Afternoon, everyone, welcome to Orkla's Investor Day here in London. My name is Rune Helland, and I'm the head of investor relations, and I will also be your moderator for this afternoon. It's good to be back here in London two years after we announced our new strategic direction. Today, we will be focusing on the progress in transforming into a leading Branded Consumer Goods company in the Nordic area. We will also go deeper into some of our key business areas, Orkla Foods, Orkla Confectionery, and Orkla Home & Personal. Orkla's CEO will, however, start by presenting the transformation, the key targets, and the strategy going forward. There will be a Q&A session after each presentation, and if you still have unanswered questions, there will be a Q&A at the very end. Let me now hand over to Orkla's CEO, Åge Korsvold. Enjoy the afternoon.
Thank you, Rune. Ladies and gentlemen, welcome to this Capital Markets Day. What we would like to do today is to tell you where we are in our transformation. We would like to tell you about our plans and our goals, and we would like to tell you why we think that Orkla transformed will be a better company and a better investment. I have divided my presentation into four. After some introductory remarks, I will go through the market environments then spend some time on how we intend to drive value going forward. Finally, priorities and financial targets. After we announced the focusing on consumer goods in 2011, we split our assets into two parts. The Branded Consumer Goods consist of five business units: Orkla Foods, Orkla Confectionery & Snacks, Orkla Home & Personal, Orkla Food Ingredients, and international. The non-core assets are today predominantly aluminum, hydropower assets, and financial assets.
Then, of course, in addition, our 42% ownership rate as an associate company. I would like to start by going back to 2011 and tell you a little bit about the reasoning. Why did we decide to focus on consumer goods? The conclusion then, looking at the financial performance of the Branded Consumer Goods, was that this was in fact an underperforming operation. The consumer goods business had not grown top-line since 2006, and the EBIT was leveling off. Analysis told us clearly that we were underperforming in spite of the fact that we had great brands and great positions. Of course, if you manage to maintain a position, flat will convert or will transform into decline. You have to manage for growth and have that ambition.
That is something that we decided that should we achieve that, we needed to focus, and we needed to be extremely good at what we can do best. Consequently, the decision to focus. However, while the financial performance was, we felt, unsatisfactory, there were far more positive elements in this business than there were negative elements. Orkla has a portfolio of strong local brands. We have superior local insights, and skills and capabilities. We have local scale, which we will spend some time explaining to you. We think in our area, we have the ability to attract the best people to drive this business forward. Finally, maybe also importantly, we believe that Orkla is a very attractive consolidator in an industry that has consolidated and will continue in the years to come. At this point, I would say that the transformation is well underway.
We have established a new vision and a new strategy. We have unified branding, as you can see. We have a new structure, and we have a new management team. Finally, we have made some acquisitions, and in particular in the food area, we have made an acquisition of Rieber & Søn, which transformed the food business in Norway and in the Nordics, and which is well-founded on a solid strategy and which will deliver results, we believe. The strategic priorities going forward and the impressions we would like to leave with you today is four things: We need to reduce complexity. We want to extract cost synergies and improve cash flows. We need to drive organic growth, and we need to improve our skill base. The rest of the presentation will be spent on those strategic priorities and how we intend to achieve those goals.
Before we go there, a few words on the other activities, because there are really two transformational processes that goes in parallel. There is a transformation of the Branded Consumer Goods business, but there's really also a transformation in divesting the non-core and extracting the values that we have in those activities. Let me say, it is a complex transition, and we have made the decision that that transition will take some time. It is more important for us to extract the economic value that we have, rather than doing fast transaction and exiting early. The difference between managing that exit in a concerted way and exiting fast is probably a very significant amount for shareholders. That transition will take some time, and the way we have defined it, given that the joint venture with Sapa, we have committed to stay there for 3 years.
We have felt that a 3-year transition period is a suitable time frame also for the transition period of the Branded Consumer Goods business. At the top level, there are 4 goals. We need to integrate what we acquire in a good manner. We need to achieve best-in-class margins and cash flows. We must generate organic growth, gain market share, and drive category growth, and we need to attract the best leaders to Orkla. Let's talk a little bit about the market environment. The consumer goods business in Orkla has been built up over 27 years. Some very large and transformational acquisitions, taking us to the point where we are, in fact, the largest Branded Consumer Goods company in the Nordics.
As you can see, if you looked at the competition and the companies that compete with us in our categories, we are significantly larger than any multinational competitor in our market. I think one of the changes that this transformation that we're talking about means is that Orkla in the past did not use its size. The size itself creates an opportunity for synergies and for building skill sets. I think one of the big changes is that we need to use our size for something. We have an unprecedented portfolio of strong market positions. We are very strong in Norway. We have a strong position in Sweden. We have good positions in Denmark and Finland. Clearly, there is scope for improving those positions. Part of what we would like to do is expand geographically into those markets.
If you look at the market shares, you see dominant positions in all the three business units in the Branded Consumer Goods area. Very large positions, which generate scale as I will come back to. We are in an attractive part of the world. It is politically stable. The economy is relatively strong. The consumer is affluent. In general terms, this is a very attractive geographical area in which to do business. It is not an area where you will have phenomenal growth, there will, at the macro level, be relatively modest growth rates. However, as we will show you, we believe that through innovation and through our own efforts, we can, in categories, grow significantly more than the economy at large. Generally speaking, we feel that being in the Nordics is a place to be, and it's a platform which we find is very attractive.
It is a market that is consolidated. I would say about this market that there are between two and four retailers in each market that dominate the market. They are competent, but they are also local as we are. To that extent, this market would have been very different if you had the global retailers in our marketplace. We have local trade. They know us and we know them, and we are a very important supplier of category growth to our local retailers. I think that in general terms, the fact that you have a competent trade, is something that is demanding and challenging, but it's also something that will drive our own performance, and to that extent, anyway. Private label is here to stay, private label has lower penetration in the Nordics than in Europe generally. Also inside categories, of course, there are major differences.
I think the most important message is that, first of all, you see that the growth rate so far is relatively modest. Secondly, I would argue that private label is more of a threat to the number 4, number 3, and the number 2 brands. That is why it is so critically important for Orkla to control the number 1 brands. I think it's also one of the reasons why you see in the multinational companies, and you will see in our portfolio that more and more resources will go behind the strongest brands. There will be more investments in the number 1 brands, and the more peripheral brands will suffer and will receive less attention.
Clearly, also, when we talk about health, we talk about nutrition, we talk about the content of our products, there are quality aspects, and there are pricing aspects related to the competition between the branded goods and the private label. We feel that there is ample opportunity to differentiate our products from private label, also in the years to come. Private label is a competitor, you are better if you have some competition. I think that has to be the attitude. Local scale. We will never compete with the multinationals on their own terms. We will never have the same unit cost in production as some of the large multinational players. We have local scale. We have larger sales forces, there is more resource in the store. We have a better deal on media spend.
We have a supply chain that lends itself to local taste and local traditions. We, in fact, our business model is to adapt to local taste and to local tradition. All the experience we have tells us that that position is a strong position, and that that position is a position from which we compete very effectively with the multinationals, which I think the chart that I showed you before proves. We can compete effectively with the multinationals given that we have the local scale that we have. I would like to take you into what precisely is it that we will do and what precisely is it that we will do differently, in order to change the financial performance and the operational performance that we've had in recent years. It starts with a vision.
Improving everyday life with healthier and more enjoyable local brands. It is a vision that any Branded Consumer Goods company in the world could have, with one exception. There's one word in there that makes the difference, and that is local. We, our business model, our way of acting is to stick to the Nordics, understand those markets better than everybody else, and then be the local champion. There will be private label, there will be multinational competition, in between those two main competitors, there is, in our view, ample space for the well-founded, competitive local provider of products. We drive value through four strategic pillars. Local brands and innovations. This is really about our contract with the consumer. Brand management is at the core of everything we do. Innovation is at the core of everything we do.
Some of the stories we will tell you later today tells you how, in spite of the fact that the economy is not growing very fast, innovation in fact creates categories and creates products that can have double-digit growth. We have examples of that. Maybe the trick is not that we haven't done it. I think the challenge is to create a more consistent performance across categories and across business units. We will show you some examples later. The first thing we will do differently is innovation, and we'll spend some more time on that. Customers and marketplace. The trade is, of course, a gatekeeper. We need to drive category growth together with the trade. It is in our interest, but it is also in their interest.
To that extent, we need to focus on all processes, all value creation, in the interaction between us as suppliers and the trade. The third strategic pillar is operations and efficiencies. Trying to extract as much cost as we can, operate as efficiently as we can, because although we will never be as effective as the multinational, there is obviously a maximum difference between their performance and our performance. Finally, nothing happens without people. We need to have people that understand the strategy, agree with the strategy, and have the ability to execute on strategy. As I said, Orkla has a proud history of innovation. The picture behind me tells a story about fish breads. Fish breads, at least in Norway, is an iconic product. As you can see, it is also a very mature product.
The challenge 13 years ago was, how do we generate growth here? I think there were several things. It's about taste, it is about packaging, it's about activities in the store. It is about nutrition and health and consumers realizing that here we have a product that has to have some very beneficial effects. If we deliver and package in the right way, people will in fact buy this and consume this and in a different way than they did previously. You can see the traditional product has had a basically flat performance during the last 10 years. Sales in this category has quadrupled. I think it's an example of how innovation drives growth significantly above the macro growth that you have in an economy.
While we, I think, have a strong history, we still believe that we can significantly improve the way we run our innovation programs. We own some of the best and most loved brands in our markets, you have to innovate, you have to expand, you have to work actively with the brands at all times in order to maintain that position in the marketplace. First of all, the fact that we have restructured our business units means that the innovation teams inside Orkla today are twice as big as they were before we did the restructuring. There is more resources available. More resources means better skills and scale. We have also established a centralized team, in order to ensure that not only do we work better in the business units, but we can share the insights and the experience across the business units.
We can improve the way we think about and work with taste and nutrition. We can improve the way we work with packaging and design. I think also, very importantly, within the food area, if you buy a product from Orkla, you know that it is safe. The resources that goes into food safety are in fact considerable. It's one of the reasons, I think, that in the food industry, a consolidation game is going on. You need significant resources to ensure that every step of the value chain is secure, and we cannot risk having accidents in the value chain. We are already putting a lot of resources into food safety. As a large company, I'm sure that we will continue to put a lot of resources into that aspect.
It is one of the reasons also why Orkla, as a large company, needs to be clear to the consumer. Orkla stands for quality. You can trust Orkla if you buy a product from Orkla. The two initiatives that we work on within customers and marketplace is first of all, to improve even more the work of the key account managers. Orkla companies in the Nordics consistently rates very high on ratings from the trade. We are a preferred supplier, I think we know that we can always be better, and one of the ambitions is to have an even closer relationship, drive value even more consistently together with our partners in trade. We have the largest sales forces in the Nordics. Clearly, both efficiency and skill sets can be improved, also, we can work more effectively in the years to come.
I think while customers and marketplace and brands and innovation is predominantly about generating growth, in this area, there are also cost effects to be had in the years to come. When we announced that we would be a focused consumer goods company, we started also by restructuring Orkla. We divided the business into five categories. We did this in order to reduce complexity, creating an environment we can have faster decisions, more logical entities, and as we also then merge all the smaller companies into one legal entity per geography, we needed to establish new management teams. In foods and confectionery and snacks, in each of those business units, we reduced number of management teams from seven to three.
We have created new management teams, I would say, with some external recruiting, but by and large, by selecting the people we felt were the best and the most able people to put the positions that we created in the new organization. I think, by and large, you will see also through the day that the teams that run Orkla today have vast operational experience from consumer goods companies. We have integrated and merged the companies. We have put new management teams in place. We have also looked at the business model. We have done an overhaul. We are not changing the business model radically. The business units still have P&L responsibility. There is one difference, and that is, of course, that we are in the process of establishing a corporate center to drive synergies across the business units and to follow up performance management.
