Cloetta: The Nordic Confectionery Leader

Cloetta is one of the leading confectionery companies in Northern Europe, selling candy, chocolate, pastilles, chewing gum, and Pick & mix. The company owns many well known local brands, including Kexchoklad, Läkerol, Malaco, Ahlgrens bilar, and CandyKing, some of which have been enjoyed by consumers for generations. With a strong position in its core Nordic markets, Cloetta is focusing on growing its biggest brands, expanding its presence in markets such as Germany, the UK, and North America, and developing new products. The question remains: Does this Nordic confectionery company deserve a spot in your portfolio?

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The Business

Cloetta was founded in 1862 and has grown into Northern Europe’s leading confectionery company, with operations across 12 countries and products sold in more than 60 markets. The company has particularly strong positions in the Nordic countries, where confectionery consumption per capita is relatively high and consumers tend to have strong preferences for established local brands. Cloetta’s five core markets are Sweden, Finland, the Netherlands, Denmark, and Norway, which together account for around 80% of the company’s sales. Cloetta is the only confectionery company with a strong market position across all Nordic countries and ranks among the three largest players in each Nordic market. Sweden is its largest market, while Finland and the Netherlands also represent significant parts of the business. Cloetta operates across the main confectionery categories of candy, chocolate, pastilles, and chewing gum. This broad portfolio allows the company to participate in different consumption occasions and respond to changing consumer preferences rather than depending on a single product category. The confectionery market itself is relatively noncyclical. Consumers may adjust their spending during weaker economic periods, but relatively inexpensive treats such as candy and chocolate tend to represent small purchases within household budgets. As a result, confectionery demand has historically been relatively stable compared with many other consumer categories. The company divides its business into two main segments: Branded packaged products and Pick & mix. Branded packaged products account for approximately 70% of sales and include products manufactured, marketed, and sold under Cloetta’s consumer brands. Within this business, Cloetta continually invests in product development, packaging, advertising, promotion, and innovation to maintain brand relevance and stimulate consumer demand. The company owns a large collection of brands, but more than half of its sales come from ten particularly important brands that Cloetta refers to as its Superbrands. These Superbrands include some of the best-known confectionery names in Northern Europe. Läkerol has roots dating back to the beginning of the twentieth century and has become one of the Nordic region’s best-known pastille brands. Malaco dates back to 1934 and has developed into a major Nordic candy brand with products spanning sweet, sour, and salty varieties. Kexchoklad has been sold since 1938 and is one of Sweden’s best-known chocolate products, while Ahlgrens bilar has retained its distinctive car-shaped design since 1953 and has become deeply embedded in Swedish confectionery culture. Other important brands include Gott & Blandat, Juleskum, Tupla, Mynthon, and Red Band, the latter being the second-largest candy brand in the Netherlands. Many of these brands have been consumed for generations, which is particularly important in confectionery. Consumer purchasing decisions are influenced not only by taste and price but also by familiarity, memories, traditions, and emotional attachment. Products such as Ahlgrens bilar, Kexchoklad, Juleskum, Läkerol, Malaco, and Tupla have become familiar parts of everyday life in their respective markets. Some products are also connected with specific occasions. Juleskum, for example, has become associated with Christmas in Sweden, while other products are closely linked to sporting events, travel, social occasions, or small everyday treats. Cloetta’s second business segment is Pick & mix, which accounts for approximately 30% of sales. Instead of simply selling packaged candy to retailers, Cloetta can manage much of the customer’s Pick & mix confectionery offering. This includes creating the assortment, supplying products, installing or managing fixtures, merchandising the displays, and in some cases operating under the CandyKing brand. The candy itself can be manufactured by Cloetta or sourced from third parties, including competing confectionery companies. This means the business is less about selling individual Cloetta products and more about providing retailers with an integrated solution for operating the entire Pick & mix category. Cloetta has an especially strong position in this market. CandyKing is one of Europe’s leading Pick & mix brands, while Cloetta is the market leader in Pick & mix across the Nordic countries. Pick & mix is particularly important in the Nordics compared with most other European markets. In Sweden, it normally accounts for around 25% of the confectionery market, while its share in the other Nordic countries is generally between 10% and 20%. Cloetta therefore holds a leading position in a format that represents a meaningful part of overall Nordic confectionery consumption. The Pick & mix business also gives Cloetta exposure to a different consumer proposition from traditional packaged confectionery. Consumers can create their own combination of products and choose both the quantity and assortment they want. This creates an element of personalization and discovery that packaged products cannot fully replicate. Cloetta intends to build on this position internationally, including through CandyKing. North America represents one potential expansion market, with Cloetta gradually increasing its presence through CandyKing and Malaco and introducing the Nordic Pick & mix concept to more consumers outside Europe. Distribution is another important part of Cloetta’s business model. Grocery retailers remain one of its largest sales channels, but the company also sells through convenience stores, filling stations, e-commerce, cinemas, airports, arenas, building supply stores, and other alternative channels. This is particularly important for confectionery because purchases are highly impulse driven. Cloetta estimates that as many as 80% of confectionery purchase decisions can be made at the point of sale. Availability, shelf position, displays, assortment, and brand recognition therefore have a significant influence on sales. Consequently, Cloetta maintains local commercial and merchandising organizations in its most important markets. Its customer base includes many of Northern Europe’s largest retailers, such as ICA, Coop, Axfood, Salling Group, Reitan, NorgesGruppen, Kesko, SOK, Albert Heijn, Jumbo, and others. These relationships allow Cloetta to secure broad distribution for its brands and support retailers with promotions, displays, launches, and category management. In Pick & mix, dedicated merchandising teams can also manage and replenish displays at store level. Cloetta’s manufacturing footprint is largely located close to the markets where its products are consumed. Products manufactured in Sweden are primarily sold in Sweden, while products manufactured in euro-denominated countries are largely sold in euro-denominated markets. This does not eliminate currency exposure, but it provides a degree of natural matching between manufacturing costs and sales and reduces some of the currency mismatch that can arise when production is concentrated in one country while products are sold internationally. Cloetta is also working to make its manufacturing