In 2019, we reviewed our market and our capabilities in order to identify new opportunities for future growth and to define AAK's strategic direction going forward. For 2021, the strategy remains valid.
Our assessment shows favorable market and consumer trends and new opportunities for continued profitable growth. We are building on a very strong historical performance, and although we will preserve the DNA of our company we will, going forward, prioritize and operate our business somewhat differently.
Acknowledging that different industries are characterized by different market dynamics, it is important to differentiate our approach to each of them. Therefore, we have identified four different portfolio roles: "Invest in continued growth", "Bet for the future", "Optimize performance", and "Maintain current strategy".
Financially, we believe that the strategy supports our ambition of an average 10 percent year-over-year operating profit growth combined with a good and consistent earnings per share improvement.
Invest in continued growth
Chocolate & Confectionery Fats
Our strong historical growth in Chocolate & Confectionery Fats has been made possible by industry-leading application knowledge and an ability to offer customers the best solutions. Strengthening our key supply chains and capacities within customer innovation will enable us to capture the growth in high-value applications.
In Special Nutrition, high-quality solutions tailored to our customers' needs have over the past decade enabled high growth rates. A strong innovation pipeline and investments in our ability to serve important markets such as China is key to continue the growth.
We will enable the continued growth of these two industries by ensuring the necessary investments in new value propositions and a reliable supply of key products.
The overall bakery and dairy markets are characterized by more standard solutions with a strong focus on cost of ingredients and less opportunities for further premiumization of AAK's offering. However, some underexploited, high-value product applications exist, and opportunities in shifting product mixes towards these higher-value products in specific applications as well as optimizing how to serve the markets will thus be pursued.
In Foodservice, our business is also characterized by large variations in the value that we can capture depending on the applications. As in Bakery and Dairy, there are pockets of high-value applications and products, and the focus going forward will thus be to focus on the higher-value products in the portfolio as well as to optimize our go-to-market approach.
Bet for the future
Health & Nutrition platform
The market shows a clear increase in consumer demand for healthy and fortified nutrition. As a result, consumer goods companies are looking to develop product offerings meeting this demand. This gives AAK an opportunity to build capabilities related to oils and fats health claims to enable our customers to claim health benefits.
The plant-based foods market is a fast-growing market where oils and fats can be an impactful differentiator to the quality, taste and texture of the final product. Our deep and broad knowledge within oils and fats provides an opportunity for AAK to become the preferred provider to plant-based foods companies. AAK already has a good starting point through engagements with key players in the market for plant-based dairy and plant-based meat, but we will lift our capabilities further to respond to the fast-moving market requirements.
Maintain current strategy
Technical Products & Feed
For the remaining segments within AAK – Natural Emulsifiers, Personal Care, and Technical Products & Feed – the current strategy stays the most promising option for further value creation.
Natural Emulsifiers (lecithin) is a speciality segment with a large overlap with AAK product applications. Our acquisition in the UK is a first step into this market.
Personal Care is a growing business with a strong value proposition in the beauty industry’s quest to move to more natural ingredients, where the future growth rates will be a function of the industry’s ongoing replacement of mineral oils.
Technical Products & Feed is another healthy business, functioning as an outlet for various sidestreams as well as serving the market with strong value propositions in, for example, animal feed and waxes for candles.
Key enablers to deliver on ambition
We have developed a strategic roadmap with key focus areas that will be addressed by a range of initiatives to lift our performance for the future. The goal is to further differentiate ourselves from our competitors by enhancing our Customer Co-Development approach and sustainability offerings. To succeed, we need to offer a customer experience that is second to none and create even more differentiated solutions meeting the needs of our customers, consumers and the world we live in.
Our aim is to continue our growth journey by further utilizing our global strengths and harvesting synergies. To enable this, we will strengthen our global product management to fully leverage insights, expertise and resources as well as aim for global scale effects and efficiencies with more integrated and holistic end-to-end supply chain planning and execution.