FMCG behemoth shifts snacking focus to packaged cakes as emerging sector expected to grow
FMCG giant Mondelez has raised its FY 2021 revenue forecast to 4% growth on the previous year, thanks to improving mobility trends helping to drive recovery after a year of Covid-19 losses.
On its latest earnings call, Mondelez CEO Dirk Van De Put hailed the return of travel retail and impulse buying in the candy and gum categories as growth drivers for the company.
Mondelez CFO Luca Zaramella projected 3% growth in H2 organic net revenue, noting the company was wary that the Covid-19 situation was still ‘volatile in certain parts of the world’ and therefore he did not know exactly how well these categories would recover.
“We feel quite good about the 4% and expect the growth to be evenly spread between Q3 and Q4,” Zaramella told analysts this week.
Net revenue for H1 increase 10% year-on-year to $13.9 billion despite cost inflation, which Van De Put said continues to affect the sector.
The company closed the six-month period with an additional $300 million on its balance sheet, although it returned $2.4 billion to shareholders.
“We are now averaging a 4% quarterly growth rate and we achieved this by pivoting from a cost and percentage margin-focus to a volume-led growth and profit dollar focus by increasing clarity and accountability in the company through a simplified local-first commercial model,” the CEO said.
M&A at Modelez looks to continue in the coming quarters as Van De Put said the company would continue to reshape its portfolio to further increase its focus on snacking and accelerate long-term growth.
The group has plans to expand further into the packaged cakes and pastries category via its recent acquisition of Chipita. Van De Put said the brand would make Mondelez the number three player in the market with the top two brands maintaining less than 10% market share between them.
The move will see some of the company’s well-known biscuit brands reimagined as cakes and waffles, including its bird and bird offering. Its Milka brand has already been expanded into brownies and so Cadbury will be next.
“We firmly believe that a leadership position in the cakes and pastries category can contribute to an accelerated growth rate for our company and between our core brands and recent acquisitions, we have the tools to succeed,” Van De Put told analysts.
Van De Put said the Chipita brand was a $600 million business that was growing high single-digit and was skewed toward European emerging market.
“We have clear revenue synergies with Chipita including distribution and co-branding and we believe there is other attractive innovation in the pipeline. We also expect to realize efficiency opportunities. This will be our seventh acquisition since 2018, which will combine to add $1.5 billion of revenue to our business,” he said.
In March, the snacks giant acquired Gourmet Food Holdings, a leading Australian food company with a strong position in the attractive premium biscuit and cracker category.
Elsewhere, the group will further increase its marketing efforts both locally and internationally and invest in rebranding and revamping a host of products.
Date published: 28 July 2021