Having delivered solid organic revenue growth of 3.8% in Q1, lapping the start of the surge in demand last year (2020 Q1: +6.4%), not only does Mondelez remain confident on the outlook for the full year, but believes it can accelerate its long-term growth rate.
1. Change of business focus unlocking investment dollars
From a focus on costs and profit margins, it has switched to focus on top line growth and profit dollars. Along with a local first commercial approach, which has enabled it to move faster and be more consumer centric, this has created a virtuous financial algorithm, which allows it to invest more in the business. Mondelez believes that this is a key point of differentiation versus its competitors.
2. Tapping into under-indexed channels
The company has identified a major opportunity in the discount and ecommerce channels. The consumer shift to ecommerce continues, with sales up 77% in the quarter, representing 6% of its revenue, as it made share gains in the US China and Europe. Mondelez is boosting its capabilities to partner and win in these channels.
3. Expanding into high growth segments, including health and premium
Acquisitions play a key role here, with Grenade, Gourmet Food and Hu helping it to grow its presence in the health and well-being and premium segments. Acquiring Grenade in the UK enables the company to develop its portfolio into active nutrition bars, while Gourmet Food provides it with a platform to significantly increase its Australian biscuits business and share. Mondelez sees a significant opportunity with Hu, a premium well-being chocolate-led lifestyle brand, to take it out of the specialty market in the US and into conventional retailers. The company is also developing new platforms in growth adjacencies such as cakes and pastries/bars.
4. Extending its points of distribution in emerging markets
Mondelez is targeting geographies where it has a strong share of one core category but a much lower share of another. In emerging markets, it is focusing on extending its distribution, adding 120,000 and 60,000 stores in China and India respectively in the last quarter. Significant headroom remains, especially in China, where in biscuits it is only in half of an identified six million stores, while gum is only offered in less than two million of these. With good momentum in emerging markets in the quarter, despite several operating under some form of lockdown restrictions, the company believes they offer a tailwind to the company as the crisis eases. With China and India already delivering good profitability, additional volume in these markets will further enhance its margins.
5. Increasing investment in brands
In addition to increasing marketing investments behinds its biggest brands, it has also been able to create more campaigns with impact. This has led to a more efficient spend of marketing dollars. Mondelez has also revitalised several of its brands with new messaging, packaging and omnichannel activations, an effort which will continue through to 2022.
6. Building a company with purpose
Mondelez is also focusing on creating value through building a sustainable snacking company. Key elements include using sustainably sourced ingredients; minimising its climate and landscape impact; building a diverse, inclusive and engaged workforce; selling products that meet the evolving snacking needs of consumers; and result in zero packaging waste. With these issues resonating with consumers, the company will focus on bringing its sustainability messaging to life in-store.
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