Mondelez will have strong snacks presence in U.S.
Sept. 12, 2012
by Eric Schroeder
BOSTON — Less than a month before the launch of its new global snacks company, Mondelez International, Kraft Foods Inc. offered insight into how it plans to capitalize on its competitive advantages once the global snacks business hits the market on Oct. 1. Mondelez will include Kraft’s Nabisco business, which features such brands as Chips Ahoy!, Honey Maid, Oreo, SnackWells, Triscuits and Wheat Thins.
“Mondelez International is a unique investment vehicle with several competitive advantages,” Irene Rosenfeld, chief executive officer, told analysts at the Barclays Back to School Conference held Sept. 6 in Boston. “They include leading positions in fast-growing categories; an advantaged geographic footprint; a portfolio of the world’s favorite snacks brands; an excellent new products pipeline with a proven track record of innovation; strong routes to market with significant barriers to entry; and world-class talent and capabilities.”
Ms. Rosenfeld said Kraft loves snacks because they “offer very attractive growth prospects because they’re aligned with many key consumer trends.”
“They provide on-the-go refueling options on those increasingly busy days,” she said. “Simple indulgences like a chocolate treat or quick pick-me-up boosts.”
A second factor making snacks an attractive market is consumption is expandable, Ms. Rosenfeld said.
“Snacks are highly responsive to advertising and in-store merchandising, and therefore, to generating incremental sales,” she explained. “Snacks are generally available wherever and whenever consumers want them, and they’re also easily packaged into various sizes and formats, from single-serve treats to family packs. This allows us to provide value while meeting demand for different targets and at different usage occasions throughout the day.”
Third, snacks offer attractive growth in developing markets, and as gross domestic product increases in markets like Brazil, China and India, consumption of snacks is likely to increase as well, she said.
Two final factors making snacks attractive are higher margins and behavior that is fairly consistent globally, enabling scale in marketing and innovation.
“We are uniquely positioned to capitalize on these advantages,” Ms. Rosenfeld said. “Out of the gate we’ll have about $36 billion in revenue and about three quarters of our sales will come from fast-growing snacks categories — biscuits, chocolate, gum and candy.”
While Mondelez will be a global snacks business, North America is expected to play a critical role in driving top- and bottom-line growth.
“In North America we expect to deliver solid growth with significant opportunities to improve margins,” Ms. Rosenfeld said. “While North America represents only about a fifth of our global sales, our business here will continue to be a top-ten food company, with about $7 billion in revenue. And with the spin-off of grocery, we will be a pure play in snacks.
“Almost three quarters of our revenue comes from biscuits. We are the clear leader in this category, with brands like Oreo, Chips Ahoy!, Ritz, Wheat Thins and Triscuits. And with market share, that's about double that of our nearest competitor.”
Calling Kraft’s global snacks brand “the heart of our competitive advantage,” Ms. Rosenfeld identified several grain-based products among the company’s 15 “power” brands.
“Our largest biscuit brand, Oreo, just celebrated its 100th birthday, and the party hasn’t stopped,” she said. “It’s now a $2 billion franchise. That’s nearly double the size of just five years ago.
“We also have a tremendous global breakfast platform with belVita and a wholesome children’s offering with Barney.
“Chips Ahoy is the world’s favorite chocolate chip cookie, and Club Social and Tuck, our savory crackers, sold in Latin America and Europe respectively, grew more than 25% last year. Together, these power brands represent about 40% of our global biscuits revenue.”