In the old Orkla, the business center was busy managing the portfolio. In the new Orkla, the business center will be busy trying to support the business units that drive the business. It is a big difference, both in terms of operational mode and in skill sets. I would also say that when you look at the cost of our headquarter, there are really three elements in that cost picture. It is the people cost and the associated cost with the corporate center as such. There are very large costs related to the transactions. Orkla has done a lot of very complicated resource-intensive transactions in recent years. That takes lawyers, consultants, bankers, and all of that flows into the headquarter cost. There are also, obviously, this year, some initial costs related to reducing the headcount, which also flows into that number.
I think if you benchmark, which we have done, the business support structure inside Orkla as such is not significant with the people we benchmark with. The synergies that we have announced amount to about NOK 400 million-NOK 500 million. The most important initiative, of course, is the Rieber & Søn integration, where we expect to extract between NOK 250 million and NOK 300 million. Where we are today is that we are absorbing the initial costs of the integration. Out of the NOK 250 to NOK 300 as we stand, we have contracted approximately cost synergies to the tune of NOK 150 million. The first positive effects of that will flow to the P&L in the fourth quarter. As we said in the second quarter report, there will be no positive effects from the programs that we are executing in 2013.
We are continuing to absorb upfront costs. The first positive effects will only flow to the P&L in the fourth quarter. I think in reality, it's only really 2014 before we see the effects flowing through to an extent that it is noticeable. One of the most frequently asked question is Rieber a good acquisition? What is your view one year after we made that decision? My view is that Rieber is still performing as an acquisition, as we expected. We are ahead in terms of synergies relative to the acquisition case. Rieber gave us a much broader technology platform, and Rieber, in many ways, fills out the positions that Stabburet already had. We are in the process of creating a much stronger food company across the Nordics. In Denmark, we are twice as big.
In Sweden, we get another category. Of course, in Norway, we get a much stronger company. I will say, though, that the speed at which Rieber sort of operates is lower than we expected. It will take more time to generate that speed that we need in the years to come. I think in financial terms, the Rieber acquisition will turn out to be probably ahead of the assumptions we had when we made the acquisitions. NOK 400 million-NOK 500 million of synergies that has been announced. As we roll out the strategic initiatives that I told you about previously, there will be further cost improvements. We can optimize business support, we can reduce headquarter, we can do everyday improvements in the supply chain. We estimate that the effect of continuous improvements will be at least NOK 150 million per year. We are centralizing procurement.
We are purchasing to the tune of NOK 18 billion per year. In 2014, 54% of the purchasing will be done centrally. That will have an effect in that year, estimated to be about NOK 400 million. We expect that the yearly savings will increase from about 1.9%-2.5% of the purchasing platform as we go forward. You can imagine, being focused on local taste and local insights, and being the results of numerous acquisitions, we have ended up with a fairly complex manufacturing imprint. Orkla has 70 plants in the Nordics, approximately, inside the consumer goods area. That creates an opportunity for cost improvements. It is a complex process. I think it's important to understand that part of our business model is to have more complexity in the manufacturing imprint than what you would find in the multinationals.
There is still considerable scope for improvements and simplifying that structure. That work is underway. We are working on some main assumptions, how we should do this. Over the next quarters, I think we will be able to tell you more about how we roll out a change program for the manufacturing imprint. Of course, as part of that reduction in plants and simplification of the manufacturing imprint, we also need to reduce the number of products and the number of SKUs, which is also consistent with what I said previously about putting more resources behind the strongest brands and the strongest products. This is all part of reducing complexity as we go forward. We have not today a number, a total number for all the business units.
In Orkla Confectionery & Snacks, which is probably the business unit that has worked mostly on these issues, Christer Åberg will later tell you that inside his business unit, the total cost savings will be about NOK 300 million. Synergies is 50-70 of that. This element of the synergies and the cost improvements for Orkla Confectionery & Snacks amount to about NOK 240 million by 2016. Where we are with people and leadership, we invest in people, we recruit people, we train people. I think the most important thing and the first priority this year is to put in place an incentive program that reflects the new goals. In 2014, there will be an incentive program aligned to the goals that we tell you about today. Strategic priorities going forward. As I said at the beginning, we need to reduce complexity.
We need to extract cost synergies and improve cash flow. We need to drive organic growth. We need to improve our skill base. Orkla has always had a strong balance sheet and financial flexibility. That is something that we intend to maintain. There are attractive add-on investments out there, and we have every intention to continue to add businesses to our current platform in the Nordic area. Transformational transactions during this transition period is highly unlikely. There will be divestments. The non-core, we will continue to work on exits there. Of course, we will also, as part of reducing complexity within the Branded Consumer Goods area, there might also be divestments of product lines or category in that area. The financial targets. It's important to understand that, as I said, there will be no effect in 2013.
We will start to see some positive effects in 2014, we do think that we need a three-year period to rev up performance. Our goal is to have an EBIT by 2016 of 15% in Orkla Foods, 16.5% in Orkla Confectionery & Snacks, and 17.5% in Orkla Home & Personal. The organic revenue growth should turn to between 2%-3% for Orkla Foods, 2%-4% for Orkla Confectionery & Snacks, 5% for Orkla Home & Personal. We've now spent a lot of time on three out of the five business units. Let me just spend a little bit of time on Orkla Food Ingredients. It's primarily a business focused on the bakery industry. It's a B2B business. 20% is retail sale, and there are really simplified two things that they do. It's a very strong sales and distribution company in Scandinavia, and it is ingredients to artisan and industrial bakers.
Return on capital employed in 2014, we have a goal of achieving 12.5%. It is a company and a business that is closely related to the Orkla Foods business. There are interesting synergies between the two businesses, we think that also here that we can rev up performance as we go. With respect to the activity side of the Nordics, we define the Baltics as core. In Eastern Europe, our businesses are below critical mass, we need to review our options in Eastern Europe, predominantly Czechia and Poland. In Russia, there is a comprehensive restructuring going on. We have said before, I repeat, we will review our strategic options by mid-2014 when the restructuring is completed. India is value accretive. It represents growth. It represents optionality. It is something which we will keep, we will come when they've been dealt with.
We all know that one of the foremost tasks of the CEO is to allocate capital. The allocation of capital in Orkla is that we will allocate capital to the Nordics. We will allocate capital to the consumer goods companies. We will maintain investment grade, we will maintain a strong balance sheet, and we will maintain financial flexibility. Dividends, the board has said, is maintained at NOK 2.50 per share throughout the transition. It is an aggressive payout ratio if you look at the consumer goods business on its own. First of all, I think we have an ambition of improving that performance. Of course, that dividend is also supported by the non-core activities. To sum up, the transformation of the consumer goods business is really a transformation, and it is about execution. We have a strategy. We know what we would like to do.
It really is about executing and doing what we say we would like to do. How do we grow? We grow primarily through driving innovation and being more innovative than our competitors. We drive growth through better execution in store, better sales forces, better key account management, driving category growth together with the trade. We have the opportunity to fill in in the current portfolio. There will be new categories in the Nordics, and there will be category growth in new channels. If you go through the presentation, you will see there is a long list of cost initiatives. We will realize costs from restructuring. We will integrate companies and extract costs from that. There is great improvement for continuous improvements, both in the supply chain, in the sales force, and in the business support systems.
We are centralizing procurement to extract the scale that we can see there. We are rationalizing the product portfolio, and we are optimizing our manufacturing imprint. Lastly but not the least, there is scope for working capital improvements. We have elected not to have a working capital program this year. In all likelihood, we will run a working capital program next year. Of course, while it is not in the charge, cash conversion is important. In our business, I believe we should have as a goal to have 100% cash conversion as we go forward. Lastly but not the least, if you add all of these effects, and if you thought that all of those effects would flow to the bottom line, you'd have a phenomenal P&L. That, of course, is not going to happen.
There will be some effects on the bottom line, and we have the margin goals that I told you about. I think more importantly, the result of all these activities will mean improved competitive positions, and that improved competitive position, of course, will transform into more growth. A lot of this will go towards a competitive position, it will flow to the consumer, and it's part of Orkla's competitive position as we go forward. Thank you.
Before we open up for questions for Åge, I'll just take this opportunity to welcome all of you watching it on the web and also welcome your questions. I'll just remind you also that you have to use the microphone when you state your name. Please, any questions for Åge?
Right here in the back.
Shall I go ahead? Yeah, Oscar from TCI. Just a quick question on the reinvestment of the cost savings into the business. Can you actually quantify to what extent you're looking to reinvest some of the savings back into the business?
Well, we haven't really quantified the savings, I think it's a balancing act. I think if I should use the rule of thumb, maybe it's a 50/50. The aim is to have a 50/50 split, 50% flows to the bottom line, 50% flows into an improved competitive position as a generalization.
I have one question from the web, Åge. What do you mean when you say that the dividend is supported by non-core activities?
I mean exactly that. That is exactly what it is. I think if you look at, first of all, there are dividends from the investments. Secondly, I think over the years, there will be more sales. I think if you look at the numbers, it is quite clear that the cash generation inside Orkla, given also that the non-core at some point will be sold, amply supports a dividend at NOK 250.
Hi, Robin Asquith with J.P. Morgan Asset Management. A question about the non-core activities. I accept your comment that you do not want to exit too early. You want to obviously increase the value. Is there a process to accelerate the disposal program, and therefore, we can get to Orkla being a clean consumer products company quicker, which might have a bigger impact in value generation in terms of the share price, et cetera?
The largest part of the non-core, as you know, is the Sapa JV. I think that, first of all, we have committed to a 3-year holding period. If we were to accelerate, we would have to do that in agreement with our partner, Hydro. An important part of the upside potential in non-core is, of course, the turnaround process that is currently going on in Sapa in Europe. We are talking about synergies of about 1 billion NOK. That is a complex process. It will take time. I think that, as I said, in the trade-off between moving fast and protecting some of the values, I think that realistically, to do this faster than we are currently presenting to you would not be to give you a realistic picture of what we can achieve.
One would have wanted to execute faster, but I think this is the reality, and I think then that's what we communicate. You can always hope, and there may be opportunities. You never know. As it stands, this is the plan.
Jeffrey Taylor, Invesco Perpetual. Could you give us a rule of thumb for how far SKU rationalization can go? How far can you go in reducing the complexity of the large array of products that you sell?
I think I would leave that to maybe Atle Vidar or someone. I think it's a continuous process, and I think the answer is also really that you will adapt as you go. I think it's a gradual process, because to the extent that you take out SKUs, you need to fill up that sort of sales volume from your stronger brands. I think to some extent, I don't think really anyone can give you a very good answer how that process goes. You look at the multinationals, you see the process has been going on for years, and it just continues. Where will it end? I don't know.
If we just put it a different way, you gave a good chart showing local scale as a reality. What proportion of sales wouldn't fit into that chart? How large is the tail of products where you're even in a local way, you don't have the right scale?
I haven't studied it very carefully. I bet that you have in this area, like in most economic cases, you have an 80/20 rule, would be my sort of guess. I haven't looked at it thoroughly. Okay, got Audrey.
Audrey Voss from Morgan Stanley. I guess back to the previous question. Judging by your track record, organic growth, where do you think you've got room to maneuver in terms of generating these 2%-3% or even 3%-5% in HBC? What has been going wrong so far, which explains why you haven't been there? In terms of innovation, if you could give us a sense of what you're doing in order to accelerate the innovation rate there.
First of all, I would say that I think the key message is that inside Orkla, inside a decentralized structure, you have pockets of excellence, but you don't use the strength of the large system. You don't use the resources that is available to a large organization. I think that, as you will see later today, you will see exactly that. You will see some examples from very strong innovation, very strong growth in categories. Clearly, Axellus are in categories that has great potential. I think that we already see synergies on the product side in the food area between Rieber and Stabburet. I think initially it's about using your resources and creating more consistency across the business units. To some extent, this is also about being ambitious, setting some ambitious goals, and create a culture where you perform.
I hope that by the time you leave this afternoon, you will have seen some examples of that. That's very much what we would like to show you
Hi, it's Piers Uvooth here from OD. Can I ask a quick question just to clarify? On the slide where you show your targets, you give targets from 2016, but you don't really say much about 2014 and 2015. What roughly do you expect to see there? Do you think it will show like-for-like EBIT growth?
