CHICAGO — Mondelez International chairman and chief executive officer Dirk Van de Put said the company’s recent acquisition of Chinese baking manufacturer Evirth “step-changes our growth in the cakes and pastries category.”

In late September, Mondelez announced that it bought a majority stake in Evirth, which specializes in the production of frozen-to-chilled cakes and pastries. Mondelez already held a minority interest in the Shanghai-based company.

“We are excited about the expansion of our existing partnership with Evirth,” Van de Put told analysts in a conference call on Mondelez’s third-quarter results. “The Chinese leaders in the fast-growing frozen-to-chilled baked snacks category, we have worked with Evirth for several years to develop, manufacture, market and sell cakes and pastries featuring some of our iconic brands, including Oreo and Philadelphia. A recent purchase of a majority stake will enable us to further accelerate growth through continuous innovation, leveraging the combination of our high-value brand with Evirth’s advanced R&D and technical expertise.”

Mondelez pegged China’s packaged cakes and pastries market — the nation’s largest snacking category — at $14 billion in 2023, with ambient products holding a 60% share, frozen-ambient products a 30% share and frozen-chilled products a 10% share. However, the company sees the frozen-to-chilled segment as the most attractive space, growing by double digits to a $1.5 billion market last year versus a 6% compound annual growth rate (CAGR) over the past five years for China’s overall cakes and pastries category.

“Chinese consumers increasingly seek fresh, premium options with innovative and sophisticated taste profiles to meet a growing range of snacking occasions,” Van de Put said, noting that demand is “growing especially fast” among younger generations in mid-tier cities. “Evirth has a strong presence among key customers, including club stores, and our expanded partnership will enable us to scale distribution broader and faster.”

The global packaged cakes and pastries market last year totaled $95 billion, about evenly split between cakes and pastries, and its growth outpaced almost all other snacking categories, according to Chicago-based Mondelez.

“It’s much bigger if you include the non-packaged, but that’s not the area that we consider as where we want to play,” Van de Put said of the global packaged cakes and pastries market. “It is a category that’s already growing 7% CAGR over the last five years and, in fact, low double digits over the last two years. Per kilogram, it’s higher value than the biscuits category. And the category is quite strong in some of the key markets where we play, the US, Europe, China.

“The opportunity is that it’s a highly fragmented category. We are No. 3 globally, but we only have a 3.5% share. So there is an opportunity to bring in known brands that come with a certain quality aspect and a certain positioning, but also by offering soft cakes or pastries that are in line with that brand from the biscuit category. So an Oreo to play in that category, for instance, or some of our other brands, that is really the way we are thinking about it.”

Majority ownership of Evirth builds on other recent purchases by Mondelez, including the April 2020 acquisition of Give & Go, a North American maker of sweet baked goods, and the January 2022 acquisition of Chipita Global SA, a leader in the Central and Eastern European croissant and baked snack markets. While those deals bring similar capabilities, Evirth proves especially attractive with its advanced frozen cake technology and “agile capabilities to innovate frequently,” Mondelez said in its third-quarter report.

“There’s different techniques in producing these products, in Evirth particularly,” Van de Put told analysts. “We already have a company that goes from frozen to fresh in the store, which is Give & Go in Canada, a company that has been growing very fast. And Evirth is similar, but to the sense that they are much more into the cake segment. In China, this category is really booming. These are quite sophisticated products, and I have to say that the quality that they can produce thanks to their proprietary way of producing is quite exceptional.”

Evirth also gives Mondelez a springboard in expansion in the packaged cakes and pastries category beyond China, Van de Put added.