and supply chain more flexible, resilient, and cost efficient through improvements covering sourcing, production, warehousing, and distribution. The company has complemented its own manufacturing footprint with long-term strategic manufacturing partnerships, allowing it to adapt capacity while improving the efficiency of its supply chain. The company’s strategy increasingly focuses on profitable rather than purely volume-driven growth. Net revenue management plays an important role in this approach. Cloetta actively manages pricing, promotions, pack sizes, assortment, innovation, and product mix with the objective of improving revenue and profitability rather than simply maximizing volumes. Its broad portfolio gives it considerable flexibility when consumers respond differently to changes in price or purchasing power. Cloetta can offer different brands, categories, package sizes, and price points while continuing to participate in consumers’ confectionery spending. Cloetta’s competitive moat is primarily built on its portfolio of deeply established local brands, extensive distribution network, leading Pick & mix position, and scale within Northern European confectionery. The strongest part of this moat is arguably the company’s brands. The European confectionery industry includes global companies such as Mars, Mondelez, Ferrero, Nestlé, Haribo, Perfetti Van Melle, and Lindt & Sprüngli, but confectionery remains unusually local. Consumer preferences vary substantially between countries, and established domestic brands can compete successfully against much larger international companies. Cloetta is particularly well positioned in this environment because it is the only confectionery company with a strong position across all Nordic markets. Many Cloetta brands have existed for several decades and, in some cases, more than a century. This history creates something that would be difficult for a new competitor to manufacture through advertising alone. Consumers have grown up with brands such as Läkerol, Kexchoklad, Ahlgrens bilar, Malaco, Tupla, and Red Band. Confectionery is often connected with childhood memories, holidays, traditions, and familiar tastes, which strengthens the attachment to established brands. Cloetta therefore benefits from a form of accumulated brand equity that has been built gradually across generations. This translates into consumer loyalty and a degree of pricing power. Consumers have continued purchasing many of Cloetta’s products despite significant price increases, indicating that purchasing decisions are not based solely on finding the cheapest alternative. A consumer looking for Ahlgrens bilar, Kexchoklad, Läkerol, or a particular Malaco product may not view an unknown private-label equivalent as an identical substitute. The relatively low absolute price of confectionery further supports this dynamic. Even meaningful percentage price increases usually translate into a relatively small increase in the amount a consumer pays for an individual purchase. Cloetta’s broad portfolio further strengthens this advantage. Rather than relying on a single confectionery category or brand, the company participates across candy, chocolate, pastilles, and chewing gum and offers products at different price points, formats, flavors, and consumption occasions. This provides diversification while also strengthening Cloetta’s position when negotiating with retailers. A retailer is not dealing with Cloetta merely as the supplier of one successful candy product but as a major confectionery company capable of supplying several important categories and brands. Distribution represents another component of the moat. Confectionery is heavily dependent on physical availability and placement because so many purchasing decisions are made inside the store. A strong brand that consumers recognize immediately is considerably more valuable when it is available across thousands of supermarkets, convenience stores, filling stations, cinemas, airports, and other outlets. Cloetta’s scale and long-standing relationships with major retailers therefore reinforce its brands, while the strength of its brands makes retailers more willing to allocate shelf space to Cloetta. These two advantages reinforce each other over time. This relationship is particularly powerful because retail markets in several of Cloetta’s core countries are highly concentrated. In Finland, for example, Kesko and SOK together account for more than 80% of grocery retail, while Sweden, Norway, Denmark, and the Netherlands also have relatively concentrated grocery markets. Winning agreements with these retailers can therefore provide extensive national distribution. Cloetta’s established commercial organizations, history with major retailers, broad product offering, and ability to support stores with merchandising and promotions create advantages that would be difficult for a small challenger to replicate quickly. The Pick & mix business adds another layer to Cloetta’s competitive position. Here the company is not simply competing based on individual products. It can provide retailers with an entire confectionery solution including assortment management, fixtures, merchandising, replenishment, and the CandyKing brand. Because Cloetta can incorporate both its own products and products from third-party manufacturers, its interests can be more closely aligned with those of the retailer. The objective is to maximize the attractiveness and sales of the entire Pick & mix section rather than merely maximize sales of an individual Cloetta brand. Scale matters significantly in this business. Managing Pick & mix across large numbers of stores requires sourcing, logistics, specialized fixtures, data, merchandising personnel, retailer relationships, and a sufficiently broad assortment to keep consumers interested. Cloetta already has this infrastructure and is the market leader in Pick & mix across the Nordic countries. A new entrant could theoretically replicate the concept, but building a comparable network and persuading major retailers to replace an established operator would require considerable time and investment. This makes Cloetta’s Pick & mix position arguably more difficult to replicate than a conventional packaged confectionery product. The combination of branded packaged products and Pick & mix also gives Cloetta an unusual position within the industry. Its strong consumer brands help it generate demand, while its Pick & mix operations give it direct influence over an important confectionery format and strengthen its relationships with retailers. Cloetta can therefore create value both as a brand owner and as a category partner for its customers. Scale provides additional benefits in marketing, innovation, procurement, manufacturing, logistics, and product development. Cloetta can spread these costs across a much larger sales base than smaller local confectionery companies. It can also launch new varieties under brands that consumers already recognize, reducing the risk associated with introducing entirely new products. Instead of convincing consumers to trust an unfamiliar brand, Cloetta can extend existing franchises such as Malaco, Ahlgrens bilar, Kexchoklad, Red Band, or Tupla into new flavors, formats, and occasions. Nevertheless, Cloetta’s moat should not be viewed as impenetrable. The company competes with some of the largest consumer goods companies in the world, and consumers frequently purchase several confectionery brands rather than remaining exclusively loyal to one. Retailers also have considerable negotiating power because grocery markets in the Nordic countries are concentrated. The strength of Cloetta’s competitive position therefore comes less from locking consumers into its ecosystem and more from continuously maintaining brand relevance, consumer preference, distribution, and shelf visibility.

