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Crunch time: Mondelēz to dump chewing gum to take bigger bite of chocolate and biscuits markets

May 15, 2022
Food & Drink

Following a strategic review last year, Mondelēz International is planning to sell its developed chewing gum business, which includes brands Trident and Dentyne. This is in addition to offloading its Halls cough drop brand, as the food giant focuses on generating 90% of revenue in its chocolates and biscuits businesses, including baked snacks.

“Mondelēz International will continue to operate other brands and products within its candy business, as well as its emerging market gum business,” the company states.  “Chocolate and biscuits are attractive and historically durable categories in both developed and emerging markets, with significant headroom to increase penetration and per capita consumption.”

Mondelēz, which recorded sales of US$7.76 billion last quarter, began reviewing its gum business a year ago after demand for the segment’s brands took a severe hit during COVID-19 lockdowns. FoodIngredientsFirst has reached out to the company for further comment.

Slimming down industry
Mondelēz is not alone in its efforts to cut back on operations, as food manufacturers globally have made significant moves to slim down amid inflationary pressures – which have led to some businesses, including Mondelēz, shrink down their portion sizes to save costs.

According to a Food & Drink Federation report, all F&B categories are more expensive compared to a year ago and reached a ten-year high in February – with prices of oils and fats ballooning by 15.9%; fruit by 6.9%; and coffee, tea and cocoa by 4.9%.

As a result of market instability, Unilever announced earlier this year that it is holding back on completing more big deals as it anticipates a “very high” input cost inflation in the first half of 2022, of over €2 billion (US$2.3 billion). The FMCG giant recently completed a major shakeup – pivoting away from food and toward personal care.

“Our competitive advantages in the marketplace and focused strategy on global snacking leadership give us great confidence in our ability to sustain strong top- and bottom-line growth for many years to come,” Dirk Van de Put, chairman and CEO of Mondelēz, comments on the targeted divestments and growth strategy toward snacking.

“Building on our category leadership, favorable geographic footprint, and the power of our iconic brands, we are well positioned for stronger growth in the decade ahead.”

Acquisition highway
As it continues to reshape its portfolio, Mondelēz says it’s targeting acquisitions to “fill geographic gaps and extend into under-represented segments and price tiers.”

The eight acquisitions Mondelēz International has completed or announced since 2018 add US$2 billion in annual revenue, and have had an average growth rate in the high single digits, notes the company.

The shift toward a more diversified snacking portfolio is evidenced by Mondelēz’s recent agreement with Grupo Bimbo to acquire its Mexican confectionery business, Ricolino, for approximately US$1.3 billion.

The transaction, which is subject to customary closing conditions, will be funded through an issuance of debt and cash on hand and is expected to close in late Q3 or early Q4, 2022.

In other recent Mondelēz International developments, the company invested around €12 million (US$14 million) in its largest food factory for dairy products and delicatessen in Europe.

Last year, Mondelēz’s innovation and venture hub, SnackFutures, launched CoLab, a start-up engagement program for early-stage, snack brands with a well-being positioning.

In February 2020, the company moved to acquire a significant majority interest in Give & Go, a North American company in fully-finished sweet baked goods and owners of the “two-bite” brand and the “Create- A-Treat” brand known for cookie and gingerbread house decorating kits.

Digital snacking ramps up
To enable its refined growth strategy, Mondelēz’s investments include a US$1 billion injection to strengthen its position in digital commerce.

The company also aims to further deliver 20% of revenues from digital channels by 2030, up from 6% of 2021 revenues.

Last February, Mondelēz teamed up with France-based telecom company Orange Business Services to enhance its digital operations. The move aims to unify the operations of brands such as Cadbury, Chips Ahoy!, Oreo and Ritz under one “all-digital workspace.”

Updating long-term growth algorithm
Mondelēz is also updating its long-term growth algorithm to 3-5% organic net revenue growth, up from 3% plus previously.

The company continues to expect adjusted earnings per share growth on a constant currency basis in the “high single digits” and gradually increasing free cash flow of more than US$3 billion over the long term.

“Consistent delivery against our financial commitments, investment in the long-term health of our brands and the capabilities of our people – combined with our key competitive advantages – position us well to create significant value for our stakeholders,” concludes Luca Zaramella, Mondelēz’s chief financial officer.

By Benjamin Ferrer

Source: foodingredientsfirst.com

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