Mondelēz International CEO sees more growth and acceleration for snacking portfolio amid inflation

15-Jun-2022 - Last updated on 15-Jun-2022 at 16:06 GMT

Photo Credit: Mondelēz International

Mondelēz International has generated consistent growth across its portfolio of biscuits, chocolate, cakes, and pastries, and will keep its focus on these categories as the company navigates current economic volatility, says Mondelēz International CEO Dirk Van de Put.

Speaking at the Deutsche Bank Global Consumer Conference this week, Van de Put said how when he took over in 2017 there was an immediate opportunity to improve margins.

To get there, Mondelēz offloaded some parts of its portfolio -- most recently a proposed plan to sell its gum and mint business -- and instead took a hard look at growing its position as a snacking leader by revamping its existing global and local brands and investing in new ones.

"We've done a lot of work on rebuilding our global brands or strengthening our global brands. So we have been revamping those and investing more, and they have reacted really well," said Van de Put.

The strategy has resulted in 4.2% topline growth for the last four years and rediscovering its purpose as a global snacking leader during the pandemic, according to Van de Put.

"During the pandemic, the consumer started to live more from home and our categories, which are mainly biscuits and chocolate have benefited from that. So our categories, which were biscuits and chocolate particularly, which were around the 3% to 4% growth got lifted up to a 6% growth," he said.

"We clearly see a change in the attitude of consumers where snacking every year is becoming more important."

Driving this trend are Millennials and Gen Z who have become all-day snackers rather than sitting down for three separate meals each day.

Indulgent snacking opportunity

And while there was a big movement towards healthier snacking, the pandemic also revealed a widespread acceptance for indulgent snacking, an area in which Mondelēz has a lot to offer, noted Van de Put.

"What the pandemic has also brought to bear is that indulgent snacking has become more and more important. And so 83% of consumers don't think there's anything wrong with having an indulgent snack or several a day," he said. "And so I think that bodes well."

According to Van de Put, Mondelēz is the clear leader in the biscuits category by revenue and is approximately five times the size of its next competitor with more runway ahead for growth.

"Oreo at this stage is 60% of its businesses in the US and China. But we think that we can grow Oreo by $1bn every three years, it's getting close to a $4bn brand," he said.

"And in chocolate we are number two, but with more momentum than the number one. So I would dare to predict that we will become the leader in chocolate," he said, adding that the company is adding capacity to its Milka and Cadbury brands to address growing demand in multiple markets.

And while at-home consumption may have eased slightly as COVID restriction loosened, Van de Put predicts a move back towards eating at home more frequently in light of rising inflation, which positions its portfolio favorably.

"I think the in-home consumption, where we will have a revival in that sense, because we go less out, and so I think from a consumption point of view, there are some indicators where I think we feel good and being relatively well set on the whole thing," he added.

Pricing, inflation, recession actions

As the global economy continues down its uncertain path with some economists warning of a recession, Van de Put said that historically, Mondelēz has fared well during economic downturns.

"History says that during recessions our categories do quite well, they're limited out of pocket, they are kind of a comfort type of categories, related to the kids and so on and so on."

And among the many areas consumer typically trade down (clothes, restaurants, travel, etc.), small comfort items such as Oreos are not usually on the list, according to Van de Put.

And despite the increased pricing actions the company has had to take to combat inflation and continued supply chain pressures, consumer demand has not wavered, he noted.

"The other thing we've recently seen is that the pricing power is there. We've increased our prices, but so far, our volumes have not suffered, if anything, they have accelerated," Van de Put said, particularly in the US where consumers are showing a lot of resiliency to pricing when it comes to purchasing their favorite snacking items.

"Now, is that going to last? I wish I could tell you that, but I don't... But the underlying trends are that consumers snack more, indulgence is on the rise, [and] they are very attached to our brands."