Management

Katarina Tell serves as the President and CEO of Cloetta, a role Katarina Tell assumed in 2024 after previously serving as Area President of Cloetta Sweden. Katarina Tell brings extensive experience from the food and fast moving consumer goods industries, with a career spanning senior leadership positions at Cloetta, Kraft Heinz, and Findus. Having worked directly with consumer brands, retailers, sales, strategy, and business development throughout much of Katarina Tell’s career, Katarina Tell has a background that aligns closely with Cloetta’s business model and its dependence on strong brands, consumer preferences, retail relationships, and disciplined commercial execution. Katarina Tell joined Cloetta in 2018 as President of Cloetta Sweden and became a member of the Group Management Team. Sweden is Cloetta’s largest individual market and is home to several of the company’s best known brands, giving Katarina Tell direct experience managing an important part of the group before moving into the CEO position. During approximately six years leading the Swedish business, Katarina Tell built a strong internal track record and developed extensive knowledge of Cloetta’s customers, brands, operations, and core markets. When Cloetta appointed Katarina Tell as CEO, the Board highlighted Katarina Tell’s performance since joining the company as well as Katarina Tell’s expertise across the company’s key markets and customers. Katarina Tell was selected following a competitive selection process, making the appointment a promotion of an experienced internal candidate rather than bringing in an external leader unfamiliar with the business. Before joining Cloetta, Katarina Tell held several senior positions at Findus and Kraft Heinz. Katarina Tell served as General Manager of Findus Sweden and previously as Managing Director of Kraft Heinz Northern and Eastern Europe. Earlier roles included Retail Sales Manager at Kraft Heinz Sweden and a position in business development at Findus. This provided Katarina Tell with experience across several important parts of the consumer goods value chain, ranging from sales and customer relationships to strategy, business development, and general management. It also gave Katarina Tell experience working with large established consumer brands across multiple European markets before joining Cloetta. Katarina Tell holds a Master of Science in Food and Nutrition from Umeå University and has also studied business administration at Lund University. The combination of an academic background related directly to food and nutrition with studies in business administration is well suited to a career that has largely been spent in branded food and consumer products. Katarina Tell has also previously served on the boards of Svensk Plastindustri in Motala and DLF, Dagligvaruleverantörernas Förbund, the Swedish trade organization representing suppliers to the grocery and foodservice industries. Since becoming CEO, Katarina Tell has taken a relatively structured approach to reshaping Cloetta’s strategy. Katarina Tell has described the process as beginning with defining the company’s vision, followed by developing the strategy, reviewing the organizational structure, and finally executing the plan. As part of this process, Katarina Tell initially spent time speaking with internal and external stakeholders before introducing a more focused strategy for the company. The objective has been to make Cloetta a more focused, efficient, and agile organization while creating the foundation for higher profitable growth. Under Katarina Tell’s leadership, Cloetta has concentrated its strategy around several clear priorities. The first is to focus more resources on ten Superbrands in the company’s five core markets of Sweden, Finland, the Netherlands, Denmark, and Norway. Rather than spreading marketing and innovation investments equally across a very large brand portfolio, Cloetta intends to concentrate resources behind brands that already have strong consumer positions and opportunities to grow across markets and consumption occasions. This should allow the company to create greater scale from its strongest brands while maintaining important local brands where they remain strategically relevant. A second priority is expanding beyond Cloetta’s core markets. Katarina Tell has identified Germany, the United Kingdom, and North America as markets where Cloetta sees opportunities for stronger growth. North America is particularly interesting because Cloetta is gradually introducing both Malaco and the CandyKing Pick & mix concept to a much larger confectionery market. The opening of the first permanent CandyKing store in New York City in December 2025 represented one step in this strategy. However, the expansion remains gradual, which reduces the risk of committing substantial capital before Cloetta has demonstrated that its brands and concepts can succeed in these markets. Marketing and innovation represent another important part of Katarina Tell’s strategy. Cloetta operates in categories where established brands provide an advantage, but consumer tastes and purchasing behavior continue to evolve. The company therefore needs to protect the heritage and familiarity of its strongest brands while continuously introducing new flavors, formats, packaging, and consumption occasions. Katarina Tell’s strategy places greater emphasis on innovation that strengthens margins and supports the company’s strongest brands rather than pursuing innovation simply to generate additional volume. Katarina Tell has also placed considerable emphasis on improving Cloetta’s operating structure and profitability. In 2025, the company reorganized parts of the business to create a leaner organization with greater speed and efficiency. At the same time, Cloetta has increased its focus on net revenue management, portfolio optimization, cost control, sourcing, manufacturing, warehousing, and distribution. These measures are intended to make profitable growth more important than growth at any price and have already contributed to a significant improvement in profitability. An important decision under Katarina Tell’s leadership was not to proceed with Cloetta’s previously planned greenfield manufacturing facility. Instead, the company has moved toward a more flexible supply chain model that combines its existing manufacturing network with strategic external partnerships. The decision reduced the need for a very large capital investment and allowed management to focus more heavily on improving the efficiency and flexibility of the existing business. Cloetta subsequently described 2025 as a year characterized by both the decision not to proceed with the greenfield plant and the introduction of its new strategy centered on Superbrands, international growth, marketing, and innovation. Katarina Tell has also strengthened Cloetta’s financial ambitions. Under the strategy introduced in 2025, the company increased its long term organic sales growth target from 1 to 2% annually to 3 to 4%, while maintaining its long term adjusted EBIT margin target of 14% and establishing an intermediate target of at least 12% by 2027. Cloetta also strengthened its balance sheet target by lowering its targeted net debt to EBITDA ratio to below 1,5 times. These targets suggest that Katarina Tell’s approach is not centered solely on expanding revenue but on combining growth with improved margins and a more conservative balance sheet. The early financial development under Katarina Tell has been encouraging. Cloetta reported a significant improvement in profitability during 2025, driven by measures including portfolio optimization, pricing, cost control, and operational improvements. The company described 2025 as one of its strongest years and entered 2026 with an all time low net debt to EBITDA ratio. The improvement continued into the first half of 2026, when Cloetta reported that it was performing in line with all of its long term financial targets and benefited from positive development across its Superbrands and strong operational efficiency. While a relatively short period as CEO means it is too early to judge the long term success of the strategy, the initial results provide evidence that the focus on profitability and operational efficiency is translating into the financial performance of the business. Given Katarina Tell’s extensive experience in branded food and fast moving consumer goods, combined with approximately six years of experience running Cloetta’s Swedish business before becoming CEO, Katarina Tell appears well suited to lead Cloetta through its current phase of development. Katarina Tell understands both the consumer side of the business and the importance of relationships with large grocery retailers, while previous leadership positions at Kraft Heinz and Findus provide experience managing established food brands across multiple markets. The strategy introduced under Katarina Tell is also relatively straightforward, with greater investment behind Cloetta’s strongest brands, selective geographical expansion, improved marketing and innovation, a more efficient organization, and stronger operational discipline. The initial improvement in profitability is promising, although Katarina Tell has only been CEO since 2024 and will ultimately need to demonstrate that these improvements can be sustained while also achieving the company’s higher long term growth ambitions.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Cloetta has historically struggled to meet this threshold. ROIC was 6,5% in 2016 and remained below 10% for most of the following decade. It reached its lowest level of 5,6% in 2020 before improving every year since then to 6,5% in 2021, 7,6% in 2022, 8,2% in 2023, 9,0% in 2024, and finally 1,3% in 2025. This means that 2025 was the first year in the past decade in which Cloetta met our 10% requirement. One reason Cloetta has historically generated relatively low ROIC is that its profit margins have not been particularly high compared with the investments required to operate the business. Cloetta manufactures much of its confectionery itself and operates six factories, meaning the company needs to continuously invest in factories, production equipment, inventory, and its supply chain. Its Pick & mix business also requires fixtures in stores and a merchandising organization to manage the displays. These investments are not necessarily a problem, but when combined with relatively modest profit margins, they have historically resulted in a lower ROIC. The Pick & mix business has also played an important role in the development of ROIC. This became particularly clear in 2020, when the pandemic caused a significant decline in demand for Pick & mix as retailers restricted or closed their Pick & mix displays and consumers became more cautious about buying unpackaged candy. Pick & mix sales declined by more than 30% during the year, and the business generated a significant loss. Cloetta’s overall sales and profitability were also negatively affected, helping explain why ROIC fell to its decade low of 5,6% in 2020. The recovery since 2020 helps explain why ROIC has increased every year since then. Consumers returned to Pick & mix as pandemic restrictions disappeared, allowing Cloetta to generate considerably more profit from this part of the business. Pick & mix has since returned to profitability and has become an important contributor to Cloetta’s earnings again. At the same time, the Branded packaged products business has also become more profitable. Another important reason for the improvement is pricing. Cloetta has faced significant increases in the cost of ingredients and other expenses in recent years, but the strength of its brands has allowed the company to increase prices to compensate. Importantly, consumers have generally continued buying its products despite the higher prices. This has helped Cloetta protect and eventually improve its profitability. Cloetta has also become more focused on how profitable its sales are rather than simply trying to sell more products. The company has increased its focus on its strongest brands, adjusted prices, improved its product mix, reduced less profitable products, and become more disciplined with promotions. This means Cloetta is increasingly trying to sell the right products at the right prices rather than focusing solely on increasing volumes. Cost savings and operational improvements have also contributed to the higher ROIC. Cloetta has simplified its organization and worked to improve efficiency across sourcing, manufacturing, warehousing, and distribution. These improvements have allowed the company to generate more profit without requiring a similar increase in investments. The decision not to proceed with the planned new factory in the Netherlands could also support ROIC going forward. The factory would have required a significant investment. Instead, Cloetta concluded that it could improve its manufacturing network through its existing factories and long term partnerships with other manufacturers. If Cloetta can continue growing without needing similarly large investments in new factories, it should become easier to generate higher returns from the money invested in the business. Looking ahead, there are reasons to believe that ROIC can remain above its historical levels and potentially improve further, although I would not expect it to increase every year indefinitely. Cloetta is targeting an adjusted operating margin of at least 12% by 2027 and 14% over the longer term. The company already reached 12,1% in 2025, meaning the longer term ambition of 14% is particularly important. If Cloetta can move closer to this target without significantly increasing the investments required to operate the business, ROIC should benefit. The strategy under Katarina Tell also supports this possibility. Cloetta is concentrating more resources on its strongest brands, improving pricing, reducing less profitable products, making its supply chain more efficient, and simplifying the organization. The objective is essentially to generate more profit from the business Cloetta already has, which should be positive for ROIC.

