Mondelez’s new CEO unveils plan to make snacking right
Mondelez International recently revealed the company’s new tagline — “Snacking Made Right” — as CEO Dirk Van de Put rolled out a new strategic plan to get its growth back on track.
He was speaking at its annual investors meeting [Sept 7] in Boston, the first he has presided over since succeeding longtime chief executive, Irene Rosenfeld, late last year.
“Van de Put said Mondelez’s transformation would focus on driving sales and include investing more in e-commerce, perking up existing brands, investing in sustainable ingredients and expanding its footprint in higher-growth parts of the world,” writes Reuters’ Richa Naidu.
“Like other food makers, Mondelez has struggled to grow sales in recent years as consumers move away from packaged food in favour of healthy eating. Van de Put’s review of the company, which owns the Oreo and Cadbury brands, has been highly anticipated since he took the top job in November,” Naidu continues.
“We need to be very attuned to where our consumers are, where they shop, what they buy and why they snack. So we have developed a proprietary methodology that takes a more holistic view of how a consumer snacks across different emotional or functional needs and occasions,” Van de Put said and tweeted.
Mondelez outlined several key priorities in a news release, including:
- Transformation of marketing and digital capabilities to increase return on investment.
- Balanced investments in both global and local heritage brands to achieve higher growth.
- The creation of a more agile organisation with accelerated innovation capabilities.
- Brand extension into new markets and snacking adjacencies.
So what’s the background of this new CEO — and chairman as of March 31 — who was lured from Canada’s McCain Foods? NBC’s Sara Eisen put that question directly to him in an interview the same morning.
“Yeah, it’s a bit of a strange story. I am from Belgium,” Van de Put replied. “And I graduated as a veterinarian. But I ended up in business quite fast because Mars, who makes a lot of pet food, needed a veterinarian to be working in their PR division. So that’s how I ended up in food. I ended up marketing. And since then, I’ve spent the last 30 years…in this industry. Worked in a lot of categories, which helps — yogurt, pet food, water, baby food. So I kinda know the industry quite well.”
In the interview, Van de Put also talked about paying more attention to some of the local brands the company has acquired that may have been “neglected a little bit” due to focus on its “big power bands”: Oreos, Ritz, Milka, Cadbury.
He also discussed shifts in distribution, not only toward ecommerce “but also convenience stores, discounters, the green channel.”
And then, there’s the opportunity to extend its well-known brands into additional categories. An Oreo is not only a cookie anymore, for example. It’s ice cream. It’s yogurt. It’s a brownie.
“Since its separation from Kraft in 2012, Mondelez has been grappling with big shifts in consumer tastes. Shares have underperformed the S&P 500 by a quarter in the past two years,” Financial Times’ Alistair Gray points out.
“The company left its sales outlook for this year unchanged, predicting organic net revenue expansion at the high end of a 1-2% range. It expected this to increase to 2-3% next year.
“Compared to other confectionery companies such as Hershey, Mondelez is helped by its exposure to emerging markets, where health concerns are less of an issue,” Aaron Back writes for the Wall Street Journal.
“In the first half of the year, the company got 38% of revenue from these markets, and it expects them to grow at a ‘mid-single-digit’ rate going forward, compared with ‘low-single-digit’ growth for developed markets.”
“Right now, however, this exposure isn’t helping Mondelez,” Back continues. “Emerging markets have been struggling with slowing growth, inflationary pressures and weakening currencies. These factors, along with planned increases in spending, contributed to the company’s surprisingly low guidance of 3% to 5% adjusted earnings-per-share growth in 2019.
“That is down from 13% to 14% growth expected in 2018 and analysts’ existing estimates of around 7% growth for 2019.”
And that may account for the market’s reaction to all of the big plans — which Back suggests lack “detail”. Its share price closed down 2.23% the day of the interview.
Mondelez has already indulged in the healthier snacking category with the launch of a low-sugar version of Cadbury Milk chocolate bars. Similar launches in the chocolate and snacking categories are also planned such as Cadbury Boost+ Protein and an extension to the BelVita range, along with exploring lower-sugar options for Oreo biscuits. Non-GMO products and breakfast bars will also feature.
Importantly though, Van de Put is making efforts to avoid any product overlap and find a better balance in brand investment. He singled out the Opavia brand in the Czech Republic as one the company has revitalised through investment and improving in-store visibility.
“We need to fill gaps in our portfolio to make sure we have the right products for the right time,” Van de Put said.
So a refined brand strategy is just one of the pillars of the CEO’s vision, with a switch to top-line growth made possible by his predecessor Rosenfeld’s success in building up profit margins.
But the proof will be in the results as to whether the new approach works, and so far investors are not leaping to purchase the stock just yet. The shares are hovering around where they were before the investor presentation – up 1% year-to-date.
Van de Put wrapped up: “We believe we have a solid platform on which we can build, providing the firepower to capitalise on growth opportunities. Our more competitive margin structure means our top-line growth will have a stronger bottom-line effect.
“And being in the higher-growth snacking space we can benefit from volume-driven growth to drive our top line, which will create extra leverage on top of the current margin.”
Source: Mediapost.com, Reuters, WSJ