Orkla SWOT and PESTLE Analysis

Strength

1. Market leader in the Nordics and Baltics Orkla is the market leader in the branded consumer goods segment in the Nordics and Baltics. Orkla is a house of brands, with over 300 local brands under it. In 2017, Orkla sold an average of 8.5 million products every single day. Some of the largest categories in which Orkla operates are snacks, confectionery, sauces and flavourings, ready-to-eat dishes, hygiene, toppings, dehydrated casseroles, soups and sauces, fish and seafood, pizza, side dishes/condiments. Orkla is a market leader in over 100 different categories. While 30% of the sales revenue is generated in Norway alone, other Nordic regions contribute 38.9%, Baltics contribute 4.9%, rest of the Europe contribute 22.4% and the rest of the world contribute 3.8%.Its popular brands include Grandiosa, TORO, Stabburet, Felix, Paulúns, Abba, Kalles, Beauvais, Den Gamle Fabrik, Spilva, Vitana, MTR, KiMs, Nidar, Göteborgs Kex, Sætre, OLW. With 18,178 employees spread across geographies, Orkla commands a huge presence all over Europe and is fast growing in other continents as well.

2. Country specific localization of products The largest and highest grossing division of Orkla - Orkla Foods witnessed promising organic top-line growth of 2.7% on an average and a positive growth in almost all the markets. Orkla’s strategic objective is to strengthen its market position by using its unique local insights and knowledge which gives it a significant edge over its competitors. Owing to the fact that Orkla serves in many diverse geographies, localization of its products as per the country’s consumer tastes, choices and preferences ensures a higher recall value for the brand, especially in the food segment. In 2017, Orkla’s Laban - Norway’s best selling gummies brand was launched in India’s fast growing sugar confectionery market. With Millennial as the target consumer, it was localized to launch in four different flavour - Green mango, mango, strawberry and orange as per standard Indian tastes.

3. Strong Integration of Consumer Goods brands With over 300 brands under Orkla, It is vital that Orkla takes integration initiatives to ensure collaboration and a shared strategy. By working as "One Orkla", Orkla is utilising economies of scale all the more effectively by focusing on lesser but larger production units. Orkla is increasingly divesting its non-core businesses to solely focus on its core competency - Branded Consumer Goods. It is currently in the last leg of its transformation from an industrial conglomerate to a branded consumer goods giant. This has led to freeing up of more resources for multiple acquisitions. “One Orkla” will also create synergies through the integration of acquired companies. The strength of integration positively determines the profitability of the company through efficiency of operations.

Weakness

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Opportunity

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Threat

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Political

1. Changes in taxation policies Orkla paid a net of NOK 904 million for taxes in 2018, as compared to fiscal 2017 where it paid NOK 934 million. Despite the reduction in absolute figure, the taxation rate has increased from 2017 to 2018. One of the reasons for the increase in tax rate is due to the raise in special tax on hydro power. Another reason for tax rate growth is the increase in ground rent tax rate, which is a result of the higher contribution to profit from Orkla’s energy operations in Norway. Orkla investments in hydro power comprises of two assets, a run of-the-river plant in Sarpsfos and a reservoir power plant in Sauda. In 2018, Orkla paid a tax rate of about 23%. With Brexit on the horizon, there are now higher possibilities of political shifts, which in turn might lead to fluctuations in the taxation rate. In the confectionery and snacks division Orkla’s revenues growth has been hampered due to the sugar tax in Norway.

2. Norwegian government’s agreement to reduce food wastage The Norwegian government signed a binding agreement to reduce food wastage by half with twelve food industry organisations, as on June 2017. This is in accordance with the UN sustainability goal 12.3 for food loss and waste reduction. This target is applicable to the entire food value chain in Norway, starting from agricultural production to the end usage with consumers. Orkla, one of the major food players in the Norwegian industry, signed the historic partnership to halve the food wastage by 2030. Orkla’s ambitious target is to achieve the goal by 2025.
To achieve its goals, Orkla has designed a waste reduction model which was tested in a pilot project in 2017 for Orkla Foods and Orkla Confectionery & Snacks. The pilot project showed positive results. This aided in establishing new working rules for waste management. Since 2014, Orkla’s waste management policies have resulted in a 13% reduction in organic waste.

3. Pressures due to Brexit As the UK is scheduled to divorce the European Union in March, 2019 there is significant speculation over the fate of trade relations between the two entities. It is also likely that UK may leave EU without a deal in place, which may sever its ties with the EU. This may adversely affect various industries, including Orkla. Orkla has a significant revenue share trickling in from the UK to Norway and the EU. With production operations in UK, Orkla stands to be badly hit by Brexit. Apart from trade restrictions, this may also lead to currency fluctuations and an onslaught of different taxation regulations. No firm strategy has yet been disclosed regarding Brexit, thus it is paramount to witness how Orkla combats with the situation.

Economic

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Social

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Technological

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Legal

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Environmental

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