The following numbers represent the book value + dividend. In my previous format, this was The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Cloetta’s equity development has been somewhat uneven, but the overall direction has been positive. Equity declined in some of the earlier years but has increased every year since 2020, with particularly strong growth in 2021 and 2022. Growth has continued at a more moderate pace since then, and equity reached a record high in 2025. Overall, the development shows that Cloetta has gradually built more value for shareholders despite some fluctuations along the way. One of the main reasons equity has increased over time is that Cloetta has generally been profitable. When a company generates profits, part of those profits can remain in the business and increase equity. Cloetta has been profitable throughout most of the period, which has allowed equity to gradually increase over the longer term. Cloetta’s equity can nevertheless fluctuate from year to year depending on the company’s financial performance. In years when profitability is weaker, less value is added to equity, while stronger earnings generally support higher equity. This was particularly visible around 2020, when the pandemic significantly affected Cloetta’s Pick & mix business and overall profitability. Since then, profitability has recovered and improved, which has contributed to equity increasing every year from 2021 through 2025. The strong development in 2021 and 2022 was partly connected to the recovery from the pandemic. Pick & mix gradually returned to more normal conditions, while Cloetta’s overall sales and profitability recovered. More recently, the drivers have shifted from recovery toward improved profitability. Cloetta has raised prices to offset higher costs, focused more on its strongest and most profitable products, reduced costs, and improved efficiency across the organization. These improvements have helped Cloetta generate higher profits and supported continued growth in equity. The record level reached in 2025 is particularly encouraging because it coincided with further improvements in the underlying business. Cloetta increased its adjusted operating margin from 10,6% in 2024 to 12,1% in 2025. Higher profitability means the company can generate more earnings from its existing business, which provides a stronger foundation for equity growth. Looking ahead, there are good reasons to believe equity can continue growing over the longer term, although it is unlikely to increase every single year. The most important factor will be whether Cloetta can continue growing its profits. Management is targeting organic sales growth of 3% to 4% annually and an adjusted operating margin of 14% over the longer term. If Cloetta succeeds in growing sales while continuing to improve profitability, it should generate higher earnings and support further growth in equity. The strategy under Katarina Tell should also support this development. Cloetta is focusing more resources on its strongest brands, improving pricing, reducing less profitable products, simplifying the organization, and making its supply chain more efficient. Rather than relying on large investments or acquisitions to drive growth, the strategy is primarily focused on getting more out of Cloetta’s existing brands and operations. If successful, this should allow the company to increase profits and gradually build more equity.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Cloetta’s free cash flow has fluctuated considerably over the years. This is not unusual for the company, as changes in profitability, inventory, payments to suppliers and customers, and investments in factories and equipment can cause cash flow to move significantly from one year to another. However, the overall development has improved in recent years, and 2025 was an especially strong year for cash generation. The record free cash flow in 2025 was primarily driven by stronger profitability and better management of inventory and payments. Cloetta generated more than SEK 1 billion in operating cash flow for the first time, while free cash flow increased significantly. In the fourth quarter alone, free cash flow increased by almost 50% compared with the previous year. Management specifically highlighted stronger operating results and improvements in the day to day management of the business as the main reasons for the strong cash generation. Higher profitability has been an important part of this development. Cloetta has increased prices to offset higher costs, focused more on profitable products, improved its product mix, reduced costs, and made its organization more efficient. This resulted in seven consecutive quarters of improved margins compared with the same periods a year earlier and helped the company generate more cash from its sales. The improvement in Pick & mix has also contributed. This business was severely affected during the pandemic but has since recovered strongly. In 2025, the Pick & mix margin reached 9,2% for the full year, slightly above Cloetta’s long term target range of 7% to 9%. The Branded packaged products business also improved, with its margin increasing significantly compared with 2024. Higher profitability across both parts of the company naturally supports stronger cash generation. There was one factor that made the 2025 results somewhat better than they otherwise would have been. Cloetta received partial compensation from a supplier related to a problem with a component delivered in 2024. The original problem had negatively affected the 2024 results, while the compensation provided a benefit in 2025. Management has therefore cautioned against viewing all of the improvement as permanent. However, even without this compensation, Cloetta would have delivered its strongest full year margin in almost a decade, suggesting that most of the underlying improvement was not caused by this one time benefit. Another important reason free cash flow was particularly strong in 2025 was relatively low investments in factories and equipment. Management has made it clear that this level of investment will not continue. Cloetta intends to increase investments over the coming years to around 4% to 5% of sales as it increases capacity, introduces more automation and modern equipment, improves efficiency, strengthens its supply chain, and expands its Pick & mix business. This means I would be careful about expecting free cash flow to continue growing from the 2025 record at the same pace. Higher investments will use more cash and could therefore temporarily reduce free cash flow even if sales and profits continue to increase. This would not necessarily be negative, as these investments are intended to support future growth and make Cloetta’s operations more efficient. Importantly, the planned investments are considerably smaller than the previously planned new factory that Cloetta decided not to build. Rather than spending a very large amount on a single new factory, Cloetta intends to spread investments across its existing production network. The company will invest in areas such as chocolate, foam candy, pastilles, and other candy production while also deciding where it makes more sense to use external manufacturing partners. This should give Cloetta greater flexibility and allow it to direct its investments toward the areas where management believes they will create the most value. Looking further ahead, there are good reasons to believe Cloetta can generate higher free cash flow than it has historically, although individual years are likely to remain volatile. The most important driver will be profitability. Cloetta has a long term adjusted operating margin target of 14%, while management aims to sustainably exceed 12% before moving toward that longer term target. If margins continue to improve, Cloetta should generate more cash from its existing sales. The company’s ongoing cost savings should also help. Cloetta reorganized the business in 2025 and expects annual savings of SEK 60 million to SEK 70 million, with the full effect from 2026. At the same time, management continues to work on pricing, product mix, sourcing, production efficiency, and reducing unnecessary complexity. These initiatives should support cash generation if they continue to translate into higher profits. However, the combination of higher investments and continued expansion means free cash flow is unlikely to increase in a straight line. Cloetta is investing behind its ten Superbrands, expanding into markets such as North America, increasing production capacity, improving automation, and investing in the Pick & mix business. These initiatives require cash today but are intended to generate higher sales and profits in the future. I would therefore focus more on the long term direction of free cash flow than whether Cloetta sets a new record every year. Cloetta primarily uses its free cash flow to reinvest in the business, maintain a strong financial position, and return cash to shareholders. Reinvestments include increasing production capacity, improving factories, adding automation and modern equipment, supporting the Pick & mix business, and investing behind its strongest brands. Cloetta may also use cash for selective acquisitions when management identifies opportunities that fit its strategy, although acquisitions are not necessary for the company to achieve its growth targets. Returning cash to shareholders is also an important priority. Cloetta recently strengthened its dividend policy and now aims to distribute more than 50% of annual profit after tax to shareholders. This means that as profits and cash generation grow, shareholders should benefit through dividends while Cloetta retains enough cash to invest in future growth. The free cash flow yield suggests that Cloetta is trading at a somewhat attractive valuation. However, we will revisit the valuation later in the analysis.