I think you will start to see improvements in 2014, and then it's a gradual improvement up to that level. I think that this is a relatively large and complex transition. I think to be very specific, when exactly do all these effects sort of hit the P&L is maybe to imply some clarity that isn't there. I think we feel that the goals for 2016 are realistic, and they are achievable.
Should we expect that if you look in the Q2 results or the first half of this year, you said that the like-for-like EBIT is kind of falling at the moment. Is the idea then that gradually between now and 2015, say, that that performance kind of goes towards zero and then slightly grows? Is that the profile? At a high level, that slight drop at the moment should drop out and should become slight growth. Is that the kind of profile?
I think that, if I understand it correctly, I think 2013, as we've said in the second quarter and I said now, I think there is very little relief in 2014. There's virtually no relief in 2013. There will be 2014 before you see some meaningful effects in the P&L.
All right.
I got one more question from Le Beau again. What are the return on capital employed targets for Food, Snacks, and Home & Personal Care in 2015/16?
Stig, do you want to do that?
We have given the EBITA or EBIT targets, and we also give the capital employed in the annual report, that gives itself. Thank you. All right. We have one more question before No? All right. Thank you again.
Thank you.
From the group level, we are now moving over to the business areas. The next speaker has 20 years of experience from the Branded Consumer Goods business in Orkla. Please welcome the CEO of Orkla Foods, Atle Vidar Johansen.
Thank you, Rune. Good afternoon, everybody. This session is called Improving Performance from Increased Local Scale. The acquisition of Rieber & Søn has provided a significantly increased scale base in each of the Scandinavian countries for the Orkla Foods. This increased scale offers significant potential for improved performance in the coming years. This presentation is structured in three. First, I will talk about our unmatched market positions in the Nordic countries. I will talk about the 2016 targets and the actions to reach. Last, we will talk about achieving top-line growth. Taste preferences differ significantly between markets, and the Orkla Foods business model is built on that fact. We want to be world-class at serving the local consumer needs. In addition to that, a large part of the scale advantages are national or local in nature.
That goes with advertising, that goes with sales forces, that goes with customer management, and that goes with recruiting and retaining the best people in the national market. Our business model is built to exploit these facts. Some numbers. Let me briefly introduce you to the revenue structure of Orkla Foods after the Rieber & Søn acquisition. The pro forma 2012 turnover would be NOK 10.7 billion. On the left-hand side, you can see that the two biggest market for us is Norway and Sweden, together constituting about 80% of revenue. In the middle, you can see this channel sales split. We are predominantly a distributor brand from selling the brands through the retail channel, which is 80% of the sales.
On the right-hand side, you can see the category sales split, and as you can see, we are operating in many, many categories with strong number 1 positions. The biggest being meals of various forms and formats. Pizza is another important category for us, and sauces, condiments, ketchup is the third largest here. These are most of our brands, and as you can see, they are heritage brands going a long way back in time. I can just mention Abba Seafood, Den Gamle Fabrik coming from the 1830s and '40s. Ekströms from the 1840s and Beauvais from 1850. Stabburet, Felix, Toro are all brands coming from the 1930s and the 1940s. Why do I tell you this? These are the brands that all our consumers have grown up with, that they love to like, and it's been so for generations.
Needless to say, the consumer loyalty to these brands is enormous. Let me then take you through our superior market position in each of the Nordic markets where we operate. These are the market positions for the categories we have in Norway. I will not go through each of them, but 9 categories we have 50% market share or more. On the right-hand side for you can see the relative position vis-à-vis the multinationals or the global multinationals, if you like, in the categories where we compete with them. We go on to Sweden, it's another picture of predominantly very strong numbers. Sweden constitutes 30% of the sales in Orkla Foods, and as you can see in 10 of the categories that is shown here, the market shares are 50% or more. Relative to the global multinationals, also in Sweden, we have superior positions.
We move on to Denmark, that constitutes a smaller part of the revenue. You can see we are operating in a fewer categories, still solid market positions, and also for the nationals. Going to Finland, the curiosity is that in Finland, Nielsen is not allowed to report and measure market shares, so these are company estimates. As you can see, pretty solid positions in the categories we operate in Finland too. The Nielsen not measuring is the reason not giving the relative market position. To sum up this part, as you have seen, Orkla Foods possess a large portfolio of number 1 brands in the Nordic markets, brands with a long heritage and that has been the consumer's favorite for generations. At the same time, Orkla Foods is one of the largest and leading suppliers to the retail trade in each market.
I may mention that we recently was awarded the Supplier of the Year in Sweden in the retail trade. Also in Norway, we have been ranked the number 1 supplier through some years now. Furthermore, local scale advantages offer some cost advantages in advertising, in marketing, in sales force. We are attracting the best talents and leaders, and we have a flexible supply chain making us able to tailor innovations to the local consumer needs and to the customer requirements. Let me move on to the 2016 targets. Åge has already been through. We aim at growing at 2%-3% and exceed 15% EBITDA margin. The organic growth will be reached by a combination of growing and focusing on the core.
That means our biggest brands and categories, as well as launching new products into new categories, I will illustrate that with a couple of examples later. The main driver of the margin improvement will come from realizing the synergies and the full potential of the synergies coming from the Rieber & Søn integration and some other structural actions we recently did. In addition to that, we will of course constantly improve our cost base and see in the operations. This is the historic performance of Orkla Foods. As you can see, we have over some years, moved from the NOK 1.0 billion in EBIT up to almost NOK 1.2 billion. In the same period, the EBIT margin has gone from 12.9% up to 14.4%. As you can see, in the first half year this year, there is a drop in the EBITDA margin.
To a large extent driven by the consolidation of Rieber & Søn into the Orkla Foods Group. When we talk about the 15% target, I think it's important to say that the consolidation of the Rieber & Søn Nordic entity into Orkla Foods will lower the EBIT margin by 1.5-2% points. The starting point is not certain. The Rieber & Søn acquisition is a very important acquisition to Orkla Foods and to Orkla, allow me to spend a few minutes on repeating the strategic rationale on the acquisition. It starts with Rieber & Søn and Orkla being a perfect match, what do we mean by that? Both companies build the business model on the strong local positions, the local consumer taste preferences, and what we call a multi-local approach.
Rieber & Søn actually call themselves the local taste champion when we acquire them, which tells you that it's the similar kind of thinking. We are complementary in many areas. We are complementary in competence, in products and categories, and in technologies. Rieber coming from dry products, chilled products, Orkla Foods coming more from frozen products and built products. In addition, there was significant overlapping geographies, especially in the Nordic area. That means we had parallel organization in all markets, which we are one and offering huge synergy potentials. 2013 is the year of great restructuring in Orkla Foods, we are restructuring to be able to reach the 2016 targets. This is what we are carrying out now and have carried out.
The most important is, of course, integrating the Nordic Rieber & Søn businesses, which Åge has stated offers a synergy potential of NOK 250 million-NOK 300 million on the cost side when we run at full potential. This is the full Orkla effect. Some will come at headquarters, some will come in the other business areas, but a clear majority will come into Orkla Foods. In the first half year this year, we successfully merged Abba Seafood and Procordia, which was a big merger in Sweden. That will give NOK 40 million in synergies. We have changed production structure in Denmark. Moving production from one site to other Orkla sites outside Denmark offers NOK 10 million-NOK 15 million and is already executed.
The last point is that we have merged 2 companies we had in Estonia, and we built a more efficient management structure in our Fenno-Baltic division, another NOK 10 million difference. As Rieber being the clearly biggest potential and not yet delivered, I will spend a few minutes on that. Realizing the cost synergies in Rieber is well on track. The graph on the left-hand side shows the run rate effect realized per end of each year. When we exit 2013, we are at the run rate of 50%, as Åge has previously stated. Exiting 2014, we will be at 80%, and we will be at full speed with the Rieber synergies when we come to 2015. If we take a closer look at where will the synergies originate from, that's on the right-hand side.
You see that almost half of it will come from a lower number of employees, 40% approximately from lower purchasing prices when we combined our purchasing power, and that are the most. I will move to talk about top-line growth. This graph shows Orkla Foods organic growth since 2010 to the first half 2013. The red one shows the growth in retail channel only, constituting 80% of sales and where the brands are most important. The blue or green one is showing the overall growth for Orkla Foods. As you can see, both in 2011 and 2012, we have delivered in the retail channel growth in accordance with the long-term targets we have. 2013, I of course need to comment, is not satisfactory. Two reasons behind that. Rieber & Søn is coming into our accounts and with a negative growth.
Also in Norway this year, we had less successful innovations that explains this drop. We regard innovation as the clear driver for organic growth. We will continue that philosophy, developing new products on our core portfolio and outside our categories into new categories. The main trends that we face has not changed much over the last years. It's health, nutrition, one strong trend. It's indulgence is a prevailing trend, turning slightly in the other direction. We also have the trend of convenience that will always be there. I think we need to realize that time is on our side in our business. For us, and a more important growth driver than trends is very much doing product development, product improvement on the products we have. Better taste, better nutritional values, more convenient packaging, relaunching and relaunching, continuously developing the products we have.
We always keep taste as advantage when we innovate. I will now go briefly into 2 cases from the Swedish markets, both of them, that helps you try to convey some of our thinking when we do innovations. The first is the launch of Abba Middagsklart, translated into dinner ready or something, a meal solution, helping the Swedish families eat more fish. The second is the brand called Paulúns, launched in Sweden a few years ago. First to Abba Middagsklart. It all starts with the consumer insight. In this case, it was pretty simple, which the good insights normally are. seven out of 10 Swedes want to increase their fish consumption. At the same time, I didn't believe in that because I'm Norwegian, the Swedish find it difficult to cook fish properly. We utilized that and the Abba team developed a dinner product.
It's a sauce presented as a dinner solution that made it easier to cook great-tasting fish meals in just 20-25 minutes. You just take a few salmon fillets, frozen or fresh, put it into some dish, and pour the sauce over, and it's a great taste with your family appeal in 25 minutes. One important thing when we work with taste is to make the taste great, but not only that, to have a broad taste appeal. Most of our brands is about the children loving it and the whole family loving it. That is important. What did we do? This was put in the marketplace in 2011. We launched three taste varieties where we said, "Just add salmon." All taste varieties tailored to the Swedish taste and tailored to salmon, which is also the biggest fish species consumed in Sweden.
Launch wave 2, just half year later, became with a bigger pack size and a new taste variety. The bigger pack size because sizes of family differs and sizes of your kitchenware differs. Launch wave 3, just add cod, which is the second most widely consumed fish species in Sweden. Three more taste varieties tailored at tasting good together with cod. Exactly the same concept. In launch wave 4, which are coming out these days, we will, in Sweden, launch a sauce tailored for pasta and shrimps, which is pretty common combination in Sweden, and we will take the original concept into Finland and to Denmark, giving it local name and to the local taste. Did it work? Yes, it did. This is the sales growth to consumers from Abba Middagsklart. There is only two years of history as we recently launched it.
As you can see, this has already generated almost NOK 100 million in extra revenue, measured at the point of consumer purchase. This launch might seem simple, but it actually created a new category in retail, and it created a new consumption habit when it comes to dinners. If you don't have that broad taste appeal and that very convenient feature, it's hard to get into everyday Swedes' dinner repertoire, and we actually succeeded with that on this one. The beauty from a financial point of view was there is no cannibalization on our current portfolio on this one. All sales, all contribution comes in addition to what we already have. I see I'm doing well on time, so I will go further into Paulúns, which was a new brand in Sweden. Again, starting with local insights.
The underlying consumer insight here was that we observed a trend when it comes to nutrition that was a little bit different from the traditional diet, I mean, counting calorie diet, that has to do with positive nutrition, well-being, naturalness, and things like that. We wanted to launch something cross-category into that might give us some extra revenue. We then didn't have a brand to sort of be a credible messenger on that promise. We call the promise "Bara Bra Mat" in Swedish. That translates to English like "good food only," but it's more to it than that. It's good ingredients. It's proper ingredients. It's naturalness when you say it in Swedish. When we didn't have a brand, we teamed up with the dominant spokesman in Sweden called Fredrik Paulún, who was a very credible messenger for this product range, and we used his name as our brand.
