Growth areas

Great growth potential on existing and new markets   

Duni is focusing on measures to promote long-term growth, and this will remain a central theme going forward. In 2012, Duni implemented a new organization aimed at creating a more market-driven organization. The Professional business area was divided into two organizations, each constituting a separate profit center – one for the Table Top product category and one for the Meal Service product category (products for take-away food). The two product categories have a joint sales organization, headed by a single manager. In addition, a new group level department, with responsibility for developing new markets, has been created in order to further focus on geographic expansion. The way in which Duni's work is structured, with several initiatives for increasing growth, is described below.

Replacement of linen napkins and linen tablecoverings with paper-based premium tablecovering products

Textile and linen tablecoverings still account for more than 80% of all tablecoverings used by restaurants and table service establishments in northern Europe. However, many of them are seeking alternatives to linen in order to avoid all the work associated with the use of linen. Thus, premium products constitute a growth area, primarily thanks to the trend whereby table linen is being replaced by high-quality single-use solutions. Duni is promoting this trend by constantly investing in product development and thereby enhancing the quality of core products such as napkins, placemats and tablecoverings. Customers appreciate the design, variation and simple handling of the tablecoverings offered by Duni, and consequently many customers are replacing cloth-based products with Duni’s products. The percentage of environmentally responsible products in Duni’s range is also constantly increasing, thereby generating further competitive advantages.

For a long time, Duni has had several products which replace linen and, at the end of 2011, Duni launched a new tablecovering material – Evolin^® – which combines the feel of textile and linen tablecoverings with the advantages of single-use products. Evolin is targeted at restaurants and catering firms which currently use linen. The product has been developed with the help of some of the leading restauranteurs in Europe and was rolled out in Europe in 2012 with the support of a number of well-known restaurant profiles, such as Pontus Frithiof, Christophe Margin and Gunnar Cocoa.

Evolin constitutes one of the cornerstones for future growth by winning over linen users. The product has been particularly well received within the catering industry, where flexible solutions are required.

Duni’s ambition is to be a trendsetter and promote the development of concepts for the set table. In the Nordic region and Germany, the work of selling developed and customized table top concepts has come a long way, while there is great potential to broaden the range sold to existing customers in Southern and Eastern Europe, and also on certain other growth markets.

Concept development - increased demand for take-away

The restaurant market is undergoing rapid change driven by underlying market trends such as our increasingly mobile lifestyles and the fact that, to an ever increasing extent, we are eating “on the go”. The trend is also partially influenced by the same basic factors as lie behind the general increase in meals consumed outside the home: an increase in the proportion of single households, continued urbanization, an increase in the proportion of the population in gainful employment, and an increase in disposable incomes.

An increasing number of restaurant chains with clear concepts and strong brands are springing up in response to the trend for "good food fast". North America is dominant in terms of restaurant chains as a proportion of the total restaurant offering, with a penetration level of 50%. Western and Eastern Europe have a lower proportion of restaurant chains, with a penetration level of just under 20%. Going forward, growth on the American market is expected to level off, while Eastern Europe and Asia are expected to account for the largest percentage rate of growth as prosperity increases in countries in those regions. During the same period, the growth rate in Western Europe is also expected to exceed the rate in the US.

Between 2008 and 2012, the restaurant chains’ percentage of sales in Western Europe increased from 52% to 58%, while independent restaurants declined marginally. The percentage of take-away is also continuously increasing. Between 2011 and 2012, the percentage in the five largest countries in Europe increased from 11.4% to 11.9%, and Duni sees the same trend in other countries. Growth within both chain concepts and take-away is expected to continue, especially within the Fast Casual and Quick Service segment (see fact box).

Duni is responding to the growing demand by developing attractive solutions for take-away and “Food on the Go” and, in close cooperation with expanding restaurant chains, is developing table top concepts and producing take-away packaging which strengthen the customer’s brand profile. For some time Duni has been cooperating with restaurant chains such as Vapiano throughout Europe, Cojean and Resto In in France, and Nordsee, Dean & David and Jim Block in Germany.

The strategy is based on Duni developing products and solutions for customers with international concepts, where Duni is able to assist in creating customized solutions which support the brand. Duni acts as concept developer and, together with customers, adds value by offering product concepts or product families which are unique in form, design, function, and material.

In addition to winning new customers, geographic growth within the area often takes place by Duni following existing international chains into new markets.

Geographic expansion

Duni’s geographic expansion is taking place both within and outside Europe. In connection with the reorganization in the spring of 2012, a new function – Business Development & New Markets – was created which focuses primarily on growth outside Duni's mature markets in Europe.