Debt

Another important aspect to consider is debt. It is crucial to assess whether a business has a manageable level of debt that can be repaid within a three-year period, calculated by dividing total long-term debt by earnings. Upon analyzing Cloetta’s financials, the company currently has 1,7 years of earnings in debt, which is comfortably below the three-year threshold. Management looks at debt somewhat differently. Rather than comparing long-term debt with earnings, Cloetta primarily measures its debt using net debt to EBITDA. Net debt is the company’s debt after subtracting its cash, while EBITDA is a measure of earnings before interest, taxes, and certain other expenses. While this is different from the measurement I use, both can help us understand whether Cloetta’s debt is manageable. Looking at management’s preferred measurement, Cloetta’s financial position has strengthened considerably. Strong cash flow and higher earnings helped reduce net debt to SEK 956 million in 2025, and net debt to EBITDA fell to just 0,7 times, the lowest level in the company’s history. This means that Cloetta’s debt is also low when measured using management’s own preferred method. The improvement has been strong enough for management to introduce a more conservative long-term debt target. Cloetta previously aimed for net debt to EBITDA of around 2,5 times but now intends to keep it below 1,5 times. Ending 2025 at 0,7 times therefore leaves the company comfortably below its new target and gives it significant financial flexibility. Management has stated that debt could temporarily rise above the target if an attractive acquisition opportunity appears. However, an acquisition would need to clearly support Cloetta’s strategy, and management would want a clear plan for reducing debt afterward. This suggests that management is willing to use debt when an attractive opportunity arises but does not intend to maintain a highly indebted balance sheet over the long term. Overall, I am comfortable with Cloetta’s debt. My own measurement shows 1,7 years of earnings in debt, comfortably below my three-year threshold, while management’s net debt to EBITDA measurement reached a record low of 0,7 times in 2025. Although the two measurements are calculated differently and therefore should not be compared directly, they point to the same conclusion: Cloetta currently has a manageable level of debt and a strong financial position.

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Risks

Commodity prices is a risk for Cloetta because the company relies on a range of agricultural raw materials to manufacture its products. Some of the most important ingredients include cocoa, sugar, dairy products, wheat, and edible oils, while packaging, energy, and transportation are also important costs. Raw materials and packaging are among Cloetta’s largest production costs, meaning that significant increases in these prices can have a noticeable impact on profitability. The main challenge is that Cloetta has very little control over the prices of these raw materials. Prices are largely determined by global supply and demand and can change considerably depending on harvests, weather conditions, crop diseases, geopolitical developments, and changes in agricultural and trade policies. Sugar prices, for example, can be affected by EU agricultural policies, subsidies, quotas, and trade barriers. Cocoa prices can be particularly volatile because production is concentrated in relatively few countries and can be heavily affected by weather and poor harvests. Cocoa is especially relevant for Cloetta because chocolate represents a little more than 20% of the company’s portfolio. The sharp increase in cocoa prices in recent years demonstrated how quickly higher commodity prices can affect the confectionery industry. When cocoa becomes significantly more expensive, chocolate manufacturers eventually need to absorb some of the additional cost or increase prices to customers. If Cloetta cannot fully compensate for higher costs through pricing and cost savings, its profit margins could decline. Cloetta attempts to reduce this risk by purchasing important raw materials through a central purchasing organization and normally agreeing on prices with suppliers for a period ahead. This provides some protection against sudden movements in commodity prices. However, it does not eliminate the risk. If commodity prices remain elevated for a prolonged period, Cloetta eventually has to purchase its ingredients at the higher prices. Cloetta’s main response to higher commodity costs is what management calls fair pricing. This means that the company adjusts the prices it charges customers when the market prices of important ingredients change. Cloetta has historically been able to offset much of the impact from higher raw material costs through price increases. Its strong local brands should make this somewhat easier, as consumers often have considerable loyalty toward brands such as Kexchoklad, Malaco, Läkerol, and Ahlgrens bilar. However, there is a limit to how much prices can be increased before consumers begin changing their purchasing behavior. Cocoa is especially relevant for Cloetta because chocolate represents a little more than 20% of the company’s portfolio. The sharp increase in cocoa prices in recent years demonstrated how quickly higher commodity prices can affect the confectionery industry. When cocoa becomes significantly more expensive, Cloetta can either absorb some of the additional cost, which puts pressure on margins, or increase its prices to compensate for the higher cost. However, increasing prices creates another risk. Management has observed that when chocolate prices increased significantly, some consumers shifted their spending toward other confectionery categories where they could still enjoy a treat at a lower price. This means that even if Cloetta manages to offset higher cocoa costs through price increases, those higher prices can negatively affect demand for its chocolate products. Commodity price risk is not limited to cocoa. Cloetta also relies on ingredients such as sugar, dairy products, wheat, and edible oils, while packaging, energy, and transportation represent additional costs. Prices for several of these inputs can increase at the same time, particularly during periods of high inflation or supply disruptions. If Cloetta is unable to fully offset these higher costs through price increases or cost savings, its profit margins could come under pressure. There can also be a delay between higher costs and Cloetta being able to increase its own prices. Cloetta sells a large portion of its products through major grocery retailers, and price changes generally need to be discussed with these customers. This means that rapidly increasing commodity prices can temporarily squeeze margins before higher selling prices take effect. At the same time, raising prices too aggressively could hurt volumes, particularly if consumers become more price sensitive or competing products are available at lower prices. Falling commodity prices can also affect Cloetta. If cocoa or other important ingredients become significantly cheaper, retailers may expect Cloetta to lower its prices in response. This could limit how much of the benefit from lower raw material costs Cloetta is able to retain. Management therefore aims to use what it calls fair pricing, where selling prices are adjusted in line with changes in the market prices of important raw materials.

Competition is a risk for Cloetta because the confectionery market is highly competitive, with many companies competing for consumers’ attention, shelf space, and spending. Cloetta competes with some of the world’s largest confectionery companies, including Mars, Mondelez, Nestlé, Ferrero, Perfetti Van Melle, Haribo, and Lindt & Sprüngli, as well as strong Nordic competitors such as Fazer, Orkla, and Toms. Many of these companies have significant resources that can be spent on advertising, product development, promotions, and securing attractive positions in stores. Competition is particularly important in confectionery because many purchasing decisions are made inside the store. Cloetta estimates that as much as 80% of confectionery purchasing decisions are made at the point of sale. This makes brand recognition important, but it also means that availability, shelf space, product placement, promotions, and attractive packaging can have a significant influence on which product the consumer ultimately chooses. If competing brands secure better positions in stores, invest more heavily in marketing, or launch products that consumers find more attractive, Cloetta could lose sales even if consumers remain interested in confectionery overall. Innovation is another important part of the competition. Consumer preferences can change, and confectionery companies continuously introduce new flavors, formats, and products to attract attention. Cloetta has strong established brands, but consumers typically purchase several different confectionery brands rather than remaining loyal to only one. This means that Cloetta needs to continuously invest in its brands and introduce products that remain relevant to consumers. If competitors are better at identifying new trends or launching successful products, Cloetta could lose market share. Competition has also increased from grocery retailers’ own private label products. Private labels still represent a relatively small part of confectionery compared with many other grocery categories, but they gained market share in 2025. Retailers can often sell their own products at lower prices than established brands, which can become particularly attractive when consumers are more price conscious. If private labels continue gaining market share, Cloetta could face pressure on both sales and pricing. The increasing size and purchasing power of grocery retailers creates another competitive risk. The European grocery industry has consolidated over time, leaving Cloetta negotiating with increasingly large retail groups. These retailers are not necessarily dependent on any individual Cloetta brand and can push back against price increases, demand greater promotional and marketing support, or give more shelf space to competing brands and their own private labels. This is particularly important when Cloetta needs to raise prices because of higher raw material costs. Even if higher prices are necessary to protect profitability, large retailers may resist those increases or demand something in return. Competition is also particularly important within Pick & mix, which accounts for a significant part of Cloetta’s business. Pick & mix agreements with major retailers often run for several years and must eventually be renewed. When a contract comes up for renewal, Cloetta competes with other suppliers for the business, and losing a large contract could have a noticeable impact on sales. Grocery retailers can also operate their own Pick & mix concepts, meaning that some of Cloetta’s largest customers can simultaneously be competitors. There is therefore a balance between maintaining attractive contracts for retailers and achieving Cloetta’s own profitability targets. If Cloetta pushes too hard for higher profitability when contracts are renegotiated, a retailer could choose another supplier or develop its own offering. Changes among competitors can also increase competitive pressure. A recent example is Fazer’s acquisition of Swedish confectionery company Aroma. Aroma itself represents only around 1% of the Swedish confectionery market, and management has said that Fazer and Aroma combined are still less than half Cloetta’s size in Sweden. The acquisition is therefore unlikely to fundamentally change Cloetta’s competitive position by itself. However, management views the acquisition as a sign that Fazer intends to increase its focus on confectionery. A larger or more ambitious competitor could invest more heavily in products, marketing, distribution, and customer relationships, increasing the pressure on Cloetta over time. The Fazer acquisition also has some relevance for Cloetta’s Pick & mix business because Aroma products are currently included in the CandyKing concept. It is too early to know whether the acquisition will change this relationship, and management has not indicated that it currently expects a significant impact. However, it illustrates how Cloetta’s Pick & mix model can involve products supplied by companies that also compete with Cloetta elsewhere in the confectionery market. Competition could become even more important as Cloetta expands outside its Nordic core markets. The company wants to grow in Germany, the United Kingdom, and North America, where its competitive position is generally less established than in markets such as Sweden. Germany and the United Kingdom are already characterized by intense competition from large international confectionery companies, while Germany also has a particularly strong discount retail market. Building meaningful positions in these markets could therefore require substantial investments in marketing, distribution, promotions, and customer relationships, without any guarantee that Cloetta will achieve the same market position it has built over many decades in the Nordics.

