s GDP growth for 2019 is estimated at 1.2%, slowing down from the previous year. Strong growth in the agricultural and industry sectors boosted growth towards the end of the year. The threat of sanctions continues to increase uncertainty across sectors. The unemployment rate remained approximately at the previous year’s level. Growth in public consumption is slow but is expected to pick up in 2020.
Weakened Swedish krona impacts net sales
Currency fluctuations have a direct impact in our financials, when local currencies are recalculated to euros. This may also be reflected in local profits through, for example, higher material costs.
The Swedish krona weakened from the previous year, with a negative impact on net sales. The Russian rouble strengthened somewhat, as did the Pound sterling, which is the main currency for cocoa purchases.
Market development: fierce competition across categories
The competitive situation has remained tough in all our businesses. The bakery business saw fierce competition especially in Sweden and Russia. Successful launches secured market share growth in the confectionery market. The non-dairy markets were intensely competitive especially in Sweden, and the café landscape saw new players entering the market.
The Finnish bakery market grew compared to the previous year, with white bread, bake-off and artisanal bread increasing their popularity. In Sweden, the market value is growing, driven by arctic bread and dark whole bread, but declining slightly in volume. In Russia, bread consumption declined in volume in St. Petersburg and Moscow but grew in value in Moscow. Fazer Bakery increased its market share from the previous year in Finland and Latvia, but lost some market share in Sweden, Russia, Estonia and Lithuania.
The confectionery market value increased in Finland, and we were able to increase our market share in chocolate tablets, countlines and sugar bags. The biscuit market grew in value, and we gained some market share towards the end of the year. In Sweden, we grew our market share with the launch of Karl Fazer fresh milk tablets and the continued success of Tutti Frutti sugar candy bags.
The food service market developed positively in comparison with the previous year. Net contract sales turned back on a positive track during the latter half of the year and the new sales pipeline remained strong. Performance improved throughout the business due to successful business plan execution in the operating countries as well as continued focus on margin management and profitable growth Fazer Food Services was sold to Compass Group on 31 January 2020.
The non-dairy market continues its strong development in the Nordics. The Swedish market is highly competitive and the Norwegian market lacks maturity, posing some challenge to Fazer Lifestyle Foods’ growth in these markets. Froosh lost market share due to strong competition. Private labels are also active.
Fazer Retail operates in highly competitive markets both in Finland and Sweden, with established as well as new players expanding their market presence.
The outlook for 2020 is unstable. The Coronavirus (COVID-19) will have a major impact on all markets and businesses where Fazer operates.