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Oriflame Restrategizes for a Stronger Future

Posted: August 29, 2013

As stated in its second quarter 2013 report, Oriflame announced it is fully committed to increasing sales and efficiency within the group. As such, the company is announcing a number of proposed initiatives to be implemented in 2013 and early 2014. These initiatives aim to shorten time to market, increase the effectiveness of catalogues, sales campaigns and back-office functions and find synergies of global indirect purchases, and are expected to lead to annual cost savings in the range of 15-20 MEUR.

“Oriflame’s entrepreneurial culture is one of our core assets. Following the international expansion over the last decade, we now need to adjust our working processes in certain areas to reach our full potential. These initiatives will make Oriflame a more agile, entrepreneurial and professional organisation, and will enable us to meet market demands and, ultimately, enhance sales,” comments Magnus Brännström, CEO and president of Oriflame Cosmetics.

After the successful launch of the improved remuneration plan for Oriflame consultants in the CIS (the Success Plan), Oriflame will also put additional focus on driving sales in the EMEA region.

  1. New sub-regional structure of the EMEA organization—Based on market similarity, market maturity and consumer characteristics, four new and further empowered sub-regions will be created: Central Europe, Western Europe, Turkey and Africa. This implies that the existing EMEA regional organization will be downsized.
  2. Improved set-up of EMEA catalogue development—Catalogue creation and production for EMEA will be relocated to the new sub-regions, thus ensuring better catalogue relevance to local market preferences and tailored response to the consumers’ needs.

Measures to enhance efficiency in the group include:

  1. Clear split of responsibilities—To ensure a high level of entrepreneurship and quick responses to market demands, while creating synergies in the organization, the company has redefined and clarified the roles and responsibilities on the global, regional and local levels.
  2. Globalize purchasing initiatives in the indirect expenditure area—Oriflame already has a global purchasing organization focusing primarily on direct spend related to cost of goods sold as well as international conferences. By further globalizing the purchases related to indirect spend (traveling, offices, external support and marketing activities), Oriflame can reduce the overall costs while at the same time keep ongoing activities unchanged.
  3. Extend the existing Global Shared Service concept and streamline back-office functions—Oriflame has in recent years successfully implemented the Global Shared Service concept in IT, finance and parts of HR administration. Oriflame will continue this process, which will enable the group to drive a more effective back-office organization, in relation to both costs and response times.

Discussions regarding the suggested new organization have been initiated with labor representatives. The proposed measures are expected to result in redundancies in Stockholm, Warsaw and Prague, as well as in the moving and standardizing of back-office functions. The annual cost savings are estimated to be in the range of 15 to 20 MEUR, with a gradual positive effect from the fourth quarter 2013. Costs for the reorganization will be charged as operational costs starting in the third quarter 2013 and ending first half of 2014. Going forward, Oriflame will give further updates to the market on costs and expected savings from these initiatives.