We have then, since 2009, launched a wide variety of products going into rather big categories. These are mainly connected to the breakfast habit in Sweden. It's about cereals, it's about granola, another kind of cereal, muesli, it's super juices, it's super smoothies, and it's porridge coming out now, which is a common product in Sweden. This has resulted in an impressive growth and high brand awareness. From zero starting point in 2009, we are now selling this for more than 120 million SEK to the consumers. The recent launch, the super healthy granola, proves very promising. The brand awareness is now 80% after just four years, which is quite impressive coming from zero a few years ago. One more time from a financial point of view, every SEK sold here is an addition to what we already do. There is no cannibalization from this.
The same goes for the contribution. I picked these two examples to show you how we really have to think because we are in categories that have limited growth, and then we need to establish something on the side of what we do that is attached to what we do and where we have the competence and where we have the value chain to be able to create growth. One slide of returning Rieber to organic growth. As most of you saw from the quarter two numbers, we reported a sales drop in Rieber in the first half year of 10%. There is no doubt that the long period of waiting and uncertainty for the final approval from the competition authorities has hurt performance in short term.
Returning the Rieber & Søn category to positive growth will be one of the absolute most important challenges going forward for Orkla Foods. We are in the process of making the plans for 2014 and 2015 as we speak. We have only been in control here for four months. We believe that a renewed and tireless focus on the core of the Toro brand, we were thinking it a little bit, has been lacking. These are the dry categories in soups, sauces, and casserole dishes will definitely have a positive impact on growth. We also believe that the taste and product development competence in Rieber and Stabburet combined, and now Orkla Foods Norge, will lead to many new exciting innovation possibilities. Even more important, we have chosen to build Orkla Foods Norge on a management team with a proven track record of creating growth in so-called mature categories.
Namely, almost entirely with people coming from Stabburet. That is my bridge to introducing Bente Brevik, the CEO of Orkla Foods Norge, and my colleague since way back in the 1990s, Bente. Under Bente's leadership, there is a long track record of profitable growth. Stabburet from 2008 to 2012, under Bente's leadership, has had a 4% growth annually in retail and increased the EBITDA with about 40%. Before that, Bente had a long period of 10 years as CEO of Nidar, creating consistently 3% growth and increased more than double or maybe triple the EBITDA of Nidar. I'm happy to leave the stage to you, Bente. Thank you.
Oh, thank you. Quadrupled, you know.
Quadrupled.
I was reading in Lonely Planet the other day on Norway, and of course, I checked the chapter on Norwegian cuisine. This is the introduction in Lonely Planet. "Norwegian food can be excellent. It is often claimed, backed by authoritative research surveys, that Pizza Grandiosa, a brand of frozen pizza, is in fact Norway's national dish." We own Grandiosa. Although the Norwegian population thinks that they own Grandiosa, it is actually an Orkla brand. Grandiosa is stronger than Coca-Cola in Norway. Grandiosa is stronger than McDonald's in Norway. When we do something with Grandiosa, it tends to engage the whole nation. The last two songs that were launched along commercials for Grandiosa had 31 weeks consecutively on the equivalent of the Norwegian Billboards, 10 weeks at number one. Grandiosa has 50% of the Norwegian pizza market in the freezer.
The Norwegian pizza market in the freezer is about NOK 2 billion, so it is sizable. When you have 50% of that with one brand, what do you do? You don't touch it, maybe. Well, for us, there is only one thing to do when you have 50% and you're growing, that is to change it. We changed, we changed the whole Grandiosa portfolio, and we launched a new Grandiosa Homemade Pizza. This year, we grew Grandiosa by 14% in volume and 17% in value. Not bad for a billion brand, is it? This is how we work with our core brands. We grow them organically, we change the core of them, we improve them, we add on to them, and we enter new areas. I will share with you some examples of that.
This is our financial performance over some years. We do it by innovation, by brand building, by working with the sales force, through all the things that Åge mentioned earlier. What do we do really? We try to create enthusiasm for what we do. We try to create enthusiasm with consumers. We try to create joy amongst our customers, which means profitable joy, of course. We try to all the time improve our own performance. In our best of moments, we are able to create growth in all of our categories. Some years ago, we recognized that all of our growth had been based on value. We innovate on value so that we generate more willingness to pay, which is fine, but it doesn't help the volumes, does it?
We decided in 2009 to change our strategy and see if it was possible also to grow the volumes. This is the total market at the time, sort of flat, zero growth. This is private label. Thank God it's going down at least in their volume growth shares. This is competition. This is the international players, all of our competitors for the total portfolio of Foods Norway. This is Stabburet, which was Foods Norway at the time, also around 0%, we thought we should try to change that by making a focused effort. This is what happened to the total market. At least we managed to sort of push it above the zero in volume. This is private label. These are the internationals. This is Foods Norway.
In this period, we managed to shift our innovation program so that in addition to creating value growth, we also created volume growth. Now the challenge is, of course, to do the same for a slightly bigger portfolio. At the core of everything we do is trying to excite our customers. Each year, 500 million choices come out in our favor. 500 million choices. It's a conservative estimate. 500 times a year, Norwegian consumers choose a product from our company, which is about 100 choices per person, including babies and old people. Yes. When we manage to enthuse our consumers like this, we also create growth, and the last five years we have been rated the number 1 supplier to the trade in total across categories. We are number 1 in total performance. We're number 1 on innovation. We're number 1 in sales force.
We're number 1 in category management. We're number 1 in product development, and we're number 1 in logistics and production. This is a pretty solid foundation for us to now try to expand this way of working into a larger scale. This is our challenge now to do with the merger of Rieber and Stabburet. We have found the perfect partner. The Rieber categories are also loved by consumers, just like the old Stabburet categories were, and their market shares are impressive. These categories that we have acquired from Rieber, and these are the core categories from Stabburet. Yes, we have talked about that. I'm often asked, where is competition? Are you there in this country all by yourself? They're all there. You have the Unilever brands. You have Dr. Oetker.
You have Findus, you have Heinz, you have Kraft, you have Lerum, you have Nestlé, although they did pull out of pizza two years ago. They tried for many years to establish a position in pizza with a Wagner brand. Kraft withdraw from dressings last year. They withdrew, and they just now have a little bit of distribution left. We see that the local scale that Åge was talking about all of these. Yes. I would now like to share with you liver pâté. These yellow tins were launched in the south of Norway in 1949. The factory manager of this liver pâté factory had a son called Per Christensen, and Per was a lovely little boy with yellow curls and a very happy smile.
Per's face was put in front of the tin because this was the most beautiful motive or image the factory manager could imagine. He put his son in front of the tin. Ever since then, we have had a little boy, and now in modern times, also a little girl, would you believe, in front of the tins. Every 10 or 15 years, we have changed the face in front of the tin. We did last year as well, engaging the Norwegian consumer to make a statement as to what face should be on the tin. We got 80,000 photographs. People sent in pictures of their loved ones, their children, their parents, their dogs. We got pictures of everything under the sun. Everybody wants to have their face on this tin. We saw no other option but to arrange a national election.
830,000 people voted. 830,000 people voted. We had a national election on the 9th of September this year. Do you know how many votes the Prime Minister got? 760,000 votes. The winners, it's Theo and Josephine, and they are now proudly presenting the liver pate on all of the cans in Norway. This is a lovely story, of course, about children on the cans, but it does invigorate a very old brand, and this is part of what we do with brand building. We engage the consumers, and we improve. At the same time, of course, we have improved the fat content and the taste and everything else in the product. The results are like this. You can see at the bottom here the canned liver pate.
At the same time, we decided to enter into the chilled section of the store because that was where the category growth was. We launched a chilled version of the good old liver pate, and this grew the total category in chilled by 7%. It's the biggest launch in the chilled section in 10 years. As you can see, the growth is incremental, and we're now market leader in total liver pate in Norway. Lately, we've also launched an adult liver pate, and you can see there is a funny old guy in the middle of the adult pate, and that is the son of the factory manager from 1947. That is Per Christensen, who has now come out again to front the liver pate. He is there with a young lady. Yes.
We have now 42% of the liver pate market, and we are by far the market leader. I apologize for the busy slide, but innovation is at the core of everything we do. We measure our innovation rates, defined by us as the portion of our total turnover that comes from products launched last three years. When I started with this company in 2008, we were below 30, and one of my objectives was to try and see if we could push it above 40, which we then did. Equally important to having a strong innovation rate is the mixture of the innovation rate. In our thinking, relaunches, improvements of the actual core brands that we have is just as important as bringing completely new stuff to the market.
We believe that the relaunch curve should be the highest of the three dimensions that we measure. We measure line extensions, relaunches, and new launches completely. Line extensions tend to drive complexity and tend not to be so profitable. Relaunches, however, are super profitable, and new launches we need because we need to expand and create new things altogether. But the first year, at least, they tend not to be that profitable, but it's an investment for the future. All in all, a good level is around 40%, in my view. Last year, we passed 50%, and then I got really nervous, so I hit the brakes a little bit. We're bringing it down now because if your innovation rate is too high, it all becomes a little bit unstable in consumer terms.
We are now below 50%, and we should remain somewhere between 40% and 50%, I think. This way of working is what we will now implement in this new food company in Norway. This way of working is already now adapted by the Rieber part of our organization, and it's already giving results. I have one example that I would like to share with you on income synergies. You have all. Åge and Atle have both been talking about the synergies coming from cost savings. And we are on track for the Norwegian part of it. But the real money will eventually come from the synergies we can create on the income side, I think. This is the first little example of income synergies.
This is from soup, where the market leader in the freezer is Stabburet, and the market leader in the dry section is Toro from Rieber & Søn. We have taken the competency and the technology from the freezer and sat together with colleagues from the dry side trying to see if these technologies and competencies can develop into something completely new, and we have. So 1st of February next year, we will launch a completely new taste experience in soups based on the competencies of the two companies and the technologies of the two companies. But this is a small innovation. We have talked about building brands, engaging the consumers, relaunching the course, developing new SKUs, et cetera. Sometimes this is not enough. Sometimes we need to go beyond what we have and expand further.
In pizza, we have just done this in launching a pizza competing outside of the retail arena. And we have called it Takeaway. In Norway, which is a very long country, when you order takeaway pizza, it takes about an hour to arrive, and by the time it is there, it is sort of soggy and sad and half cold most of the time. I'm sure a lot of you have this experience. We thought we can do this better. It shouldn't be like that. With our technology and competency, we should be able to deliver a real takeaway pizza from the freezer. We created a taste that beats the takeaway pizzas in blind tests and we have developed a box that sort of associates with takeaway pizza. The actual pizza looks like this.
We put the cream sauce inside and we made it so big that it will actually not fit into a freezer that you have at home. It just doesn't. It just about fits into the oven, but you have to eat it the same day, really. When you buy it in the store, it sort of defrosts on the way home, and then it will be perfect. It takes 10 minutes, and you have superb quality. This year, we managed to take turnover from the takeaway parlors and move it into the retail. This was real additional category growth for the retailers and for us, although it did damage the takeaway parlors a little bit. Yes. We launched this with a simple story of a takeaway salesperson delivering takeaway pizza to a young man who was obviously a regular customer, and he found himself superfluous. Yes.
We ran a whole series of these little films with the interaction between the sales guy and the pizza buyer. This is how it went.
Hi. It was a film and pizza package, right? That's right. Let's see. Film. There you go. Soda. Yes, cool. Pizza. You can just keep it. Bye. Huh? Now you can finally bake the takeaway pizza yourself. Takeaway by Big One is as big and tasty as the pizza you usually order, but finally in the freezer aisle. You were kidding, right? No. Thanks.
Yes. I would not dream of coming here without serving you pizza. We have flown in takeaway pizzas from Norway, especially for you. They are cooking as we speak. Before we have a break and indulge, we are happy to take any questions that you might have, and I would like to ask Atle to join me for a little session before we go out and experience what it's really all about.
Thank you. Please, Audrey.
