Atria’s shrinking markets in Scandinavia

Atria’s Capital Markets Day has been held in 3^rd December 2014 and presentations are available on the Group’s pages.  Let’s look just Finnish and Scandinavian market updates.  

According to Mika Ala-Fossi, head Atria Finland, Finnish retail market in Atria’s categories has shrunk 3.4% in value and 2.0% in volume.  In food service sector the corresponding shrinkage in value is even 4.4%.

In Sweden, the situation is not much better.  According to Tomas Back, head Atria Scandinavia, Swedish cold cuts market has shrunk 2.1% in value and 3.8% in volume.  Back also tells that in this product group Atria’s branded value share is 11.5% and Atria’s total value share, private label included, is 12.7%, both decreasing slightly.  If I get it right, these share figures tell, that Atria is not a big player in cold cut private label market but instead the company is highly dependent on its own brands.  On the contrary, it can be noted that in sausages the readings are 10.4% and 15.5% indicating that Atria has a strong presence in Swedish private label sausages.

Seriousness of the situation in Sweden is revealed, when Back notices that private label growth in cold cuts has been 15.8%. That’s truly enormous growth, I think.  It does not help much that, according to Back, Lönneberga products are keeping their position versus other branded products.  I personally think that this means just that all brands wither.

Denmark does not bring relief. According to Back’s presentation cold cut market declined 4.0% in value and 3.7% in volume.  Atria’s 3-Stjernet brand was able to raise its market share but at the same time, Back tells, hard discounters are increasing their share on the market.

We will look at Atria again later but on Friday, January 30^th we are going to look at HKScan’s businesses.  Only Estonian punk can save us - and not always even that.

This is Artoparto and here is my Disclaimer.  Please read it.

Disclaimer:  All content provided on this site is for entertainment purposes only.  This site does not provide any investment advice and content on this site should not be construed as recommendation to buy or sell any financial instruments.  Please consult a qualified financial adviser before making any financial decision.  I make no representations as to the accuracy, completeness, suitability, or validity, of any information on this site or found by following any link on this site.  I will not be liable for any errors, omissions, or any losses, injuries, or damages arising from displaying or using any content provided on this site.  I am not responsible for users' comments.  I reserve the right to update or delete any content on this site for any reason.

GMO is a troublesome issue to Atria Finland

Atria Finland has started blogging (in Finnish). The blog of course should be followed by all interested.  The first posting is from May, and it is written by Mika Ala-Fossi, EVP Atria Finland.  He talks about GMO.  He says that raw materials used by the company are GMO free.  However, he admits that 20% of contract farmers’ pigs get feed which contains modified soy.  Ala-Fossi’s message comes absolutely clear: genetically modified feed is okay.

It is obvious that Ala-Fossi’s attitude angers skeptical consumers whose number is growing steadily.  Atria’s hardest rivals, HKScan and Snellman, offer GMO free alternatives.  Atria Finland just doesn’t mind.

Atria Scandinavia - precious brands

When Atria Group in 2007 bought the company Sardus AB, it was not generally considered to be a particularly good deal.  However, the Group itself saw that the €124 million acquisition was a success:  they were buying precious brands and a bridgehead to Denmark.

Okay, today there’s nothing new in Denmark, but the same old 3-Stjernet.  However, it is in a good shape as are most of those precious Swedish brands with a long history, like Lönneberga, Arboga, Onsala, and Pastejköket, which all came with Sardus acquisition.  Not to forget Falbygdens Ost which truly is a good brand but was years for sale and now at last it will be sold, Arla is the likely buyer. Lätta Måltider was of course not a good product line but it's just history.

Currently, when Atria Scandinavia’s other main brands, like Sibylla and Ridderheims are looking for growth in Russia, those above-mentioned home market brands are increasingly important due to Russia’s bans.

So, Atria Scandinavia’s brands are fine but there is a marked threat, however.  Avoiding carbohydrates is already a permanent phenomenon and bread consumption is a long-term downward trend.  That’s why sandwich toppings like cold cuts and pates are problematic as the company’s core category.

We will look at Atria again later but on Friday, October 10th, we are going to look at HKScan’s businesses.  Russian melancholy is suitable for all situations.

This is Artoparto and here is my Disclaimer.  Please read it.

