Financial targets and strategy
Financial targets
Duni's target is an average annual organic growth in sales in excess of 5% per year over a business cycle. In addition, Duni may consider acquisitions in order to reach new growth markets or strengthen its position on existing markets.
Duni's operating margin shall be 10% or more.
It is the Board’s intention that, in the long term, dividends shall amount to at least 40% of income after tax.
Strategy
Market leader and a leading brand
Market leaders are in a position to act as trendsetters and proactively drive developments in the industry. This is a valuable factor in the work of promoting an increased use of single-use products, and constitutes a strength in discussions with customers in the HoReCa area and also within the retail trade, where shelf space is often given only to leading brands. Duni's role as a market leader must, therefore, be defended and further strengthened. Duni's market share in Europe for its main products, napkins and tablecoverings, exceeds 20%. Duni's sales are more than twice those of its nearest competitor in the napkin and single-use tablecovering segments and, in addition, Duni enjoys a unique position within the premium product segment, where prices and margins are higher. By offering unique materials which can compete with textiles in terms of high quality and design, while retaining all of the advantages of single-use products, Duni has created what is by far the best known brand on the market. The brand is particularly strong among the most important customers, namely restaurants and hotels. The breadth and variation in the product range also distinguish Duni from its competitors.
Unique sales model
A large percentage of sales takes place through cash-and-carries as well as distributors and wholesalers. Duni's sales force, which is the largest on the market, devotes a great deal of its time to maintaining a regular dialogue with the end customers concerning the selection and use of Duni's products, with orders being placed with the retailers. The close relationship with customers creates customer loyalty and allows Duni to quickly receive signals regarding, and be able to adapt its range to, new trends and changes in demand. The strong market position and the broad range, combined with a strong brand, also contribute to maintaining high margins. In 2011, Duni launched a web shop in order to further strengthen the relationship with its customers and increase access to its products. Thus, a new direct channel to the end consumer has been opened, with the possibility for greater dialogue, which at the same time increases flexibility and accessibility for potential customers.
Leader in product development, design and materials
Duni’s development of the colors, designs and qualities in its product range is an important component of the business model. Duni’s product range is regularly evaluated based on sales, profitability, and inventory turnover rate criteria. New and existing products are evaluated using the same criteria. In recent years, Duni has placed great importance on developing product concept work within the Company. A product concept development process has been implemented in which employees, customers and suppliers co-operate in order to create and evaluate product concepts. This increases the likelihood of success and of resources being focused on those products with the greatest potential on the market.
Duni’s design department constantly monitors trends by attending various trade fairs and shows on fashion, design and current trends in Europe and the United States, as well as with the assistance of external trend scouts. Market surveys and focus groups also provide information about trends and feedback regarding products. Duni’s sales force participates in the development work by passing on customers’ wishes and views. The graphic design is carried out largely by Duni’s own design department.
High renewal rate in the product range
A high renewal rate creates possibilities to quickly adapt the product range to changing trends, while at the same time giving Duni the edge over its competitors. Duni thus endeavors to have the highest product range renewal rate on the market. Approximately 25% of the collection is renewed every year. Materials development within the table top products category takes place in close co-operation between the marketing department, product developers and production managers.
Control over value chain and logistics
Control over the value chain reduces the price risk, increases delivery certainty, and provides possibilities to plan the renewal of designs and materials. Thus, Duni is an integrated company which controls the entire value chain (apart from raw materials) in respect of its most important products, namely napkins and tablecoverings. Approximately 70% of the products are paper-based and these products are generally produced within the Group; other products are purchased from external suppliers and are regarded as an important complement. The manufacture of tissue and airlaid takes place in Sweden, while converting to finished table top products takes place in Germany and Poland. Duni’s paper mills are specialized in the production and deep dyeing of short runs of high-quality tissue and airlaid, and consequently table top products can be offered in many colors and shades, with color matching between different materials.
Specialization in short runs means that Duni can quickly adapt the collections to the customers’ wishes. The majority of Duni’s production is made for stock. Duni’s central warehouses in Germany and a number of distribution centers handle distribution to customers.
Growth areas
Growth will increase by means of structured work involving several initiatives as regards concept expansion, market penetration and platform expansion within the core HoReCa market.
| Core geography | New geography | |
| New HoReCa concepts | Concept expansion | |
| Table top | Market penetration | Platform expansion |
Duni is established on a number of markets which offer good opportunities for organic growth. In Southern and Eastern Europe, Duni’s most profitable segment — premium products — accounts for approximately only one third of the total market, as compared with approximately two thirds in Northern Europe. In both Southern Europe (the largest market region) and Eastern Europe, growth in premium products is expected to outstrip the market in general. Total market growth is expected to exceed GDP growth.
The geographic expansion today is taking place primarily in Eastern Europe and the Middle East, where sales networks and distributor networks are being established. Duni is also increasing its efforts to accelerate organic growth in Southern Europe and the UK.
Premium products constitute a growth market, particularly due to the trend whereby table linen is being replaced by single-use high quality products. Duni is driving this trend by continuing to invest in product development and thereby increasing the quality of core products such as napkins, placemats and tablecoverings. Customers appreciate the design, variation and table setting simplicity offered by Duni’s products, which is leading many of them to replace fabric-based products with Duni's products.
The launch of Evolin®, which began at the start of this year, represents an important step in this work. Evolin possesses unique characteristics which enable it to match linen; this is important in the work of gaining market shares on the linen market, which accounts for more than 80% of the total tablecovering market in the HoReCa sector. Consequently, with Evolin Duni is able to reach an important market which, in principle, we are unable to reach at present.
The development of take-away packaging solutions is another growth area in which Duni is investing. An increasing number of restaurant chains with clear concepts are springing up in response to the fast food trend whereby consumers are demanding higher quality than previously. The trend has moved away from "fast food" to "good food fast". Duni is focusing on meeting this demand by - in close cooperation with expanding restaurant chains - producing customized, quality take-away and catering packaging which strengthens the customers’ brands.
Acquisition opportunities
Duni is the only major European company focusing primarily on the table top concept market. Competitors consist of relatively small, local companies, as well as a number of larger paper and pulp companies. In addition, there are a number of players with similar concepts and product ranges which are focused on the HoReCa market. Accordingly, acquisition opportunities may arise.
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