Just a quick one on Rieber & Søn. When you bought it looks like they had negative EBIT for a couple of years. Now looking at it, what do you think is the part of the portfolio which is underperforming, and how long is it going to take to bring it back to Orkla level in terms of both like for like and margins?
Please, Bente Brevik.
Yes. I'd be happy to answer that. I think the biggest potential in the Rieber portfolio, for the Norwegian market at least, are the older jewels, which are the dry soups, the dry casseroles, and the sauces. We see already with simple means, that we're able to create growth amongst those old jewels. We have, for example, just rejuvenated the cauliflower soup, and we have double-digit growth already on that. I think that's very inspiring in terms of what we can do. As far as timing is concerned, you asked, I think we need 2014 in order to get this back on track.
Oh, in the back.
Hi, Zaman Mishra from LBBW. Could I just ask how do you manage the sort of balance of innovation in terms of driving volume growth? Do you target pricing growth or margins on the other hand?
Yes. Yes, yes, and yes. We try to do all of those at the same time. Sometimes it's a balance. I think it is possible to do both or all three things at the same time. It's not easy, that's what we do. Hmm. Yeah.
I guess I might add that we have a value chain, not only going innovation and volume growth. The margin comes also from quite impressive work on continuous improvements throughout the value chain. Everything, purchasing, efficiency and production, and so on.
Yeah.
Daniel Johansson from Fondsfinans. Thanks for an interesting deep dive in your innovation efforts. I'd just like to know a little bit more about the new food trends. You talked a little bit about what you were doing in Sweden at the time. Given your reliance on Norway, where are you in terms of innovation? starting creating new brands really, new products, which you can think could take the top-line growth, perhaps above this 2%-3% level. secondly, also, if you could comment a little bit on the price negotiations. If you could tell us a little bit about that, the retail price negotiations, and its frequency.
Very different questions. I will try to remember all of it. First of all, health. We believe that some of our brands have a health potential, whereas others are more close to indulgence. We are launching in February the first Grandiosa, which is gluten-free, which is giving an alternative for those people who have that kind of issues. We think all people young at heart should have a Grandiosa just for them. That is an example of what we do within the work of a brand. We have other brands who are very health-oriented, like the mackerel that Åge showed earlier on, where we can just keep on launching new products and new formats and making it relevant to consumers in more and more situations. That is a brand with a strong health core.
We work with indulgence, we work with health, and in some instances, we can do both. We also have a Grandiosa with a keyhole, which has less fat and more fibers and things like that. It varies within the brands. We have a very big portfolio. With the acquisition of Rieber, we get competency on some of these areas that we didn't have before. They have a very strong line of the gluten-free products, for example, and I recognize this as such. That is something to build on. When it comes to your question about the trade terms, we negotiate trade terms once a year, typically in the autumn in Norway, and the annual negotiations haven't started yet. This year we will negotiate the new company as one, as we formally merge 1st of October.
I might add on that differs too from market to market. You probably got a local message now. Even that differs from market to market. In Sweden, it's a different way of doing it, they're category by category, more on a rolling basis. In Denmark, it's a regime that's similar to the Norwegian.
Yeah.
Thank you.
Thank you. Andrew Guman from Meyer Mannheim. You may be aware in Central Europe, there's possible regulation coming through shortly regarding mineral oil migration into foods. No? This is from the central governments, large ones in the middle of Europe, making draft regulations to make sure in the future, all packaging will have barriers to prevent mineral oil migration, which is possibly cancerous causing into the foods. What steps are you taking to create barriers to this? Are you developing for your innovation barriers to protect your customers?
There are similar things going on here, and of course, we have actions relating to all those kind of regulations, I would say, that we expect to come or might expect to come. I cannot comment more specifically on that specific issue. These regulations vary from market to market, from government to government.
Audrey.
I'd like to come back on your slide with the innovation rate. Basically, I'm looking at your like-for-like in the first half of the year, and it was negative in Food. Your innovation rate was fairly high. Do you think this was one of the contributing factor to the lack of stability and the underperformance, or does it show a significant underperformance from the rest of the portfolio?
The figures I showed was for all of 2012. 2013 has been a year of significant transformation for us, we have taken the innovation rates down considerably, which I believe is one of the key causes for our drop in results. It has simply been a very large effort for the organization to integrate Rieber and Stabburet, in this process, innovation has suffered. Yes.
As innovation comes down your like-for-like turns negative compared to the market.
Yes. In our need innovation to invigorate. Innovation is important of the categories. We need innovation in order to be interesting. In a year when innovation is slack, results will suffer. That is our experience. We are now working hard to have full speed ahead as of January 1, which we will. Yeah.
One more question for Atle, Vidar, and Bente. All right. If not, we will thank you very much, we will take a break. We will continue with the presentation at 3:30 P.M. Please remember to sample the famous pizza outside.
Thank you.
Will do.
Yes, absolutely. You must have much joy.
Yeah.
We enjoy eating. Oh my.
I'm going to hide a little bit. Okay. Just come across to this side. Just hold them. Don't feel too much drawn to me.
These first ones with better comments.
That might be another one.
Yes. Actually, we cannot have this on camera. That won't do at all. You, the English people, will burn us. That was a Rune Helland standard and close call.
Only one.
Only one. Okay. We're never doing that again then. Too much stress.
Yeah.
Excellent. Wonderful. Yeah, we definitely want to eat that.
Okay. Just lift it up the side of it that way. Do you mind doing?
Hello. Andy Cameron. We are leading packaging company in Europe, Orkla, number 1. Two things, you can move your printing to Poland and Estonia, big cost out of Sweden, use Ekman and these companies. Our mills are much better located to supply you from there than they are physically your current incumbent. The second thing is we've developed a very good food board which will give you full barrier protection against mineral oil migration, which is the biggest issue for German, central European food industry. I know you don't operate there, but there's a light version coming through that's under second draft legislation, probably going to get approved very soon. I've already mentioned it via some briefings that we've introduced. With your board as the largest food manufacturer in the U.K. today, how long does that take?
Have you been dealing with this German approach for the last few years? Considering pairing with a very keen level, I think we've got fair
Take it. Yeah. Take it.
Take the card. Okay.
Yeah.
I'm very happy to introduce the next speaker and also a new member of the executive team in Orkla. He has 24 years of experience from the industry and 16 years from Unilever. He joined Orkla from his previous position as a CEO of Arla, Sweden and Finland. Confectionery & Snacks, this is Børge.
Thank you, Rune. I'm representing Confectionery & Snacks. We, for those who remember the vision that Åge spoke about earlier, we don't just represent the health part, which is the healthier part of the vision. We're also the more enjoyable part of local brands. When you look at our results, you might think that where is the enjoyment, looking at the Confectionery & Snacks results, that's very clear. That's also why we're calling this section "Turning Around: The Differential for Improvement." That's what I'm going to take you through for the next 30 minutes. This will be divided in three sections. I'll spend some time going through the background, taking you through the history, the positions, the markets, not least, also the historic performance. I will take you through and repeat the targets, also most importantly, take you through the initiatives.
Why are we actually going to turn this business around, why do we firmly believe that this will be done no later than 2016? The sooner the better. The weak results have been there for a while, they're much more dominant in Q2, you will all have seen that in the recent results. These are all fundamentally stable positions. There's nothing wrong with the brands, that's something I'll show you soon. We see that this clearly has potential to move on. When we talk about Confectionery & Snacks, confectionery being the second-largest part of this business, which is 37%. Close to 80% of our business comes from confectionery and from snacks. Snacks being chips, nuts, cheese products, all sorts of indulgent snacks. The smallest part, which is a bit less than 20%, comes from biscuits.
One of the things that you might have seen, especially if you follow some of the international players in these categories, you might also seen it outside on the tables, is not least the confectionery and the biscuit categories are becoming much, much closer together. There's some really good opportunities there, which we'll also talk about. Confectionery for us is chocolate confectionery, it's also gum pastilles. Our business currently is one of the largest Confectionery & Snacks businesses in the Nordic countries, including Baltic. We get 80% of our business from Norway and Sweden, that's clearly where we have our most dominant position. In making sure that those two countries perform as the absolute most important core markets is vital. Also to make sure that we cover white spaces in the other markets where we're not as strong as currently.
In Norway, we have a presence in all three of these categories that I just showed to you. It also means that these little logos here all historically have represented three strong companies with different cultures, with different identities. That's also the integration work that is now ongoing in Norway. That's a very important part of the current performance, but not least, the way we're going to strengthen the business going forward. Sweden, we're in biscuits and snacks. A clear number 1 in both of those. Again, these are two separate companies with separate cultures now merging into one. Denmark, we're only in snacks so far, so we have some white spaces in biscuits and in confectionery. While in Finland, we have a very strong and healthy snacks business. We have a sizable confectionery business, but it's yet not as healthy.
Baltic is about 7% of our overall turnover, represents a much more significant part of our opportunities going forward. Fundamentally, despite the performance that we have currently, we have strong and healthy brands. We have a lot of number 1 brands in each of these categories. We have a lot of strong and healthy number 2s. Stratos, as an example, which is an 80-year-young brand, I would say. You had it on the desks outside. It's number 2 in the chocolate market in Norway, but a very clear leader in its segments where it operates. In snacks, we have, across the board, very strong and very healthy number 1 positions. We have 1 number 2 position, which is in the Norwegian market. Except from that, we're a clear leader across the board.
Biscuits, we have a very long heritage, several sub-brands, a clear market leader in the most important markets, Sweden and Finland. Sorry, Sweden and Norway. A number 2 in Finland. A lot of brands similar to the food situation. We have a lot of heritage. These are still vital brands that can do far more for us going forward. These are our shares for the most important categories for the most important markets. I think the new news on this slide is really where do we stand vis-à-vis competition. On confectionery, it's clear that we are facing tough competition. We are number 2 in Norway after Mondelez International. On the competitor horizon, we have all three typical types of competitors. We have strong international players, which is trying to adopt a bit more local flavor to what they're doing than they've done historically.
We also have strong local players with no international ambitions beyond where they are today. We have also seen private label growth. I think confectionery and snacks probably represents the exception from what Åge said this morning or early this afternoon, is here we've seen some quite rapid growth from private label in snacks. They've been taking share significantly in Denmark, but also a bit in Sweden, which has harmed us because we haven't really stepped up a gear in meeting this type of competition and differentiated enough. In biscuits, we can also see that we have firmer private label competition than we had in the past, private labels have been good at adopting new innovation and new ideas there. We have local competitors that have also stepped up a gear.
Overall, the competitive landscapes for confectionery and snacks has gone a bit tougher in the recent years. Let's face it, we haven't been good enough to respond to that's one of the reasons why we're not performing as we are. One could also say that is this driven that we're actually going down now? Is it because everyone in this audience is out running three times a week, not eating unhealthy products? No, we strongly believe, actually, that the balance of indulgence is really there to stay. After me, you will see Stig talking about some of the health trends that we're capitalizing on other brands. Clearly, indulgence is something that consumers will spend money on despite whatever health trends that comes and goes. There's an underlying growth in these categories of about 2%.
Clearly, that also suggests why we should have a target which is plus of 2%, beating the market overall and making sure that we get more of consumer spend in our category. The other opportunity we have is that consumptions in the markets where we operate are either at an already healthy level in terms of high per capita consumption. We have a couple of markets in the confectionery industry where we unfortunately are a bit underrepresented overall. There we have high per capita consumption compared to European average, while in the Estonian markets, they are actually underrepresented. As economies go stronger, you tend to move up the per capita consumption ladder. On snacks, we're very high on not just pizza in Norway, we're actually very high on snacks as well in terms of per capita consumption.
Sweden is somewhere in the middle, also we have several countries where we have strong brand positions, we still have good opportunities as market leaders to drive per capita consumption even further than we have done up to now. On biscuits, across the board actually, we can see that the markets where we are represented are lagging behind the bigger European markets in terms of consumption per capita. What you typically see is that biscuits are used in these markets much more as indulgence, the way you use chocolate or sugar confectionery, or sometimes even snacks in our markets. Here it's about making sure that biscuit is something that is actually vital, not old-fashioned, for the slightly older section of the population that has coffee in the afternoon.