Disclaimer:  All content provided on this site is for entertainment purposes only.  This site does not provide any investment advice and content on this site should not be construed as recommendation to buy or sell any financial instruments.  Please consult a qualified financial adviser before making any financial decision.  I make no representations as to the accuracy, completeness, suitability, or validity, of any information on this site or found by following any link on this site.  I will not be liable for any errors, omissions, or any losses, injuries, or damages arising from displaying or using any content provided on this site.  I am not responsible for users' comments.  I reserve the right to update or delete any content on this site for any reason.

A brief look at Atria Group's 2012-12-04 Capital Market Day presentations

Yawn freely, but Atria has updated its strategy. The slogan is now “Atria’s way to number 1”.  There are three lanes:  Commercial excellence, efficiency and Atria way of work. Commercial excellence is about branding, understanding consumer, being a preferred partner and creativity. Efficiency is about processes, production, R&D, purchases and upstream activities. Atria way of work is about leadership governance, knowledge and synergies and positive atmosphere. 

That’s it.  Forget it.  It is first class nothingness.  Or is it even that?  Somehow I feel, that public sector is better when it comes to producing this kind of general nonsense, namely every now and then they manage to be even interesting. 

Juha Gröhn, CEO Atria Plc nails these theses and the country managers apply them to their plans and the presentations are cut from the same cloth. Their content looks somehow orchestrated.  However, for whatever reason, Olle Horm, EVP Atria Baltic, did not follow the format, and his presentation is the most interesting.  Anyway, there is some useful content in all of these CMD presentations.  Let’s take a look. Links to presentations are found here.

Atria Group – Juha Gröhn, CEO

Atria Group’s core is cold cuts and processed meat products.  There is nothing new but it is good to know that there are no changes. Gröhn also gives arguments for the stated core:  High volume and value potential, strong expertise in recipes and production, flexibility in sourcing, strong categories in more or less all countries, opportunity for synergies and state-of-the-art product portfolio.

In all, the Group core is solid and clear, and arguments for it are convincing. Next we will have a look at local cores.

Atria Finland - Mika Ala-Fossi, EVP

Atria Finland’s core is wide.  It includes practically the whole product range.  But a large food company must have products in all product and price categories for every consumer.  Perhaps the core just couldn’t be less wide. Upstream activities – a new term in Atria’s vocabulary, mentioned also by Gröhn, is now repeated here.  One may wonder what kind of changes it means or already has meant for Finnish farmers.  Not anything good, I suppose.

In his market update Ala-Fossi gives some interesting info about consumer trends.  Organic food and ecological aspects shouldn’t pose big problems for Atria. Finnish origin is of course a big plus.  However, Ala-Fossi mentions still another emerging trend: Cooking at home is growing. If this is a valid research result, there is a huge threat to Atria. The presentation includes also some info about retail chains, and in this context is the following announcement:  Market development is based on price increases.  Volumes have been developing far less excluding in poultry category.  This is quite frightening. 

Atria Scandinavia Tomas Back, EVP

Back does not explicitly state Atria Scandinavia’s local core, but instead repeats the old and familiar strategy:  To be market leader or to have a strong second position in cold cuts, sausage and delicatessen in our markets in Scandinavia through strong brands, innovation and successful sales.  

Quite funny, but this statement gives the chance to be only the second, perhaps Back should update it. But practically speaking, the statement looks sound: Cold cut brands Lönneberga and 3-Stjernet prosper, Lithells sausages likely are ok and Ridderheims goes well with its deli products.  But something is missing: Where is fast food?  It is indeed thought-provoking that specifically in Atria Scandinavia’s presentation Sibylla is just mentioned once and only due to its expansion in Russia.

Atria Russia Jarmo Lindholm, EVP

Atria Russia’s local core looks clear:  Processed meat products, convenience food and Sibylla, concentration on branded products, and only in St. Petersburg and Moscow.

One question arises instantly:  Is Sibylla Atria Russia’s business in Russia?  I thought that Sibylla is a part of Atria Concept in Atria Scandinavia.  Another thing is that it has now become obvious, that Atria’s primary production in Russia will be closed down.  Why it is not stated explicitly in the presentation or someplace else? 

Lindholm’s arguments for the local core are clear but they are mostly wishes, a list of potentials like these:  High market value potential in cold cuts, strong market growth potential in convenience food and Sibylla, strong assortment management and new product development implementation. Only one argument is a realized fact:  Strong market position in sausages category. And this is valid only in St. Petersburg, of course.

There is nothing wrong with the presentation but Atria Russia will not convince anyone until there is more evidence about successful launches and until Gorelovo’s plant is running at full steam.

