Mondelēz to cut SKUs and 'significantly' reduce innovation projects: ‘We are working on making our business simpler’
The company’s biscuits brands – Oreo, belVita, Ritz, Triscuit, and Wheat Thins – posted an average of low double digit growth after initial consumer pantry loading behavior calmed down, said Mondelēz CEO Dirk Van de Put during its Q1 2020 earnings call.
“There was an original pantry loading in our categories and you would see in Biscuits growth that would approach 30%. And then in the weeks after we saw that come down to high-single digit. For brands like Oreo and Ritz, that was somewhere between 15% to 20%, but in some of our other brands like Fig Newtons or Nutter Butter, it’s over 40% new consumers,” he said.
“We’ve been interviewing consumers around the world and we can say that it’s clear there is increased snacking... there is a lot of out-of-home consumption that has now shifted to in-home. And in-home, there is more grazing, more continuous eating, and snacking takes up a much bigger role, particularly biscuits.”
Van de Put added that consumers have also reported eating more cheese than in pre-pandemic days, which in turn drives demand for salted snacks.
The other driver for an increase in its core brands is the sense of “normalcy” and “togetherness” snacking brings to consumers confined to their homes, he added.
“Our local brands are showing a resurgence driven by consumers going back to a feeling of comfort and trust in familiar products. And I believe, as long as we are in this uncertain situation, and as long as we are not having the same out-of-home consumption, our categories, particularly Biscuits, but also Chocolate will benefit from that.”
Simplifying innovation and portfolio
Over the past few years, Mondelēz has made a big push in its innovation pipeline including the launch of its innovation hub Snack Futures in 2018 which has gone on to invest in gut health brand, Uplift Food, chocolate firm Hu Products, and refrigerated nutrition bar company, Perfect Snacks.
Now, Van de Put says, Mondelēz is taking a conservative approach to its innovation pipeline by simplifying its portfolio and new projects.
“We are making some adjustments that will make it easier for us during the recession,” he said.
“We are using this opportunity to significantly reduce the number of SKUs to significant – we have always have had a lot of innovation projects, not always the most useful ones, I would say. So we are reducing significantly our innovation projects.”
His comments reflect those from Coca-Cola CEO James Quincey, who told analysts on the firm's Q1 earnings call that the firm plans to “eliminate a longer tail of smaller projects.”
Employee safety, supply chain priorities
Van de Put said that the health and safety of Mondelēz employees, many of whom are frontline workers, is its first priority and that the company has taken put in place a number of new measures.
“Their wellbeing is our highest concern. We’ve put in place strict health protocols including temperature screening, social distancing, mass clearing, and the mandatory work from home policy for everyone who can and we’ve provided frontline employees with enhanced benefit. We extended sickly for anyone who contracts the virus and in markets like the US, we announced increased hourly pay and bonuses for frontline workers,” said Van de Put.
Its next priority, Van de Put said, is supporting its robust supply chain, which has been resilient throughout the COVID-19 crisis.
“Case fill rates, in fact, are at better-than-average levels. We’ve seen an increase in demand in developed markets, and we’ve met it by focusing on the most important SKUs. Our strong relationship with our suppliers have helped us maintain critical raw materials and packaging supplies. And we have worked with local governments to keep our factories open during lockdowns."
Looking ahead
Commenting on what the rest of the year holds for the company, Van de Put said that while he can’t make firm growth predictions due to the volatile environment COVID-19 has caused, he commented: “We remain confident that with our dedicated people, our portfolio of trusted global and taste-of-the-nation local brands, our strong balance sheet, access to significant liquidity and our clear strategic priorities, we have everything we need to manage through this pandemic and emerge stronger on the other side."
How is COVID-19 impacting innovation plans?
Just over half of food & beverage professionals surveyed by product innovation firm Mattson this month say projects and launches have been delayed due to coronavirus, but two thirds are still working on new concepts and products and 50% believe COVID-19 will positively impact the packaged food industry in the long-term. Read more HERE