Sales outside Europe are modest, but represent great potential in the long-term. Most of the identified markets are demonstrating attractive growth, with a high percentage of meals being eaten outside the home. At the same time, penetration within the substitutable tabletop products area has been low thus far, and accordingly there are great opportunities for Duni. Most of the markets require products which live up to exacting expectations regarding hygiene, a factor which benefits Duni's single-use solutions concept. The population density in many growth areas constitutes an additional sales argument due to shortage of space at restaurants and the high costs for dealing with textile-based products, while Duni's napkins and tabletop products require less space for storage and less time for handling.

For several years, the Middle East has been Duni's largest export market after Europe, at the same time as metropolitan areas in the Asia-Pacific region and South America also constitute rapidly growing markets on which Duni is gradually establishing itself. In the Asia-Pacific region, it is primarily cities such as Singapore, Hong Kong, Tokyo and Sydney which, as a first step, constitute interesting growth markets; in the long term, however, other major cities in the region offer opportunities. The average rate of growth on Duni's prioritized market outside Europe is 20%, and Duni is intensifying the work of increasing sales outside Europe.

Eastern and Southern Europe also offer interesting growth opportunities. In Russia, Duni has built up a new organization which is focused on the 21,000 hotels and restaurants in the country. Sales amount to SEK 45 million, and grew by 48% during the year.

In Southern Europe, especially Italy, Duni has been working for many years on building platforms for sales on new growth markets. The region is linen-oriented and, consequently, competition does not primarily refer to other paper-based products; rather, the challenge is to change strongly ingrained habits. Thus far the strategy has been successful, with an average increase in excess of 30% per year.

Acquisition opportunities and joint ventures

In light of the fact that Duni’s sales outside Europe still represent a small proportion of total sales, Duni is constantly on the lookout for acquisition opportunities. Thus, acquisitions and joint ventures on new geographic markets are considered as regards both Asia and Russia, in order to build platforms for growth.

In Europe, Duni is the only major European player focusing mainly on the table top concept market. Competitors primarily consist of small, local companies, as well as a number of larger paper and pulp companies. Some of these companies have concepts and product ranges which, similar to Duni’s, are focused on the HoReCa market. Consequently, acquisition opportunities might also be identified on those markets where Duni is well-established, but in such case in the form of an acquisition aimed at consolidating our position. 

Increased proportion of premium product sales in order to increase profitability

By increasing sales of premium products, Duni is creating possibilities for increased profit margins. Standard products account for approximately 45%, and premium products for approximately 55%, of the total estimated sales on the European napkin and tablecovering market. The ratio between standard and premium products varies, however, between different regions in Europe. In Southern and Eastern Europe, premium products account for only one-third of the total market, as compared with Northern Europe, where premium products account for approximately two thirds. In both Southern and Eastern Europe, premium products are expected to grow more quickly than on other markets.

Italy is the single largest market in Europe for standard paper napkins and tablecoverings. In addition, Southern Europe (Italy, France, Spain, Portugal and Greece) is the largest market region. The market’s size is attributable to the large consumer sector, a high percentage of meals eaten outside the home, and tourism in the region, which also generates large volumes within standard products. In Southern Europe, premium products account for approximately one-third of the total market. In Eastern Europe, too, premium products are estimated to account for approximately one-third of the total market.

The Nordic region, Germany, Austria and Switzerland together comprise the second largest market region in Europe for single-use napkins and tablecoverings, with premium products accounting for roughly two-thirds of the market. The premium products’ high market share is largely due to the manufacturers’ dedicated sales work and historically strong economic growth.

The UK and the Benelux countries together constitute the third largest market region in Europe for paper napkins and tablecoverings. As in Germany, Austria and Switzerland, premium products account for approximately two thirds of the total market in the Benelux countries, as is also the case in the Nordic region. In the UK, premium products are believed to account for a smaller share of the total market.

Duni is the clear market leader in Central Europe, Northern Europe and the Benelux countries, which are the markets where the premium segment is dominant. Therefore, Duni perceives great growth potential in the countries of southern and eastern Europe, where simpler paper products dominate.

Duni's estimated position on each market

Table top branded goods within the grocery retail trade

Since the beginning of the 2000’s, grocery retail sales of private label products have increased at the expense of branded goods. In the single-use table top products sector, this has resulted in an increased focus on simpler, low price products. As a consequence of this trend, total retail sales within the table top products sector have stagnated on most European markets. In general terms, it can be said that retail private labels are over-represented in the table top products category, and often account for more than 50% of sales. The benchmark for the grocery retail chains is often that private labels should account for between 20 and 25%.

This creates possibilities for a strong brand such as Duni to contribute to increased value growth in the category by means of unique, premium-based product concepts aimed at quality-conscious consumers.

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