This is something you have on the go when you need a bit of reward or indulgence in the middle of the day. That's where you see countries moving up the consumption ladder. Per capita consumption, there is still opportunities, even though we start from a reasonably good level, also the overall market represents some opportunities of stable growth. We also represent some local brands. Obviously, we sell salted potato chips in every single market. One might think that this is exactly the same wherever you go. I can tell you that the salt levels and the salt preferences across these different markets is quite different. We have the lowest levels in Finland. We have somewhat higher in Norway and Sweden.
Even though for health reasons, we'll try to tune that down, it also signals that there are different taste preferences in such a simple thing as potato chips. For those who have tasted ketchup chips in Latvia, you would know that that's not necessarily the biggest-selling SKUs in London, neither in Stockholm or in Oslo for that matter. There are some very big differences in terms of snacks preferences as well, where if you tasted sweet cheese doodles, again in Latvia, that's not probably the SKU that we're going to transfer across countries the fastest. There are some very good examples where we can meet local needs, but actually also make sure that we have some good ideas that travels across countries. Even in these categories, you see big differences between markets. The smallest differences is actually in biscuits, where we see more similarities across markets than differences.
We have brands, I've said this a couple of times now, but I would be much more worried if we had brands that were not healthy and that was not in the number 1 or number 2 positions. We have brands that are healthy, and I'm absolutely convinced that they also have legs to move into new categories and make sure that they actually do much more for us going forward. We are in impulse categories. Very few of our consumers put our items on the shopping list when they go into the store. About 80% of the items they buy in our categories are all on impulse.
We have about 400 people in the field as merchandisers and salespeople across the countries where we operate, visiting the retailers on a regular basis, making sure that we are on the cashier lines with chewing gums or on the aisles with the snack products. Making sure that we get absolutely most out of sales execution is very, very important for us. It also builds on what Åge said earlier today. Local preferences are there. There are also a lot of similarities that we need to capitalize on further going forward. This is all about impulse. Despite that situation, where we have a lot of fundamentals in place, both in terms of the macroeconomics, but also in terms of the brand positions, we have a very disappointing performance right now. In my view, this started a couple of years back.
We are not growing in line with the category growth, which is then below two. Already in 2011 and 2012, we were below that growth. Clearly, we have had a steep decline, and you saw the disappointing Q2 results. We are firmly believing that we're going to turn this around. It will come in steps, and I'll come back to that. The rolling 12-month EBIT is also going south to levels where we're not satisfied. We're now just above 15% EBIT for the first six months of this year. Clearly, these are levels, and as you can see, we can always discuss how challenging our targets. Within these five years, there's only one year where we exceeded the targets we have spoke about in terms of both top line and bottom line. That's what we now intend to do on a much more regular basis.
This is the historic performance. It's a bit of explanation on where we're coming from. Why has this then happened? Managing business in hindsight is always extremely easy. The key things is if we were to sort of sketch out a few clear items that really we need to change going forward, is that I love that picture that Bente showed, and especially the line that talks about investing in your core innovation, investing in your core, which was the first line Bente spoke about when it comes to innovation. We haven't been successful enough in really driving our core of our business. That's the fundamental part. If that part is not healthy, we can never compensate with innovations in other areas, which were the two other lines that Bente showed.
A similar picture, and clearly here we can see across the board that we haven't been successful in that in the last couple of years, and we're now paying a price for that. This will not take ages to turn around, but that's one of the key reasons. When we talk about innovations, we have also spent far too much energy on small-scale innovations that neither have given benefits across countries, and particularly not across categories. We have very few examples of brand initiatives behind innovations that have been valid for more than one category. Clearly here, competitors have been more successful recently. In our market, private labels has also had an impact, most significantly in Denmark, where they've taken five share points in two years. They've also taken a couple of share points in the last 12 months in Sweden, and that's also impacting our performance.
This is less of an issue in Norway. On the other hand, in Norway, we have had the most significant integration process. There is no doubt taking three businesses with very strong culture, merging them into one, has led us to lose a bit of momentum. I think that's also now what we're gearing up to improve going forward. Margin pressure is the other item. We lost the top line. We also lost a bit of margin driven by higher trade demands, and we haven't really been able to take cost out in a significant way. This is how we build then our actions forward to address these issues. We therefore believe that reaching a 2%-4% consistently in terms of top-line growth, we're not going to hold back, I can promise you that, if we can go beyond that.
Reaching that on a consistent basis clearly is a stretching target, but it's also something we can achieve. Getting an EBIT margin of at least 16.5%. In a historic perspective, we've done that once in the last five periods. Doing that on a consistent basis going forward. We believe that these are stretching targets, which require a very clear top-line plan as well as a bottom-line plan and a margin plan. These steps will come gradually, and we will not hold back as we improve. [So now], and I'll give you a few examples of what will we do to drive the revenue and driving the top line. Getting focused back on core. The core SKUs, the core positions, the core brands we have in snacks, in biscuits, and in confectionery.
I think that's where we need to find the most important and certainly the most healthy and profitable part of our growth. That's where we're now also in the integration of these businesses. As Åge said earlier on, we have invested in innovation resources, and all of the key markets we now have ongoing projects for next year investing in core initiatives behind a much stronger innovation team than we had previously. Innovation is absolutely vital. It has to come behind core, but also has to make sure that we are much faster than we've done historically to take cross-country initiatives and run with them, steer them with pride into new markets. We have very few examples, unfortunately, where we launch something in one country which have been successful and taking now to another country with a great speed.
We need to do that much more firmly than we've done recently. Probably the most important opportunity here is to look at some of the brands we have, and they can really stretch across categories. We have competitors that's done this very successfully in the last couple of years, and that's hurt us a bit. I will share with you one example quite soon about Stratos, which some of you might have tasted outside. We have few of those examples which have been stretching either from snacks into confectionery or from confectionery into biscuits. Trust me, we have several of those opportunities where brands are loved by consumers, and we can easily see them being loved by consumers in a new category. Execution is vital for us.
We think we can run the execution in the store level with more professional and investing in skills development in key account management, but even more importantly, with the 400 people that actually meet our retailers and the point of purchase every day. That's where a lot of our purchase decisions are being made, as I said, and it's also where we can be more professional, more decisive, more rigorous, but also we have a scale compared to our competitors that is significantly superior to this. A winning organization. I think we cannot do any of this, and neither can my colleagues, if we don't have the right structure in each of these countries. That's why we now created much stronger operations in each of the markets. We merged three businesses into one. We simplified our overall leadership in confection and snacks as a whole.
Three businesses into one, as I said, in Norway. Two businesses into one in Sweden. Two businesses into one in Finland. That's quite a big exercise that's been ongoing since Q2. It has had some short-term impacts, but it will clearly give us some long-term benefits, and it will not take ages before we start delivering on them. Sure we have the right people in all the positions, of course. When I come back in a couple of years, I will hope that I will have a few more examples to share with you. We've seen some very excellent examples from the food side.
When I look around right now, we have too few examples of where we managed to take brands from one category to another and really take a brand and extend it into meeting consumers with new user occasions, offering them new pack sizes, new variants, new inspiration that actually make them meet the brand and eat the brand, most importantly, more often. Stratos is an example which we actually only this year took into biscuits. I think we have passed more internal barriers to make that happen than external barriers. Consumers love it. The Stratos brand grew by 15% so far this year. We have some issues overall in the confectionery business, but this is an example of what we really want to do much more of going forward. It's an 80-year-old young brand, it's still very vital. We're investing in the core, as I said before.
We're now offering a double digit of variance, might give us a bit of a complexity, but this is complexity worth having. We have other bits of complexity that we need to take out, but this is one of the complexities that really pays off when we invest it in the right way. Next time I come back, I promise to show you much more of these examples where you take a brand with 80 years of history and strength and turn it into much more vital categories, vital variants, and really good taste experience. Another way of growing the top line is looking at Baltics. As I said, Baltics is only 7% of our market right now, or 7% of our business right now, but it's far more than 7% of the opportunities going forward. We tend to talk about Baltics as one country.
As you know, it's three countries with very distinct differences. They certainly themselves don't club themselves together. Neither do Swedes and Norwegians, by the way, actually. This is also where the local strength comes into play. As I said, I'm not the biggest user of ketchup chips in Latvia, but it's clearly something that consumers love down- sure we actually serve them with that, but also serve them with much more opportunities going forward. These markets have gone through rough times, but they actually also show a strength to turn around and come much stronger through rough times than a lot of other markets. Their GDP growth now is superior to most other markets in Europe. What is even more exciting is actually that our categories grow faster than GDP.
The reason for that is what I showed you earlier on, it's the consumption per capita in the categories where we operate is clearly lifting. As the economy goes stronger, you reward yourself with indulgence, and that's where we come into play. Clearly here, categories grow faster. The third thing here, which is even more beautiful, is actually that we grow much faster than the categories. We grow faster than the categories, and categories grow faster than the countries as such. Therefore, we think that Baltics represent a good strategic opportunity despite being small markets, because this is markets where we come in and can have a very significant share.
They might not be top of the priority list for our international competitors. We can clearly commit these healthy and growing markets to make sure actually that Baltics really matters overall for Orkla Confectionery & Snacks, and Orkla as a whole when we go forward. Right now, we have two businesses in Baltics. Kalev, that we have had for some years, which is a fantastic track record of several years now, double-digit growth, and their earnings are also coming in very nicely. It means that we're now the market leader in chocolate and in Estonia. We're number 1 in biscuits in Estonia. Overall in Baltics, we're close number 1 and 2 with Lay's on snacks. We have Latfood with the Ādažu brand, which is the market leader in Latvia.
That brand across the Baltic region and the way we adopt that in the different markets mean that we're now neck and neck with Lay's in the Baltic markets. We clearly see that we have wide space in terms of categories to grow. We have strong starting points in these two businesses. With the development we see going forward in Baltics, we will see much more growth from these markets in the next couple of years. To do that, but also to address the weaknesses we have in the current performance, we announced a program of NOK 300 million in the next three years. Åge mentioned this early in the afternoon. An insignificant part of this program are the synergies we're getting from the integration.
Much more than NOK 200 million is going to come from what we do from an end-to-end point when it comes to supply chain, looking at all the elements of our products, all the way from procurement until it reaches consumers. The way we work with our efficiencies, we have initiated a program for our biggest site, biscuit site in Kungälv, which is on the west coast of Sweden, where we now have a task force working since a few weeks back, making sure we address the weaknesses we have on that site. We have that as a clear initiative. We're looking at our chocolate and snack supply chain, where we can see that we can have some streamlining to do to simplify the way we go forward.
Also in this area, we clearly have some complexity that is worth having and that serves consumers very well. We also have a lot of complexity that we need to get rid of to make sure we reduce the number of SKUs, and it might impact one or two very small brands, to make sure that we harmonize a bit further across some of the markets than we've done in the past without losing our local edge that we have vis-à-vis our international competitors. As we go forward. That was about top line, it was about bottom line. This is a convincing turnaround case. We have a tough performance right now. As I said early on, if the brands were unhealthy, I would be really concerned.
We have brands to build from, we have people to build on, and we have made a lot of very good appointments recently and changes in our organization that we're going to benefit from. We will see gradual improvements of 2%-4% top-line growth coming from, I know, a very negative trend right now, but that will improve. We can see that EBIT margin of 16.5% plus is clearly something that should be achievable in these categories. Driving the top line is vital, but to do that, I would say that getting about NOK 300 million of cost out is also absolutely vital, and I agree very much with the rule of thumb we talked about earlier. To fuel growth from cost savings is absolutely vital, and some of those cost savings will obviously fall down to bottom line as well.
Focusing on the core, focusing on the really strong brand positions that we have, meeting the retailers not as three, as we did just a year ago in Norway, meeting them as one is a benefit for us, and it means that we are creating a much stronger organization. It gave us some short-term disturbance, but we're going to come stronger out of that. Having the right leaders, which I strongly believe we have, with the right attitude, is going to turn this around. Let's face it is a turnaround case, but we're very much looking forward to do it. Thank you very much.
Thank you, Christer. Now Christer is happy to take your questions. Pull up.
