The EU has given Norwegian snack firm Orkla the go-ahead to acquire Finnish rival Chips.
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Orkla’s purchase of Chips clearly strengthens its position in the Nordic countries, but it is Chips’ Russian and Baltic operations that really catch the eye. While the snacks market continues to expand in most major markets, health concerns over diet in western European and the US means this trend may level off. Emerging market access is therefore vital for Orkla’s future growth.
The purchase of the Finnish snack food leader indicates Orkla’s eagerness to expand the geographical reach of its portfolio of snack products. The Finnish market has a relatively low per capita consumption figure of 2.3kg, in comparison to its regional counterparts (Norway has 6kg, Sweden 3.8kg, and Denmark 3.3kg). Due to Chips’ pole position in the snacks and crisps market through established brands such as OLW and KiMs, Orkla should be able to cement its place as the major snacks player in that part of northern Europe.
However it is Chips’ Russian operations that may yet prove the prize asset for Orkla. Low per capita consumption of 0.3 kg per annum provides Orkla with a prime opportunity to leverage growth there. The arrival on the Russian market of major players such as Frito-Lay, which has recently established a base in Moscow, strengthens the notion that Russia is indeed an increasingly important emerging snack market.
Orkla could find that the Russian market becomes a veritable treasure trove if consumers there begin to emulate the behaviour trends of their counterparts in many of the major western markets – though this is a big ‘if’. Western consumers are progressively opting for products that provide a solution for their on-the-go lifestyles, and this has driven growth in the snack food market as traditional mealtime patterns are challenged.
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By GlobalDataIn addition, emerging markets such as Russia may become yet more vital in light of increasing health concerns in the West over the health attributes of many mainstream snack products. Though manufacturers such as Orkla and Frito-Lay will be at pains to stress the suitability of their products as part of a balanced diet, they will inevitably suffer if significant numbers of consumers turn towards more obvious natural snack options, like fruit. Tapping into emerging snack markets may therefore provide the key to compensating for this waning demand in the years ahead. Seen in this light, Orkla’s tie-up with Chips may have come at just the right time.
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