Changing consumer preferences is a risk for Cloetta because the company depends on consumers continuing to spend money on confectionery products such as candy, chocolate, pastilles, and chewing gum. These products are treats rather than necessities, and demand can therefore be affected by changes in how consumers think about health, ingredients, sustainability, and their eating habits. If consumers gradually reduce their consumption of traditional confectionery or shift their spending toward other types of snacks, Cloetta could experience slower growth and lower sales volumes. One of the most important long term risks is the increasing focus on health and wellness. Consumers are paying greater attention to sugar consumption, calories, ingredients, and the nutritional content of the food they eat. This presents a challenge for Cloetta because many of its best known products are traditional candy and chocolate products that contain relatively high amounts of sugar. If consumers increasingly try to reduce their sugar intake, the overall confectionery market could become less attractive over time. Consumer preferences are also changing when it comes to ingredients. There is growing demand for natural ingredients and greater skepticism toward artificial colors, flavors, and sweeteners. Consumers increasingly want products with fewer artificial ingredients, less sugar, and fewer calories, while natural sweeteners such as xylitol and stevia have become more popular. If Cloetta does not adapt its products quickly enough to these preferences, some of its traditional products could become less relevant to consumers. Cloetta is already responding to this development by introducing more sugar free and lower sugar products and reducing artificial ingredients. The company has set a target for sugar free products to represent 33% of its consumer units by 2030. However, adapting established confectionery products is not necessarily straightforward. Taste and texture are extremely important when consumers buy candy and chocolate, and changing ingredients or reducing sugar could make a product less appealing. Cloetta therefore needs to balance making its portfolio healthier with maintaining the taste and experience that made its brands popular in the first place. The increasing use of weight loss drugs could strengthen this risk further. GLP-1 medications such as Wegovy and Ozempic reduce appetite and are increasingly being used for weight management. Cloetta itself has identified the growing use of weight loss drugs as a potential risk because users may follow diets with lower sugar consumption. If these medications become much more widely used over time, they could change eating habits and reduce demand for discretionary snacks such as candy and chocolate. The long term effect on the confectionery industry remains uncertain, but it is a development worth monitoring as the number of people using these treatments grows. Changing preferences are not limited to health. Consumers are also becoming more interested in where products and ingredients come from, how they are manufactured, and their environmental and social impact. This is particularly relevant for ingredients such as cocoa and palm oil, where issues including deforestation, working conditions, and the income of farmers have received considerable attention. If consumers believe that Cloetta or one of its suppliers is behaving irresponsibly, it could damage trust in the company’s brands and potentially affect sales. Government efforts to reduce sugar consumption could strengthen this risk further. Rising obesity rates and other health concerns have led governments and health authorities in several countries to introduce measures intended to encourage healthier diets. These can include taxes on products with high sugar content, stricter nutritional labeling, restrictions on advertising unhealthy products to children, and rules limiting how certain products can be marketed or promoted. While many existing sugar taxes have primarily targeted sugary drinks, similar measures could increasingly affect confectionery products in the future. A tax on confectionery or products containing high levels of sugar could affect Cloetta in several ways. If the additional cost is passed on to consumers through higher prices, demand could decline or consumers could shift toward cheaper or healthier alternatives. If Cloetta instead absorbs part of the additional cost, its profit margins would come under pressure. This risk could be particularly important in markets where consumers are already becoming more conscious of sugar consumption and calorie intake. Restrictions on advertising and promotions could also make it more difficult for Cloetta to reach consumers. Confectionery is heavily influenced by brand recognition, impulse purchases, promotions, and visibility in stores. Stricter rules governing how products high in sugar can be advertised, particularly to children, could therefore reduce some of the marketing opportunities available to Cloetta and other confectionery companies. These regulatory developments are closely connected to the broader change in consumer preferences. As governments and health authorities encourage people to consume less sugar, consumers may become even more aware of the health effects of confectionery. This could accelerate the shift toward products with less sugar, fewer calories, or other perceived health benefits and put additional pressure on traditional candy and chocolate products.

