BOCA RATON, FLA. — Consumers have a snacking dilemma, and Mondelez International, Inc. management is intent on solving it as a strategy to accelerate growth. With the heavy lifting of transforming the company mostly complete, the focus now is on execution in the market for packaged snacks.
“While snacking as a behavior is growing, consumers feel a certain degree of tension as they do so because, on one hand, they want to snack because it fits in their lifestyles; on the other hand, they want to eat right,” said Dirk Van de Put, chairman and chief executive officer, Feb. 19 during a presentation at the Consumer Analyst Group of New York conference in Boca Raton. “We do not see that tension as a limitation of the snacks markets nor of our business.”
Mr. Van de Put sees Mondelez as being in an advantaged position in the packaged snacks category. He said the highest percentage category growth is in the natural, wholesome products segment, where the company has such brands as Enjoy Life and Triscuit, but that the biggest dollar growth is in indulgent snacks, where Mondelez owns both the Cadbury and Oreo brands. Cadbury generated $4 billion in revenue in fiscal 2018 while Oreo generated $3 billion, according to the company.
“We believe that our purpose to empower people to snack right will drive our growth in the years to come and will allow us to lead the future of snacking,” he said. “As a world leader in snacking, we offer the consumers a wide variety ranging from healthy, more natural options to more indulgent treats.”
In the biscuits, chocolate, gum and candy categories Mondelez grew revenues by 2.8% in fiscal 2018. Management is forecasting 3% growth in fiscal 2019.
“We believe we will accelerate the growth of our business by focusing on three strategic axes: the consumer, execution and our culture,” Mr. Van de Put said. “By adopting a ... more consumer-centric model we will create more demand for our brands and products. And by focusing on operational excellence, we will ensure that we translate that extra demand into sales and profits. And by changing our mindset and the way we work, we will create more opportunities to grow our business.”
Mr. Van de Put stepped into the c.e.o. role at Mondelez in 2017. His predecessor, Irene Rosenfeld, laid the transformational groundwork that is allowing Mondelez to benefit. Changes the company made include the closing or divesting of 50 facilities, reducing its supplier base and undergoing a stock-keeping unit rationalization plan. The company also has invested in 15 new plants and “lines of the future” around the world.
“Going forward, we are moving from a transformational approach to a phase of continuous incremental improvement to reduce our costs and drive our top line through better demand fulfillment,” Mr. Van de Put said. “In a company of our size, there’s a big opportunity to improve daily on our operations in sales, marketing and supply chain and reduce our overall costs.”
Continuous improvement initiatives include streamlining the procurement function, digitizing the supply chain and sales execution.
“Cost excellence will always be a significant focus of this company, but we expect it to be a contributor to our growth agenda rather than a distraction or an obstacle,” said Luca Zaramella, chief financial officer.
Mr. Zaramella added that the company is pivoting to a growth-oriented business model that is funded by increased levels of investment funded by savings.
“The output of these priorities and initiatives is a 3%-plus growth, high single-digit e.p.s. growth and more than $3 billion in free cash flow over the long term,” he said. “We believe this is an attractive algorithm, which is high quality, which is sustainable and will serve us well and our shareholders in the coming years.”