Orkla launches bid for snacks firm

Related tags Sweden

Norwegian firm Orkla has closed in on a takeover deal for Finnish
snack firm Chips with a view to dominating established snack
industries in Scandinavia and rising markets in Russia, writes
Chris Mercer.

Orkla already owns 20.4 per cent of Chips' shares and would have to pay €320 million to buy the rest. Chips' directors and major shareholders have announced their support for the move and a shareholder ballot is expected some time after January 2005. The two companies also have close relations through their joint ownership of Nordic snacks firm, Chips Apb.

Halvor Stenstadvold, Orkla executive vice-president, said the move was the best way of launching the company further into the lucrative Nordic snacks markets using established branded goods such as OLW and KiMs, while also grabbing a slice of the action in Russia.

"Chips has a leading position in Sweden, Denmark and Finland and in Norway Chips and Orkla are number two in the market. In both Russia and the Baltic states, we believe that, based on the current level of snacks consumption and the early development stage of the market, there is good growth potential,"​ said Stenstadvold.

Figures from Chips prove him right: Scandinavians are among the biggest savoury snackers in Europe, with Norwegians eating five kilograms per person per year, Swedes 3.8kg, Danes 3.3kg and Finns 2.2kg.

Chips' OLW and KiMs brands, including potato chips, peanuts and salt sticks, have a combined 30 per cent share of Norway's savoury snacks market, and KiMs alone has a 47 per cent share in Denmark.

Market analysts Datamonitor​ have forecast Russia to be the fastest growing savoury snacks market up to 2006, and Chips holds a 10 per cent share in that market with its Nash Champion potato chip brand.

Russia's recovery from the economic crisis of the late 1990s has led a spirited rise in savoury snacking; sales hit 88,000 tons in 2001, rose to 114,000 tons in 2002 and then recorded around a 90 per cent value increase in 2003 when sales reached €697 million.

There is a long way to go, however. Per capita consumption levels in Russia and the Baltic states are just 0.3kg and 0.9kg respectively.

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