Atria Baltic Olle Horm, EVP

Horm, not following the given presentation format,defines Atria Baltic as a full circle meat company, which is a fact of course.  Reading on the presentation, one could suspect that Horm himself is a man of 180 degrees, and when compared to the rest of the pack, he goes into the opposite direction in a number of issues. 

Straightforwardly he defines Atria Baltic’s two main focus areas.  They are sales improvement and cost efficiency.  This is not original, but his means for sales improvement might be. He plans to restructure sales and marketing organization, reduce the share of campaigns in daily sales and he also aims to growth in meat sales. One cannot know, what he means by restructuring, but surely it will lead to major changes.  Less campaigns is an unexpected and  bold move and growth in meat sales is just opposite to the previous strategy, according to which highly processed products have seen to be  the only way to success.

Unfortunately Horm’s cost efficiency measures are not quite as straight talk although saving targets are clearly expressed.  Measures include optimizing office and management personnel, centralizing logistic operations to Valga factory and tightening general cost control.  But what means optimizing and what is general cost control? One more target there is listed, namely the factory outlet in Valga.  We discussed about the matter in this blog four weeks ago.  Now the closedown looks certain.  Not a great move.

In the future outlook section Horm, just in case, repeats the new strategy:  Our focus is on increasing sales, especially in fresh meat segment.  However, elsewhere in his presentation, Horm brings up processed products and somewhat softens the strategy change. He says that Atria Baltic has been losing market share in processed products and gaining market share in meat, and in this instance he declares that the primary target is to stop the loss of market share.  No doubt, Horm will implement at least some of these activities.  Atria Baltic’s long-awaited entry into the black may be just around the corner.

We will look at Atria again later but on Friday, January 4th we are going to study HKScan’s businesses.  If snow turned green, it would not make summer, in my opinion.

This is Artoparto and here is my Disclaimer.  Please read it.

Disclaimer:  All content provided on this site is for entertainment purposes only.  This site does not provide any investment advice and content on this site should not be construed as recommendation to buy or sell any financial instruments.  Please consult a qualified financial adviser before making any financial decision.  I make no representations as to the accuracy, completeness, suitability, or validity, of any information on this site or found by following any link on this site.  I will not be liable for any errors, omissions, or any losses, injuries, or damages arising from displaying or using any content provided on this site.  I am not responsible for users' comments.  I reserve the right to update or delete any content on this site for any reason.

Atria Plc back on track?

Atria’s Q3 result was fine, and especially Atria Russia's good performance was the one that made ​​the audience go wild. But let’s look first at the number of employees in Atria’s different business areas.  Admittedly it is not much of an indicator to anything. Nonetheless, since Atria Plc has in recent years repeatedly announced personnel reductions as a part of austerity measures, we will now shortly look at the number of employees by business area over the last five years.

Figure:  Atria’s number of employees by business area over the last five years*

*The data is taken from Atria’s quarterly reports, but possible errors and misunderstandings are mine.  If I have got it right, quarter specific readings, at least in most cases, refer to the average number of employees from the beginning of the year up to the end of the quarter.

The trend is downward in all business areas.  However, during the last two years, the decline has been minimal in Scandinavia and Baltic, and Finland shows actually only seasonal variation. In Atria Scandinavia, the acquisition of Sardus AB in 2007 increased the personnel by about 1000 and the largest layoffs were made during the year 2009.  In the Baltics, the acquisitions of AS Wõro and AS Vastse-Kuuste in 2009 increased the number of employees, but after rapid and heavy layoffs the current number is below the 2008 level. In Russia the acquisition of OOO Campomos in the second half of 2008 increased the number of employees by some 800 and no less than two years the number remained unchanged.  But finally it began to happen.  Last year's and this year's reductions in Russia are even tougher than 2009 reductions in Scandinavia and in the Baltics.  Consequently the number of employees in Atria Russia is nearly the same as it was during the pre-Campomos years.

All in all, Atria Plc may well be back on track.  Staff costs have been cut harshly.  In a way, these savings are permanent, costs don’t return in the short term.  But it does not mean that Atria would not be able to come up with new costs, which completely destroy these savings.

Atria's outlook by business area

Atria Finland - The relatively good Q3 result was reported to be due to improved meat market conditions, improved sales structure and higher sales prices and - surprisingly mentioned only after those three - efficiency measures. Cattle slaughter rationalization and Nurmo plant development program, are creating annual savings of € 10 million.  Completion of the new bovine slaughterhouse at Kauhajoki early next year should bring even more of these cost savings.  Ongoing extension of Atria’s incubation facilities indicates strengthening in demand for chicken products and may suggest also Atria’s rising market share. It seems that Atria Finland’s machine is running just fine. 