Hi. Dan O'Keefe with Artisan Partners. One of the things that surprised me is the private label penetration. In a lot of other geographies, confectionery and indulgence-related categories tend to have the lowest participation of private labels. Why is that so different in your two main markets?
Yeah. Norway is not that different because it is quite low in Norway, but it is clearly much higher in Sweden, these categories, than you see in some of the others. Internationally, biscuits tend to have high private label share. There we are not that different. I think the difference is primarily in snacks. I would say that the main reason for that is also behind some of the background slides that Åge showed earlier, that we have quite a concentrated trade. The trade structure in our part of the world is one of the most concentrated in Europe, which means that the buying power is clearly something the retailer benefits from. They clearly don't offer as wide range as we do.
We also need to look ourselves in the mirror and say, have we been strong enough if this is the share that private label takes in snacks, which is the most significant issue we have? We need to drive this and make sure that we can deliver growth into the categories. The retailers will be happy as well.
Thank you.
All right. No more questions? All right. Thank you, Kriss. Our next speaker has 25 years of experience from the Branded Consumer Goods business in the Nordic area. He was the CEO of Axellus since 2003 and is now the CEO of Orkla Home & Personal. Please welcome Stig Ebert-Nilssen.
Thank you, Rune. For the next 20 minutes, I will talk about Orkla Home & Personal unit. I will show you the strong number 1 position we have in the Nordic region, and I will try to explain to you why we have been successful by highlighting some of the local winning concepts. Finally, I will focus on the future growth opportunities. After that, Tine Hammernes Leopold will present you an exciting case, Nutrilett, of a fast-growing slimming brand. I will start with a short introduction to this unit. We have a number 1 position in the 4 main categories that we operate in. These are personal care, home care, health, and textiles. Our markets are stable with high margin, and we experience strong brand loyalty. Also, as mentioned before, the Nordics. We have 4 different companies in Home & Personal. These are Lilleborg, Jordan, Axellus, and Pierre Robert.
In the personal care business, we are operating in grocery, pharmacy, but only in Norway. In home care, we are in Norway, Denmark, and Sweden, and there we are both in grocery, B2B, and home improvement retailers. The health business: There we have home markets in the Nordics, in the Baltics, and in Poland, and there you can see that we are operating in quite many channels. The textile business is across Norway and Sweden. We are operating in large categories with the main sales in Nordic markets. The revenue pro forma, including Jordan in 2012, was NOK 4.7 billion. 66% of the revenue was in Norway. Sweden, Denmark, and Finland sum up to 20%, giving a Nordic share of 86%. You can see the category split on your left side, where home care is 41%, personal care 20%, and health 20%.
In all these categories, we have a great number of strong local brands with a long history. Starting back in 1837 with Jordan and up until today, where still new brands are being launched. This gives us a really strong platform for future growth. Personal care in Norway is truly unique. 71% market share in home care and a number 1 position in all sub-categories. In personal care, 43% and also there, number 1 in all sub-categories. You can see on your left side the international competition. These categories are competitive, and still we are able to compete against these big players. You can see that P&G, for example, has 3% in home care or 5% in personal care. We have also a number 1 market share position in home care. We estimate the total share there for 55%, and we are number 1 in every market.
There we are competing against global players as well as local players and the private label share. In the Nordics, the main channel for Axellus is the grocery channel. There we have a number 1 position with the strongest market share in Norway. The main competitors are Cederroth and Midsona, and also you can see that the private label is low. We have a strong grocery position in textiles. With a clear number 1 position in Norway with 78%. In Sweden, we are a growing number 2 with 29%. To sum up this section, our experience is that despite global competition, local brands based on local insights are competitive. We are able to find or create local preferences based on special needs of Nordic consumers. It could be sensitive skin, Nordic hair, fragrances, local nutritional needs, but also on packaging and design.
Our aspiration is to continuously improve our consumer and trade understanding. As mentioned before today, we can also see that local scale is an important capability to succeed. With a flexible value chain, we can be dynamic and reduce time to market, and we can tailor-make campaign and assortment. Local scale gives us also a competitive edge regarding local media buying, and also we have a very strong sales force impact. Let's look at some of the local win concepts. As a market leader, we need to create category growth. OMO Powerdose, a technology-driven local innovation, was launched in 2012. The laundry category had experienced a negative development the last four years, driven by a price war in the trade. With the Powerdose, we established a new premium price format and have this far, as you can see, received more than 10% market share in the total detergent market.
Another great example is the Norwegian hair care brand, Define. The brand was established in 2001 and has a 10-year track record of a strong innovation pipeline based on the local consumer and trade insights. Today, the consumer sales of Define is approximately NOK 250 million, with a market share around 30%. The latest success, as you can see there on your right side, is based on the new ingredient trend in the hairdressing market. With the launch of Define Moroccan Argan Oil Shampoo and Balsam, the brand experienced all-time high in net sales and strengthened their position as number one in the total hair care, but also managed to be number one in all sub-segments. I think this is also an example that we managed to outpace the global players when it comes to markets.
In the textile category, Pierre Robert is driving the grocery penetration by launching the brand into new sub-categories, like for instance, children's wool or sports underwear. Based on consumer and shopper insights, we develop together with our trade partners, concepts and products tailor-made for Scandinavian consumers. You can see that the textile category has shown an impressive growth since 2007 in the grocery channel, and that the category share has grown from 7.9% up to 16% from 2006 to 2012. This is really cases that our trade partners like to see. The revenue management competence is an important capability for all units in Orkla. A key success factor in the Jordan House Care business has been the ability to grow the category with different price and quality offers. You see there on the right side on the slide, the different concepts with Basic, Perfect and Ultimate.
You can see on the graph that the consumers are trading up to the high-end in the paintbrush market, and that we managed to grow the market with 16% from 2009 to 2013. It's a great example. As mentioned before, we have many old and strong brands in Home & Personal, and you can't have a presentation like this without talk about Möller's Tran, Möller's cod liver oil. The brand management competence to work with continuous improvement is vital for Orkla's success, as many have mentioned before today. We have continuously grown the brand by systematic improvement to make sure that the product offer and quality is at all time relevant for the consumers. On the right side, you can see the latest relaunch. This relaunch we are sending to the market in these days.
A bottle with a new shape, new formulation, and also a label which better communicates its health benefits. The target with this launch is to strengthen the natural and fresh image, and I believe that this launch will be an important growth factor for Axellus. As mentioned also before today, our strong local presence enable us to create tailor-made and impactful in-store campaigns. This is showing a great Möller's campaign together with the famous Norwegian film, "Kon-Tiki," and we really managed to increase up to 50% in the campaign period. Let us now focus on the future growth opportunities. Based on our market insights, we see significant growth opportunities both in structural and organic development.
For the last five years, the organic sales growth has been on an average level of 2.5%, but we can also see year to date, of the first quarter also, Home & Personal have had a weak start. The step change you see on the reported revenue the last 18 months is mainly driven by the acquisition of Jordan, but also some smaller acquisition in the healthcare category. The target going forward is 3%-5%. In addition, we will continue structural opportunities. I think it's fair to say that we have a sustainable profitability in Home & Personal. You can see the rolling 12 months EBIT level has grown from just below NOK 600 million in 2008 up to almost NOK 800 million as of first half this year.
If you look at the EBIT margin and adjust it for contract production to the process chemistry industry, the EBIT margin has been on a quite stable level from 2008, on roughly 17.5%. We will have an ambitious level going forward. I think we are well-positioned for future growth. We are playing in attractive categories in markets with high purchasing power. We believe that the increased focus on health, well-being, and beauty is a sustainable macro trend. The aging population, they want to stay young. Nordic citizens, in general, have high incomes, and compared to other markets, they spend a big part of that income in their homes and on home improvements. Also, I think I showed today that Nordic premium products in these segments. Going forward, task number one is to create organic growth.
Secondly, we need to utilize possibilities to expand into new markets and sales channels. Further, we also need to improve efficiency and operational excellence. Innovation is the key to accelerate growth. We will grow the core business with better innovation, and we will continue to develop unique local brand management skills. So we need to do more of the best. Also mentioned before today, I think we can improve the sharing of best practices within Orkla, as well as utilize economies of scales opportunities to support the top-line ambitions. We can also see here that we have some expansion possibilities. We have a strong position in Norway, but we have some white spots in the other markets. We can use existing organization for this expansion, but there are also opportunities in the market. Grocery is our main channel. We see, however, growth opportunities with a more multi-channel approach.
By utilizing existing setups or competencies, we can establish new growth platforms. An example can, for example, be to use Axellus' presence and develop a platform in the pharmacy sector in the Nordic region with both health and beauty. We also see opportunities in the e-commerce and for many categories, and we are also upside in home improvements and in the convenience sector. Also, we plan to work harder the next years with operational excellence. Complete synergy realization from the acquisition we did in 2012, Jordan and the smaller add-on in the health. We will continue to product portfolio streamlining, increase the cross-category country cooperation and synergies, and also further leverage on existing cost base, both organic and structural. We have also identified a wide portfolio of operational value chain initiatives, both regarding factory structure as well as in and outsourcing projects.
Then in the next strategy period, we will also evaluate existing. Yes, next. We would like to draw your attention to the Nutrilett case. This is a case where we demonstrate how to utilize central synergies and at the same time take advantage of local insights. Please welcome Tine Hammernes Leopold. She has been working with the Nutrilett brand since 2005, and I think it's fair to say that she is a big part of this success. Welcome, Tine.
Thank you. Yes, Nutrilett are fast-growing slimming brand. This is a fantastic growth story, really. Nutrilett was part of a company that Orkla took over in 2005, and it has grown on average 21% every year organically since the start. This is fantastic for any brand, but maybe more so for a slimming brand because the nature of consumers when they are slimming is that it's hard. It's really difficult to lose weight, so you keep trying new methods all the time. This is a proven success story. The brand has grown more than 500% since we took over, and it's based on three things that are our core competencies. It's a superior product range, it's a constant focus on consumer insight and understanding how slimming works for people, and innovation, obviously, and it's also the utilizing of our strength in the way we're organized with and scale.
Well, how do we get the superior product? Nutrilett was launched 20 years ago or developed 20 years ago by Lars H. Heier. It's based on this very special soy protein with a mixture of vitamins and minerals, everything you need in order to get all the nutrients the body needs in a day. It is low calorie, and it gives satiety, and you lose weight without losing muscle mass. This works really effectively, and it's been proven in 20 clinical studies that have been published in renowned medical journals. This works so well we have a money back guarantee on the product. This obviously is it needs to work. Another important thing that we work on, which is much the same as any other category with products you put in your mouth, is taste.
In slimming, this is particularly important because like I said, slimming is difficult. Any deterrent, like bad taste, will get people moving off of your category. Our benchmark is to have products that are better tasting than the competition, and this is something we work hard at every day. The measurement is obviously what consumers think, and consumers prefer our bars over the competition across the Nordic region, and this is something we take pride in. We work continually on innovation because this is something that really drives value and volume. This part of our product range is intended for heavily overweight people who need to maybe lose 30 kilos, 15 kilos. This is hard work. You stay on a diet, eat the same thing every day, five times a day.
In order to maintain loyalty and maintain volume, we've innovated on taste variants like vanilla, which is our biggest seller this year, and on new meal options like the vegetable soup, which is a lunch variant. Not everybody, luckily, needs to lose 30 kilos. This is a smaller group, yet there are some. The much wider group is everyone who wants to maintain their weight or maybe lose three or four kilos. This is a much wider consumer group. In order to get to them, we have products that are tasty, but on-the-go solutions of ready-to-drink shakes or bars. Really good products, which is maybe a rarity in the dieting sector, but which are products that consumers love and come back to when they want to lose their weight. We also use innovation to get frequency into this category. Here's an example of a frequency case.
When you're on a diet, one of the most hard things is to withstand the craving or the hunger that you get in the afternoon. Here's an example of a low-calorie bar that can be a part of your everyday snacking routine. It's a smarter snacking. This obviously is how we want it to be. We want Nutrilett to be a part of consumers' everyday life and get into their habits. These are important volume and value drivers. Go forward. There we go. This picture shows how we continue to improve our product range over time. It's an example of how communication on pack gets sharper and better as time goes by, and it's also an example of how little steps of improvement will gain value and volume over time.
