DEERFIELD, ILL. — It was only six years ago when Kraft Foods spun off Mondelez International to create one of the largest snack-centric companies in the world. Since that time, management’s focus has been on growing the company’s “power brands,” those within the company’s portfolio that represent approximately three-quarters of net revenues, and margin management. Under new chairman and chief executive officer Dirk Van de Put, that’s about to change.
Mr. Van de Put spoke Sept. 7 during Mondelez’s investor day. He emphasized that while the company’s large brands and an efficient infrastructure remain important to the company, he said Mondelez must adapt to a changing marketplace. A strategic priority for management is “consumer-centric growth."
“We have a wide range of brands,” Mr. Van de Put said. “Fine-tuning the role these brands play in our portfolio offers major opportunity. At the same time, the consumer snacking behavior is complex and changing. We need to be fully attuned to where consumers are, where they shop, what they buy, when they buy and why they snack.”
Mondelez has developed a proprietary snacking database based on interviews with an estimated 170,000 consumers, said Mr. Van de Put. The database allows the company to evaluate how consumers snack across different emotional or functional needs and occasions.
“With this new methodology, we are able to segment snacking needs based on all possible drivers like state of hunger, time of the day, location, emotional need, demographics and so on,” he said. “All this allows us to sharpen our brand positioning, improve our communication, ensure our portfolio remains incremental and avoid overlap, and it also identifies innovation and renovation opportunities. All of this is leading to a better consumer connection with increased sales and higher returns on our marketing and innovation investments.”
Most consumers know Mondelez by its stable of large brands like Oreo, Ritz, Milka, Lu and others. Mr. Van de Put said those brands remain important to the company’s future, but he has made a priority of unlocking some of Mondelez’s lesser-known local brands. As an example, he referenced Mondelez’s Opavia biscuit brand in the Czech Republic.
“It is the leader in the biscuit market, with a strong heritage, a very emotional connection with local consumers and a very broad portfolio,” he said. “We recently reinvested in the brand, differentiated it more from competition, and we improved its in-store visibility. As a result, Opavia went from mid-single-digit declines to low single-digit growth. We have many Opavia-like situations around the world, and we see growing evidence that this strategy will accelerate our overall sales.”
Other local brands that may receive additional investment include Triscuit, The Natural Confectionery Co., Cote D’or and Kinh Do.
The company’s “local” focus also will include the empowerment of sales and marketing teams on the ground in specific markets. Currently, 15 markets around the world account for 79% of Mondelez’s revenue. Mr. Van de Put said that while the company already has a strong presence in those markets, it's usually in one or two categories.
“This means we have a tremendous opportunity to use our local strength in one category to boost our growth in the others,” he said. “As an example, we see key growth opportunities in biscuits, for instance, in India and Australia; and in chocolate, in Mexico and Southeast Asia. We will also empower our local teams to move faster, launch more relevant local innovations and hold them accountable for accelerated growth.”
Mondelez’s innovation process will evolve as well, focusing on expanding such brands as Oreo into new categories, for example. New Oreo formats and applications include bites, rolls and thins as well as chocolate, ice cream, yogurt and brownies, according to Mr. Van de Put.
“We are also changing our innovation approach, switching to fast test and learn and then scale fast versus an immediate big launch,” he said. “This will lead to more projects coming to market faster. We also, of course, have to invest in the development of new skills and capabilities of our teams.”
While past operational programs at Mondelez were focused on improving efficiencies, Mr. Van de Put said the company will emphasize return on investment and growth in the future.
“…In order to make our growth-driven strategy a success, we are fundamentally changing our ways of working to provoke a shift in mindset and behaviors,” he said. “The newer area of operational improvement is digitalization. It includes, of course, optimization of our supply chain operations, achieving omni-channel excellence or delivering consumer-centric digital marketing. For example, on the consumer-facing side, we are increasing our use of new technology such as social listening and advanced analytics to better understand the consumers' needs and react faster on emerging needs. As an example, in our supply chain operations side, we will boost the use of advanced automation, artificial intelligence and 3D printing to reduce our time to market, reduce our costs or personalize our products.”
In fiscal 2017, Mondelez International generated $25,896 million in sales and earnings of $2,922 million, equal to $41.93 per share on the common stock. Mr. Van de Put said the strategic changes the company is making will accelerate future sales growth to 3%-plus per year, and it will enable high single-digit earnings per share growth.
“This is clearly a shift in our value-creation model,” he said. “For the past five years, our cost focus has lifted the company to the next level. We can now build on this and drive a more sustainable, higher-quality earnings growth approach.”