But there are doubts.  Farmers have reduced meat production and Atria’s all main raw materials, pork, beef and poultry are more and more expensive.  Unavoidable weakening of general economic conditions in Finland will worsen the situation in the very near future.   Is there overcapacity, after all?  The new Kauhajoki cattle slaughterhouse will be one of the largest in Europe.  Even more overcapacity?

A Finnish newspaper, Maaseudun Tulevaisuus, paints the darkest colors.  According to its recent article, meat production is in crisis. Empty pig farms, half-empty cattle farms. Meat industry is running inefficiently and with poor profitability.  Also there is expressed quite an extreme opinion according to which, provided that the crisis continues, there will eventually enter a foreign player and take the possession of major Finnish meat processing companies.

Atria Russia - Few people could expect a positive Q3 result.  But at the same time, I think only few people are sure that the result will remain positive in the near future.  Improved cost structure was said to be one reason for the good result. The chart above also shows it clearly. Layoffs have been made in part due to an increased automation and in part due to closing of units and reductions in product mix.  In fact, Atria’s profitability improvement programme 2010-2011 it is now fully carried out in Russia (annual savings target € 7,5 million, see Annual Report 2011, page 7). It seems to have been successful.

What’s more, in the Q3 report it was announced, that Atria Russia has launched a new programme in order to improve production efficiency at the Sinyavino and Gorelovo plants. Annual savings are estimated to be about € 2 million.  Therefore the results should still improve.

However, the Q3 report does not say a word about Dan-Kub farm’s huge African Swine Fever problems.  Furthermore, Atria still not confirmed its plans to discontinue the primary production in Russia.  Most importantly, Atria completely failed to tell anything about the success of new product launches in Russia.  Some positive words in the report would have been nice.

Atria Scandinavia - Small changes, more centralization and automation, that's Atria Scandinavia's recipe, "lite bättre".  All surprises would be ... surprises.  Lönneberga campaign has been helpful, market share is said to be strengthened.  The brand uses only domestic meat and it is entitled to use the “Svensk kött” symbol, which was introduced last year.  Currently Lönneberga is a valuable brand for Atria Scandinavia, and so is the Danish brand 3-Stjernet, which also was reported to be successful.  Both of these brands came with Sardus AB in 2007.  Then, if we just forget the Lätta Måltider brand, could it be that the acquisition was not at all as bad as commonly thought?

Atria Baltic - Will Atria Baltic be a chronic loss-maker?  In August, the management has been changed once again. The new managing director, Executive Vice President of Atria Baltic, Olle Horm has previously worked for many Estonian meat processing companies, Atria's toughest competitor included. 

In his search for savings, Horm evidently had ended up with their factory outlet in the city of Valga.  A regional newspaper Valgamaalane became interested in the case, and asked whether or not the outlet will be closed. Not to be closed – this year, Horm replied, but apparently he was hovering between different options and just could not or did not want to rule out any of them. Shortened service hours currently, but anyway the shop is running, which is truly a good thing.  There are image benefits which may well overcome all the direct financial losses.  Perhaps the outlet should even be renovated and re-branded.  Atria Baltic’s headquarters are situated in Valga, and the home ground is important. And this leads us to news which tells, that Horm has signed a sponsorship agreement with the local basketball club. I’m not trying to argue, that factory outlet money would have been needed for this, but who knows.  Sponsoring too is a good thing and incidentally the partners form a perfect couple.  The team, Max & Moorits, named after Atria Baltic’s precious brand, has not yet achieved great success and Atria Baltic of course, has quite much the same problem.  Let’s hope that Horm has a brilliant playbook and thumbs up for the team too. 

We will take a look at Atria again later but on Friday, December 7^th we are going to study HKScan. To my disappointment the sun has been traveling a low path in recent weeks. I hope that it will take a little more height when the summer comes again.

This is Artoparto and here is my Disclaimer.  Please read it. 

Disclaimer:  All content provided on this site is for entertainment purposes only.  This site does not provide any investment advice and content on this site should not be construed as recommendation to buy or sell any financial instruments.  Please consult a qualified financial adviser before making any financial decision.  I make no representations as to the accuracy, completeness, suitability, or validity, of any information on this site or found by following any link on this site.  I will not be liable for any errors, omissions, or any losses, injuries, or damages arising from displaying or using any content provided on this site.  I am not responsible for users' comments.  I reserve the right to update or delete any content on this site for any reason.