Reasons to invest

Superbrands is a reason to invest in Cloetta because the company is increasingly concentrating its resources on the ten brands that management believes have the greatest potential for profitable growth. These brands already account for more than half of Cloetta’s sales and include some of its strongest names, such as Kexchoklad, Läkerol, Malaco, Ahlgrens bilar, Gott & Blandat, Juleskum, Tupla, Mynthon, Red Band, and CandyKing. Rather than spreading marketing and investments across a very large portfolio of products, Cloetta can focus more of its resources on brands that are already well established with consumers and have proven that they can generate attractive returns. Cloetta has clear requirements for what qualifies as a Superbrand. The brand must generate at least EUR 15 million in annual sales, have a presence in multiple markets, offer opportunities across different occasions, be scalable, and have higher profitability than Cloetta’s average portfolio. The brands must also have a unique position and strong consumer recognition built over many years. This is important because Cloetta is not simply selecting its largest brands. Management is deliberately focusing on brands that combine established demand with higher profitability and opportunities for further growth. The higher profitability of the Superbrands is particularly attractive. Management has stated that they generate higher gross profits than Cloetta’s average portfolio, meaning that a larger contribution is earned from every sale. As Superbrands become a larger part of total sales, Cloetta’s overall product mix should therefore become more profitable. This is already beginning to show in the financial results, with management identifying the increasing contribution from Superbrands as one of the reasons behind the recent improvement in profit margins. This means the Superbrand strategy has the potential to support both sales growth and higher profitability at the same time. An important part of the opportunity is that Cloetta does not necessarily need to create entirely new brands to grow. Many of its strongest brands already have successful products and strong consumer recognition but are not fully distributed across all of Cloetta’s core markets. Cloetta can therefore take a product that has already proven successful in one country and introduce it into another market using its existing relationships with retailers, distribution network, and marketing capabilities. This can be a less risky way to grow than developing a completely new brand without knowing whether consumers will accept it. Kexchoklad provides a good example. The brand is deeply established in Sweden, where its yellow checkered packaging is widely recognized and the product has strong associations with skiing, outdoor activities, and Swedish everyday life. According to management, Kexchoklad is the best selling individual product across the entire Swedish food and beverage industry. Despite this strength in Sweden, Kexchoklad historically had only limited distribution in Denmark and was often sold through price promotions rather than being supported as a strong brand. Cloetta changed its approach in Denmark by using the brand positioning and marketing that had already proven successful in Sweden. Instead of reinventing Kexchoklad for Danish consumers, Cloetta translated the existing marketing materials, increased marketing investment, improved distribution, and supported the product with dedicated activities in stores. Management has said that this resulted in stronger demand and higher sales. It demonstrates how Cloetta can potentially generate additional growth from an existing product by applying a successful approach from one market to another. Cloetta is now attempting to repeat this strategy in Finland. Kexchoklad was launched with around 90% weighted distribution, meaning the product quickly became available across a very large part of the relevant retail market. Management also said that Kexchoklad reached its initial market share target during its first week. It is still too early to know how successful the Finnish expansion will ultimately become, but the early results support the idea that some of Cloetta’s local brands can travel successfully across its core markets. Mynthon provides another example of the same strategy. Mynthon has traditionally been particularly strong in Finland, but Cloetta is expanding the brand across Scandinavia and other core markets. After initially introducing Mynthon Zip Mint in Norway, Cloetta expanded the product across the Scandic markets and has also launched Läkerol, its largest pastille Superbrand, in the Netherlands. The idea is again to take concepts that have already demonstrated consumer demand in one market and use Cloetta’s existing distribution capabilities to introduce them elsewhere. Cloetta can also grow its Superbrands without entering entirely new countries. Management wants to increase distribution within existing markets, enter additional sales channels, strengthen e-commerce and quick commerce, and find new occasions where consumers may purchase the products. Juleskum, for example, has traditionally been strongly associated with Christmas, but Cloetta has experimented with new ways of reaching younger consumers through Foodora and digital marketing. This provides another route for increasing sales from brands that are already familiar to consumers. The strategy could also make Cloetta’s marketing spending more efficient. Confectionery is an impulse-driven category where many consumers only purchase products occasionally, making it important to continuously attract consumers and keep brands visible. Instead of dividing marketing spending across numerous smaller brands, Cloetta can concentrate more of it behind its ten strongest brands. A successful campaign can then potentially be reused across several products, markets, and sales channels. The Kexchoklad expansion from Sweden into Denmark is an example of this, as Cloetta was able to reuse a brand positioning and marketing concept that had already proven successful rather than developing everything from the beginning.

Growth beyond core markets is a reason to invest in Cloetta because the company still generates most of its sales in a relatively small number of Northern European markets, while several of its brands and concepts have the potential to reach a much larger consumer base. Cloetta has identified Germany, the United Kingdom, and North America as its three most attractive markets outside its core markets. These are large confectionery markets where Cloetta already has some presence but remains relatively small, leaving considerable room for growth if the company can successfully increase distribution and introduce more of its existing products. The opportunity is particularly interesting because Cloetta does not need to build its international expansion entirely from scratch. In Germany, the company has sold Red Band since the 1960s, while in the United Kingdom it has an established presence through brands such as Chewits and CandyKing. Cloetta can use these existing operations and relationships with retailers as a foundation for introducing more products from its portfolio. In Germany, for example, the company plans to expand Red Band, introduce successful products from its core markets, increase distribution in parts of the country where its presence is weaker, and test the CandyKing Pick & mix concept. A Pick & mix pilot with German retailer Edeka is already part of this strategy. The opportunity in the United Kingdom is similar. Cloetta has historically focused on Chewits and CandyKing, while its broader portfolio of branded packaged products has received relatively limited attention. Management therefore sees an opportunity to introduce more successful products from its core markets, expand into pastilles and gum, strengthen CandyKing, and increase distribution through grocery stores, e-commerce, and other sales channels. Germany and the United Kingdom are particularly attractive because they are among Europe’s largest confectionery markets, meaning that Cloetta does not need to capture a very large market share for these countries to become more meaningful contributors to the business. North America potentially represents an even larger long term opportunity. The United States is the world’s largest candy market, with annual sales of around $38 billion, while North America currently represents only a small part of Cloetta’s total sales. Management has said that sales in North America are already growing at double digit rates, but they remain too small to have a significant impact on the Group. This combination of a very large market and a small existing position gives Cloetta a potentially long runway if it can establish its brands successfully. The growing American interest in Swedish candy gives Cloetta an interesting opportunity to enter the market with something that is already closely connected to the company’s heritage and expertise. Rather than competing only by placing another packaged candy brand on supermarket shelves, Cloetta can introduce consumers to the Nordic Pick & mix tradition through CandyKing. The company has operated Pick & mix concepts in thousands of European stores for many years, giving it experience with assortment selection, displays, merchandising, store execution, and the practical operation of the concept. Cloetta took an important step in this expansion by opening the first permanent CandyKing store in Manhattan in December 2025. The store offers the complete CandyKing concept and allows Cloetta to introduce American consumers and potential retail partners to Swedish Pick & mix candy. Importantly, the store is not intended simply to become the beginning of a large chain of Cloetta-owned candy stores. It also functions as a showcase where retailers can see how the concept works in practice. Management has said that the store was profitable from its first day and has received a strong response from both consumers and the media. While one successful store says little about how large CandyKing can ultimately become in the United States, the early response is encouraging. Cloetta is also testing CandyKing directly with U.S. retailers. The company launched its first Pick & mix concept based on Swedish candy with an American retailer and intends to use these initial stores to understand consumer behavior before committing to a larger rollout. If the concept performs well, Cloetta can expand with existing retail partners and potentially attract additional retailers. This is important because the long term opportunity is not dependent on Cloetta opening and operating thousands of stores itself. CandyKing’s European model is based largely on installing and operating the concept inside other retailers’ stores, making the business potentially much more scalable. Branded packaged products represent another opportunity in North America. Cloetta has adapted recipes, packaging, and product information to comply with North American food regulations and has been preparing selected Superbrands for wider distribution. The company is taking a gradual approach rather than introducing its entire portfolio at once. Selected products that management believes have the strongest potential will be introduced first, allowing Cloetta to learn which brands and products appeal to American consumers before committing significantly more resources. The global agreement with IKEA provides another interesting route into new markets. Cloetta signed the agreement in 2025, and a broader assortment of its products is already available through IKEA in 14 European countries. Cloetta plans to expand the agreement into additional markets during 2026 and 2027. This gives the company access to consumers in countries where some of its brands may otherwise have limited distribution, while using IKEA’s existing international store network rather than having to build that distribution independently. The IKEA partnership is also a good example of how Cloetta can potentially internationalize its Superbrands more efficiently. Products that have already proven successful in the Nordic markets can be introduced to consumers in other countries through an established global retailer. If consumers respond positively, this can provide Cloetta with information about which brands have potential outside their traditional markets and could eventually support broader distribution through other retailers.

