Mondelez sees payoff from focus on chocolate, biscuits and baked snacks categories
Executives from the Chicago-based firm detailed brand successes and explained their strategy for the future, late last month at the Consumer Analyst Group of New York conference.
They described an increased focus on high-growth categories of chocolate, biscuits and baked snacks, which will take the firm’s performance “to the next level” to meet a long-term growth algorithm of 3% to 5% organic net revenue growth.
“Becoming a more focused chocolate and biscuit company is going to accelerate our top and bottom line growth, resulting in better and higher returns for our shareholders,” explained CFO Luca Zaramella.
Chairman and CEO Dirk Van de Put pointed to Mondelez’s recent State of Snacking research as justification. The survey found that 75% of consumers always make room for snacks in their grocery budget, despite rising prices, and 60% of people expect to spend the same amount or more this year on cookies and chocolate as last year.
Further, 65% say they prefer brand names over private-label snack products.
“We are confident in our future because we are confident in our consumers,” he said. “Consumer research confirms that snacking is more and more prioritized over traditional meals, and that demand for snacks is continuing to grow.”
According to the CEO, Mondelez presently holds the No. 2 global position in chocolate with almost 13% market share, and is No. 1 in the biscuits category with a 17% market share.
Mondelez comes in at No. 3 in both the cakes/pastries and snack bars categories, with a 3% and 10% market share, respectively.
Further, snack category growth keeps rising, with just less than 3% growth in 2018 from 10% in 2022.
“We are doubling down on these categories, chocolate, biscuits and baked snacks, because they remain attractive, resilient and durable in both developed and emerging markets,” Van de Put said. “We’re playing in the right categories and we are well positioned to win.”
Mondelez anticipates further growth in the snack category will help drive additional gains. Chocolate, biscuits and baked snacks presently comprise 80% of the firm’s portfolio, and it is “well on our way” to increasing that to 90%.
“Over the last four years, chocolate biscuits and baked snacks have delivered consistently much stronger volume, net revenue, gross profit and operating income than our other categories,” according to the exec.
Not content at No. 2
Mondelez is also looking to improve on its No. 2 positioning in the global chocolate category, with plans to take over the top slot, according to Chief Marketing and Sales Officer Martin Renaud.
He explained that the firm will zero in on its three strategic focus areas - accelerating growth in tablets; winning in seasonals, gifting and sharing; and step changing position in premium.
To drive tablet/bar growth, Mondelez is working to deliver product superiority, which involves frequent recipe adjustments, per Renaud.
He held up the recent launch of a new Milka formulation as an example, which he described as “the creamiest, most tender Milka ever.”
“We believe our new recipe is superior to the former one and to the main competitor, and the large activation plan around the new recipe is driving significant net revenue and share growth,” Renaud said.
As for a seasonal tie-in, the exec highlighted a Cadbury easter egg that is part of an online activation and virtual egg hunt.
With the premium chocolate segment growing faster than mid-range, Mondelez is also looking to strengthen its Toblerone portfolio, to include “additional offerings to meet consumers’ growing demand for innovative premium options, including [pralines] and personalized gifts.”
Sales of Oreo products surpassed $4 billion in 2022, according to Renaud, but the brand still has room to grow despite its top biscuits category positioning.
Oreo is an “incredible success story,” he said. “We are focused on relentlessly growing our penetration through sustained investments in media and outstanding creative excellence while driving distribution in both existing and new channels.”
Another area of attention will be chocobakery, where “chocolate and biscuits converge.”
The category grew by double-digits in 2022, “driven by hero products like wafer or cheap cookies filled with chocolate.”
Products with Milka have done well in Europe, and thanks to that success, Mondelez is expanding with other chocolate brands in other regions.
In markets without a chocolate presence, the firm is building chocobakery behind its Chips Ahoy franchise, Renaud said.
On the M&A front, Zaramella noted that the firm has made nine strategic acquisitions since 2018, which added almost $3 billion in revenue for the firm.
“Our framework around M&A is very straightforward,” he explained. “We are targeting growth accretive assets that meet key consumer needs and fill portfolio gaps, both from a category standpoint and geographically.”
The exec pointed to Tate’s as an example, noting it provides an entry into the premium cookie segment. Since the brand’s acquisition four years ago, Tate’s has doubled revenue and distribution, while extending retail coverage by more than 40%.
“Looking ahead, this brand has a lot of potential, including more distribution points, new products such as a cookie bar and vegan, and growing the platform in baked snacks or chocobakery,” Zaramella said.
Mondelez’s 2019 acquisition of in-store bakery Give & Go has also been successful with its “delicious, visually-stunning products that appeal to a variety of consumers,” seeing 20% revenue growth over the past two years and exceeding $700 million in sales.
Meanwhile, CLIF, which the company acquired in 2022, is poised to continue its double-digit growth.
“We expect significant top line synergies, including deeper distribution and channel expansion in club, convenience and e-com, while refocusing on our core portfolio items,” according to Zaramella.
Per Van de Put, Mondelez is reinvesting in its business to drive growth, including single-digit increases in advertising and consumer spend.
Renaud explained that the firm has completely changed its approach to advertising, “to be much more engaging and accelerating fully digital media.”
“We are obsessed with elevating the quality of our advertising to drive further effectiveness and turbocharge our brand building,” he said. “We have put a lot of rigor to make sure our advertising was more impactful.”