“If our business would be only biscuits and chocolate, we would see a much stronger top line and we would see a much stronger bottom line, and we think that’s where we gradually have to move towards,” CEO Dirk Van de Put told attendees at Barclays Global Consumer Staples Conference in Boston late last week.
He explained the company doesn’t feel the need to exit immediately because “it’s not like the categories that are not core for us … are doing particularly bad.” Rather, he said, “we see it more as a gradual balancing act” with both exits and acquisitions occurring in the next two to five years.
While the goal is to reshape the company’s portfolio so 90% is focused on core chocolate and biscuits, Van de Put acknowledged that Mondelez will likely remain slightly active in other areas as “that comes from the acquisitions or that is still remaining from our portfolio like we have it today.”
The transition to focus on chocolate and biscuits is already underway with several acquisitions and divestments in recent years expanding the company’s focus in this area from 59% in 2012 to 79% in 2021. Among these were the acquisition of nine businesses worth $2.8b in sales since 2018, including Hu better for you chocolate, Ricolino, Tate’s Bake Shop, Gourmet Food Holdings and others.
The decision to focus on indulgence at a time when buzz around better-for-you and healthy options has been building may seem counterintuitive, but the strategy is already paying off with Mondelez reporting about 6% year-over-year growth for the past three years.
CFO Luca Zaramella added if Mondele is able to concentrate its business on core chocolate and biscuits it also likely would push its earnings per share into the double digit.
“Quite frankly, if I look at the P&L performance of those two categories, our EBIT in the last four, five years has been almost double digit,” Zaramella said.
In addition, Zaramella said, “there are a lot of synergies between this part of the portfolio” related to branding, route-to-market and advertising, which will improve the return on investment in the area.
[Editor’s Note: Learn more about where Mondelez and other key industry stakeholders see healthy snacking headed by tuning in for FoodNavigator-USA’s free upcoming webinar on Healthy Snacking Trends Sept. 27. Get all the details and register HERE.]
Three areas for growth in chocolate
For Mondelez, there are three parts in the $110b global chocolate market that particularly interest it and which reflect shifting shopping habits post-pandemic.
These include an increased consumer interested in tablet chocolate since the first coronavirus outbreak, which Van de Put described as Mondelez’ “home turf.”
He explained: “We see a shift in consumer behavior during the pandemic where chocolate has taken up a much more important place in the day-to-day life. For instance, 72% of consumers in our recent State of Snacking Survey [said] that they cannot imagine a world without chocolate.”
Drilling down, he sees significant potential for chocolate during “alone time or adult time when the kids come home,” on which “we can still play out.”
The dark chocolate tablet market also is growing quickly, and this is an area where Mondelez currently is underrepresented, he said, adding: “So, we are going to also do an effort in becoming bigger in dark chocolate.”
The second area where he sees potential is around seasonal gifting and the holidays.
“It’s our objective to continuously develop a bigger range and a more sophisticated range of seasonal and gifting items, think about pralines, wafers, for instance. We think personalization is going to start to play a big role,” as well as the opportunity in ecommerce.
The third area where he says he sees big growth potential is in premium, which is another area where Mondelez is “underrepresented.”
Van de Put explained: “We have three brands – Toblerone, Green and Black and Hu – and we are expecting with those three brands, which all play very specific individual roles, to take a bigger piece of the premium segment.”
Mondelez will reinforce this by relaunching Toblerone in the second half of the year and increasing communication around the brand, which will “be a big push for us,” Van de Put said.
Beyond chocolate: from cakes and pastries to better-for-you options
Within the highly fragmented $76b cakes and pastries market, Van de Put says he sees potential for consolidation and enhanced branding through Oreo, Milka and Cadbury – creating an extension of the $100b biscuit shelf that will resonate with consumers.
Finally, he said, the much smaller healthy snacks or health bar category, currently estimated at about $16b, is primed to accelerate after slowing during the pandemic.
“We see Perfect Bar, Cliff all growing very strong double digit at the moment, and we believe that there is international expansion” with sophistication and optimization that could drive “above average growth possibilities there,” Van de Put said.