Innovation and product development is a reason to invest in Cloetta because the confectionery market depends heavily on new products, flavors, textures, and formats to keep consumers interested. Consumers regularly look for something new when buying candy and snacks, which means successful product development can support both sales growth and stronger brand relevance. Cloetta has made innovation one of its three strategic priorities and is increasingly focusing on fewer but larger product launches that management believes can generate meaningful growth rather than simply introducing new products for the sake of novelty. Innovation is already an important contributor to Cloetta’s business. Management has stated that products launched during the previous three years accounted for around 20% of sales, while new products contributed approximately half of the company’s growth in 2025. This shows that product development is not a small side activity but an important part of how Cloetta grows its existing brands. Management also estimates that around 10% of confectionery industry sales are generally generated by innovations, which underlines how important it is for companies in the category to continuously refresh their portfolios. One of the most interesting parts of Cloetta’s approach is that innovation increasingly builds on its existing Superbrands. Rather than trying to create entirely new brands, Cloetta can use brands that consumers already know and introduce new flavors, textures, formats, or product categories under those names. This lowers some of the risk compared with launching an unknown brand because consumers already recognize and trust the brand. It also allows Cloetta to use its existing distribution, marketing, and relationships with retailers to support the launch. Läkerol MORE is a good example. Läkerol is one of Cloetta’s Superbrands and traditionally competes in the pastilles category. With Läkerol MORE, Cloetta introduced a softer and chewier texture while keeping the product sugar free. The idea was to create a more modern and indulgent product that could attract younger consumers without moving away from what the Läkerol brand already represents. Early results have been encouraging, with the product gaining market share after launch and repeat purchases already running above the category average. This is particularly important because strong repeat purchasing suggests consumers are not simply trying the product once because it is new, but are returning to buy it again. Läkerol MORE also shows how innovation can help Cloetta respond to changing consumer preferences. Consumers increasingly look for products with less sugar while still wanting an enjoyable taste and texture. By introducing products that remain sugar free but feel more indulgent, Cloetta can potentially attract consumers who may otherwise reduce their consumption of traditional confectionery. This makes innovation important not only for growth but also for protecting the relevance of Cloetta’s brands as consumer preferences change. Malaco Foamy Monkey provides another example of Cloetta’s approach. The product originally became successful within the CandyKing Pick & mix assortment, where Cloetta could see that consumers responded positively to its flavor, foamy texture, and shape. Instead of developing a completely new concept for packaged candy, Cloetta used this proven product and introduced it under the Malaco Superbrand in a branded bag. It has been launched in sweet and sour versions across major Swedish retailers. This approach is attractive because Pick & mix can effectively function as a testing ground for new products. Cloetta can observe which candies consumers repeatedly choose from the CandyKing assortment and then use that information when deciding which products deserve wider distribution in packaged form. A product that has already demonstrated strong demand in Pick & mix carries less uncertainty than something developed without any evidence of consumer interest. Management has described this approach as providing faster growth and lower risk, and Foamy Monkey is a good example of how Cloetta can transfer successful ideas between its two business segments. Innovation can also help Cloetta expand its brands into entirely new product categories. Tupla, for example, has successfully been extended into ice cream in Finland. Cloetta has launched premium Tupla ice cream products with strong distribution and intends to introduce additional products. Extending an established confectionery brand into categories such as ice cream gives Cloetta another way to grow without needing to create a new brand from scratch. If consumers already associate Tupla with a particular taste and experience, that recognition can potentially be transferred into adjacent categories. Cloetta is also becoming more systematic in how it develops new products. In 2025, the company launched Cloetta Next, an initiative designed to identify and accelerate growth opportunities beyond the existing business. Cloetta Next focuses on developing product concepts and prototypes, testing new commercial approaches, working with external partners, and identifying emerging consumer trends. The objective is to develop ideas more quickly, test them with consumers earlier, and concentrate resources on the concepts with the strongest potential. This is important because Cloetta does not want to maximize the number of product launches. Management is instead aiming for fewer but larger innovations that can generate meaningful sales, improve margins, and potentially be rolled out across several markets. A successful product developed for one country can therefore become more valuable if Cloetta can introduce it in multiple markets using the same product, packaging, or concept. This creates economies of scale and allows development costs to be spread across a larger sales base. Management is also focusing more on making new products profitable rather than simply using innovation to drive volume. Cloetta has said that future innovations should improve the company’s product mix and contribute positively to margins. Another positive aspect is that Cloetta does not depend on acquisitions to achieve its innovation or growth objectives. Management has said that acquisitions could be used as an accelerator when an opportunity fits the strategy and makes financial sense, but M&A is not required for Cloetta to achieve its financial targets. This means the company’s growth strategy is primarily based on developing and expanding assets it already owns, while acquisitions remain an additional option rather than a necessity.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an adjusted EPS of 2,78, which is from year 2025. I have selected a projected future EPS growth rate of 7%. Finbox expects EPS to grow by 7,1% a year in the next five years. Additionally, I have selected a projected future P/E ratio of 14, which is twice the growth rate. This decision is based on Cloetta's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be SEK 18,92. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Cloetta at a price of SEK 9,46 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 1.057, and capital expenditures were 131. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 92 in our calculations. The tax provision was 227. We have 286,7 outstanding shares. Hence, the calculation will be as follows: (1.057 – 92 + 227) / 286,7 x 10 = SEK 41,58 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Cloetta's Free Cash Flow Per Share at SEK 3,23 and a growth rate of 7%, if you want to recoup your investment in 8 years, the Payback Time price is SEK 35,46.

Conclusion

I believe Cloetta is an intriguing company with a strong management team. The company has built its moat through a portfolio of deeply established local brands, an extensive distribution network, a leading position in Pick & mix, and its scale within the Northern European confectionery market. Cloetta’s ROIC has historically been below my preferred 10% threshold, but the trend has improved significantly in recent years. ROIC has increased every year since 2020 and reached 10,3% in 2025, while improving profitability and a more disciplined approach to investments could support higher returns going forward. Cloetta’s free cash flow has historically been volatile, but cash generation has improved considerably in recent years, with 2025 marking a record year. While higher investments are likely to limit near term growth, improving profitability and cost efficiencies should support stronger free cash flow over the longer term. Commodity prices are a risk for Cloetta because ingredients such as cocoa, sugar, dairy, wheat, and edible oils represent important production costs and can fluctuate significantly. If Cloetta cannot fully offset higher costs through price increases or cost savings, margins could decline, while higher selling prices could also reduce consumer demand. Competition is another risk because Cloetta competes with large global confectionery companies, strong Nordic brands, and private labels for consumers’ attention and valuable shelf space. Intense competition could pressure sales, pricing, and market share, while the loss of important Pick & mix contracts could also negatively affect the business. Changing consumer preferences also represent a risk, as growing health awareness, lower sugar consumption, and the increasing use of weight loss drugs could reduce demand for traditional confectionery products. Government measures such as sugar taxes and restrictions on advertising could further accelerate this trend and negatively affect sales and profitability. On the positive side, Cloetta’s Superbrands are a reason to invest because they account for more than half of sales, generate higher profitability than the average portfolio, and still have significant potential to expand across markets and sales channels. By concentrating resources on these proven brands, Cloetta can potentially drive both higher sales and improved profit margins. Growth beyond core markets provides another opportunity because the company has relatively small positions in several large confectionery markets, including Germany, the UK, and North America. By expanding the distribution of its Superbrands and CandyKing concept, Cloetta could make these markets increasingly important contributors to long term growth. Innovation and product development are also reasons to invest because new products have become an important growth driver, accounting for around 20% of sales and approximately half of growth in 2025. By building new products around established Superbrands and proven consumer demand, Cloetta can support growth while adapting its portfolio to changing consumer preferences. Overall, I believe Cloetta is a great company that may be somewhat overlooked compared with its larger global peers. However, I personally do not want exposure to the confectionery industry, so I will not be buying shares at this time.

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