11 Jan 2016 Irene Rosenfeld’s 2016 challenge at Mondelez
Irene Rosenfeld’s job won’t get any easier in 2016. The headwinds buffeting her company, snacks giant Mondelez International, show no sign of slackening.
Global growth remains sluggish as China’s swoon deepens. A strong US dollar continues to dilute foreign revenue. And activist investor William Ackman is still her biggest investor, controlling 7.5 percent of the Deerfield-based company’s stock.
Rosenfeld’s twofold challenge this year is to deliver the profit margins she has promised and give investors reason to believe she can turn Mondelez into the growth engine they expected. Mondelez got a pantry full of megabrands like Oreo and Toblerone in the 2012 breakup of Kraft Foods, along with a big presence in emerging markets.
Kraft Foods Group, meanwhile, got slow-growth grocery items like salad dressings and cheese.
Slowdowns in key markets like China and a rising dollar changed the Mondelez story. Growth stalled, forcing Rosenfeld to shift her focus from revenues to costs.
Under pressure from Nelson Peltz, an activist investor who holds a 3 percent stake and a board seat, she vowed to shed $1.5 billion in annual expenses and bring Mondelez’s margins in line with those of other big food companies.
Investors cheered her commitment to frugality. Mondelez shares climbed 23 percent last year, far outpacing the Standard & Poor’s 500 and the S&P consumer products index. The stock trades at a premium to major competitors.
“We’re one of only a few companies in this difficult environment that’s delivered strong margin expansion and constant-currency earnings growth together with solid revenue growth,” Mondelez spokesman Michael Mitchell says.
Mondelez’s adjusted operating margin reached 14.1 percent in the third quarter, a big improvement but still shy of margins at Kellogg, Campbell Soup and General Mills. Rosenfeld has promised adjusted operating margins of 15 to 16 percent this year.
And Mitchell says there’s more where that came from: “We clearly see upside beyond our 2016 target, as many of our supply-chain and overhead savings will not be fully realized until 2017-18.”
Good thing, too, because somebody just pushed the goalposts back. Brazilian buyout firm 3G Capital, backed by Warren Buffett, is shaking up the packaged-food industry with unprecedented cost-cutting.
After acquiring H.J. Heinz in 2013, 3G last year merged the ketchup maker with Kraft. Based on results at Heinz, observers figure the combined company will post operating margins above 20 percent…..