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Market situation and operating parameters
The international economic situation was still generally weak in 2003, despite the fact that interest rates declined to historically low levels. The fall in interest rates was particularly sharp in Norway, and towards the end of the year they were on a par with international rates. This led to a substantial decline in the value of the Norwegian krone in the course of 2003, and a resulting improvement in the situation for internationally exposed Norwegian industry, which had been particularly difficult at the beginning of 2003. There appears to have been moderate volume growth in Nordic grocery sales in 2003. There is still stiff competition in all market segments from both international and local manufacturers. The grocery trade in the Nordic region is among the most concentrated in Europe and the establishment of new foreign low-price chains represents another challenge. Private labels are growing and had a share of around 11 % of the Nordic market. Orkla has a solid base with very strong, profitable market positions and will defend and develop these positions by further rationalising local business systems and increasing its focus on innovation and consumer communication. 
New foreign low-price chains have recently established operations in Finland and Sweden and will soon start up in Norway. So far, Orkla has found that measures to improve its cost situation and focus on innovation and product improvements enables Orkla to largely maintain its market positions. The market situation for beer was mixed in 2003. The Carlsberg brand achieved good growth and BBH strengthened its leading market position in Russia, while the situation in Sweden remained negative. The Russian economy continued to grow in 2003, but the value of the rouble fell relatively sharply against the euro, largely due to the weaker USD. Annualised market growth for beer in Russia was around 7 %. For Orkla Media, the advertising markets in Denmark and Poland were weak while the situation in Norway was more positive. Towards the end of the year, there were signs that the markets in Denmark were flattening out, but it is too early to conclude that there are clear signs of recovery. In general, Orkla Media maintained its market shares on all markets. The Chemicals business has a large proportion of its cost base in Norwegian kroner, Swiss francs and euros, while its revenues are largely dependent on US dollars. The company was therefore affected by the weakening of the USD although, as mentioned above, currency hedging contracts helped to limit the impact. The generally weak economic situation had a negative effect on demand and the markets for bulk products were particularly poor. |
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