Also in the competition, this is an example of improvement that will make consumers choose our products over the competition because it's simpler and easier to understand what it is that you get from our brand as opposed to the competition. The way we're organized is also an example of how, or one of the reasons why we are so successful with the Nutrilett. We have a probable combination of local scale and of scale and local presence. Let's take the brand-building processes. This is at the core of our business. The people that work with Nutrilett really love the brand, and they know the consumers really well. We have one sharp brand position, with a centralized marketing team that understand how to get the most out of consumers in this category, and we're able to roll this out across all our markets.
We have the same marketing campaigns in advertising and packaging across the markets. We also have economy of scale in product development, in the regulatory issues, which are quite severe in this category, and in sourcing. This leaving us one of Europe's largest buyers in the field of dieting powders and bars. At the same time, we have a very strong local presence. We have local sales teams and marketing teams, where the local sales teams have a close-knit connection to these very strong trade customers in the Nordic region, getting us access to the shelf and getting us the ability to have very large volume campaigns on the floor, where the brand Nutrilett will be available across the stores.
The local marketing teams, they are able to identify really local needs, like in Sweden or in Norway or in Finland, and capitalize on these local trends and diets. We are able to take out value very fast on trends that are in just one market. Examples of this. We launched in Denmark in 2012, and when we did so, we adapted the dieting shake to the Danish consumer preference and taste, and also to be a better benchmark towards the competition in Denmark because we came in after everyone was already there. When we went into Poland, we adapted the pack size. As you might imagine, Polish consumers have a lower purchasing power. We adapted the pack size to have a lower entry price for the Polish consumers.
Any of you in here, and maybe all across Europe, there's a big low-carb, low-sugar trend that has been rolling over us for a little while. This was particularly strong in Sweden last year. We adapted our product mix to be able to meet this particular Swedish demand with less sugar products and being first on the market with Stevia when that was legalized in the Swedish market. These are examples of how we are able to quickly adapt to local trends. I also want to draw your attention here to our sales capabilities. We have very effective local sales forces. They're able to generate large volumes in retail stores. These are examples of trade campaigns that we've done. Needless to say, they drew a lot of attention and lots of volume on the floor. Here's an example of how they did it.
Amazing things can happen. You haven't seen anything yet.
A lot of attention. We have strong market leader positions across the Nordic region. We're number one in Norway, we're number one in Sweden, we're number one in Finland. We launched in Denmark, like I said, in 2012, using our knowledge of those other markets. In only one year, we were able to get a 20% market share and substantially growing the market at the same time. To sum up, the growth has been substantial for Nutrilett for a long time, and we're sitting on a platform with a strong brand, with a local insight and an ability to operate rapid change from taking this insight, local scale with good trade relations and large volumes. The future potential is also good in the slimming category. 10% of the Nordic consumers are obese.
75%, that's 18 million people in the Nordic region, want to lose weight, 65% have been on a diet or tried dieting products. Consumers are constantly looking for slimming methods, Nutrilett will be there to capitalize on that growth. Thank you.
Thank you, Tine. Just to sum up the total Home & Personal part, I think it's to say that we have number one position in attractive markets. We have a track record which demonstrates the ability to grow, we will also utilize synergies to improve profitability. Finally, we believe that we have several attractive growth opportunities for the longer term, both with new markets and new channels, both organic and structural. Thank you.
Very good. Thank you. Now Tine and Stig will welcome your questions. Okay. Here.
Hi, you mentioned that you see opportunities to expand into new markets and sales channel.
Yeah.
Could you put a timeline on that and some targets maybe?
I think we are working with that right now. It's always difficult to say when it will happen. We plan to do that in the next years.
What kind of opportunity that?
What kind of-
What kind of opportunity do you think that is in terms of acceleration of your top line in terms of growth profile and margin profile?
I think it will be dependent if we do that organic or structural. If it will be organic growth through existing Axellus organization, it will take a little longer time. Was that answer on the question or?
I guess in that case, what would be the preferred method to do that?
In that case?
What would be the preferred method to get into new channels?
The new channel?
Are we talking about organic growth or are we talking about acquisitions there?
Yeah.
What would be the preference?
No, I think we'll do both or look for both opportunities.
Thank you.
Håkon Oskjæv, DNB Markets. Question on Nutrilett. I know that in general, Orkla focus on the Nordic markets, but do you see opportunities outside the Nordic markets for Nutrilett, given its strong position in the Nordics and seems like a solid product.
Key focus is in the Nordic region, but we have a strong organization in Poland, for example, in the pharmacy sector, and there we have been launching through Axellus. Key focus will be in the Nordic region.
All right. If there is no more questions, thank you very much. Yeah, well, I have one more question for you from the web, actually.
Okay.
It's your agreement with Unilever is expiring in 2014. Should you give the key elements in the agreement and the consequences if it's not renewed?
Yeah. We have a long history with Unilever, more than 80 years, and it's right, the agreement will expire in June this year, but it's a constructive discussion ongoing right now. I think the agreement today has three key elements. We are distributing some Unilever brands in Norway, like Axe, Dove, Vaseline Care, but that is less than NOK 150 million. It's some production. We are doing some production at Unilever factories. Also it's a know-how agreement where we are getting access to some part, some development, some marketing and so on. I think it's fair to say that Unilever has been a very important part of the development of Home & Personal Care in Orkla, in the past, but today we are not that dependent on Unilever anymore.
Okay. I'll ask questions.
Assuming that this agreement wasn't renewed, can you talk about your competitive advantage versus the international guys? You've mentioned several times.
Yeah
scales. What would happen in your view if you were to lose all these brands?
All these brands? It's not all these brands. It's not that important brands, only NOK 150 million. The two cases I show today in Home & Personal Care, it's innovation made by Lilleborg. It's not a part of the agreement with Unilever, showing that we are able to compete against the global player without the competencies and the support from Unilever. Of course, it's always a challenge, but I think we have that challenge today. We are competing with all the players today as well.
Comments? Yeah.
I think you need to understand that we own the Unilever brands in Norway. That will continue irrespective of the agreement, and that, of course, is the bulk of the volume. That is really the key. That is, of course, why in the Norwegian market this will be a relatively stable situation with or without the agreement.
Okay. Thank you so much.
Thank you.
After the final Q&A and Åge's closing remarks, there will be served some light snack and meals and drinks outside in the foyer. Here, the Orkla management will be available for you for the next hour or so. I hope you will all stay. Now, Åge, please.
Do you want to take some Q&A or?
Yes, we'll start. Are there any final questions for Åge? Yes, we have one here.
Liz Desmond from Mondrian. How important are acquisitions to the total transformation strategy that you're talking about?
I think overall, I think over longer periods, I think that acquired growth is important. As I said in my introductory remarks, add-on acquisitions is an important part of our strategy, and we have every intention to continue to make selective acquisitions. As I said, transformation acquisitions is not contemplated. Again, I think particularly the three business units that we have spent the most time on are maybe at different stages in the transformation. I think there are companies inside Orkla that are better prepared for absorbing acquisitions than others. I think as an example, in food, we need to integrate Rieber and get that organization going first, while I think as Stig indicated, for Axellus and for the Home & Personal Care area, there is maybe more capacity to expand through acquisitions at this point.
There are differences inside the portfolio, and we always, I think, need to look at organizational capacities and where the organization is in its transition. Overall, I would say that if Orkla grows organically 2%-4%, on average, I think acquired growth should be at least 4% on average per year.
I'm sorry, I just want to clarify that. You're not saying 4% growth from acquisitions, you're saying 4% total growth. You're not going to add 4% a year-
No. It's an average figure. In other words, I think that acquired growth should be at least as big contributor or maybe a bit more of a contributor than organic growth overall, over years and on average. This will come in spurts. As you know, this will not be a smooth process.
Do the difficulties you've had this year and the poor financial performance you've had, in conjunction with the acquisitions you've just done, do they give you pause about doing more acquisitions?
No.
Why?
I think that what we knew and what we know is that you have to think through, carefully, your acquisitions, and they have to fit into the plans for the businesses as you go ahead. The acquired growth is an important driver. We are in an industry that is consolidating. Orkla is a very natural consolidator in our categories and in our geographies. There are situations available. Again, I think that we know, like every other company knows, that you have to have managerial capabilities in order to execute on acquisitions. I will say that the flurry of activities in 2012 was extraordinary. It was a very major break in terms of these two transitory processes that I spoke about. I think that already I would say that we have a much more stabilized business system.
We have new management teams in place. To that extent, I don't see a situation like 2012 happening again. It was a very eventful year.
Hi, this is Eduardo from Dynamo. I would like to understand, since you're focusing much more now on the Branded Consumer Goods for the last couple of years, what is the rationale behind keeping Jotun as a core business for Orkla?
Keeping?
Jotun, the paint business, a minority stake of 42.5%.
Again, I indicate in my presentation that the paint business is not a core business in the sense that it is a brand and consumer business, although the decorative paint, certainly, branding is an important part. We own a 42% share. It has been a very successful partnership with what is effectively a family-controlled business for 40 years. I think that the difference between an orderly transition to new ownership for that company and a very aggressive exit strategy is a big number. Again, I've said that for Orkla shareholders, it is more important that we manage these values rather than rushing out and trying to sell everything. In some ways, it may be frustrating to shareholders, but I think that we also have an obligation to manage the values that we command, and of course, you have a 42% ownership, you are not in control.
We have to work with the company, we have to work with the families, and we need to find good solutions, and that may take some time.
Could you give us a bit more indication on your acquisition criteria? It seems like it's going to be a big part of the agenda.
Of course, we have an average cost of capital requirement of around 10%. Clearly, across categories, that cost of capital requirement will vary depending on the risk situation. We have financial criteria, but I think more importantly, when we evaluate acquisition opportunities, I think, actually, the most important criteria is that we want to acquire companies with strong brands, because that is really at the core of our belief. It is the strong brands that we can build on. It's the strong brands that are defendable. Clearly, categories where we think that with our skill base or that are adjacent to things we already do, we can probably create more organic growth if you acquire adjacent categories rather than completely new categories.
I would say that, in a way, the financial requirements obviously has to be met, but then we look at brand strengths, we look at category fit, we look at geographical fit. As I said, our capital allocation criteria are that we want to expand in the Nordics.
Thank you. In that case, what's going to happen to the Rieber & Søn portfolio, which is out of the Nordics and the Baltics?
As I said, we do not have critical size, so we are reviewing our options.
Hi, it's James Woodrow from IL. Just a question on working capital. If you benchmark the BCG business against international competitors, it's got a lot more working capital invested. You said you weren't going to do it this year, but what potential do you see over time to release invested capital there and reinvest that to get the 4% growth from acquisitions? I think there's quite a big number that you could get there, and why isn't that a strategic priority? It's an easier win than quite a lot of restructuring.
Well-
How does the concentrated nature of your customers give the ability or restrict the ability to do that?
Well, I think one of the reasons we haven't done it is we really haven't done the preparations. I think it's a general observation that we do at management level is the same that you do. If you benchmark, we have more working capital employed than the bench. As a consequence, we are convinced that we can improve also that part of the business. Again, we also need to prioritize. Everything is important. In other words, I think there are other elements of the transformation and the change process that we have given priority over working capital. It will come, but other things need to happen first.
Thank you.
I think it's been a long afternoon. If I can just spend a very short period trying to sum up. We have told you about four strategic priorities: reduce complexity, extract cost synergies and improve cash flows, drive organic growth, and increase the skill base. I'm convinced that when we realize our strategies and our plans, some of the benefits will, of course, flow down to the bottom line, and we have indicated to you what that means in terms of financial performance. I think that the other part of those effects will be used to reinvest in the business and reinvest in a competitive position that, again, will generate growth. Growth will come from innovation, and we've spent a lot of time today talking about our skill set and why innovation is important.
The effect from all the cost initiatives and the effectiveness that we expect to derive from our programs will be, to a large extent, reinvested in a stronger competitive position, and that could also drive growth in the years to come. To sum up in one word, this is all about execution.