Oreo-maker Mondelez has a plan to become the biggest name in snacks
Mondelez is determined to be the biggest name in snacks.
The company rolled out an aggressive new growth strategy this fall that includes a bold plan to revamp old brands and launch trendy new businesses. The move comes after years of cost-cutting efforts that took a toll on its snack sales.
“We need to become more consumer-centric than ever before,” said Mondelez CEO Dirk Van de Put during the company’s investor day in September. He stepped into the role late last year. “What they eat, how they buy, why they buy and where they buy, we need to be on top of this and follow where the consumer is leading us.”
The company’s new innovation hub, SnackFutures, is an important part of making that happen. Its small team is tasked with developing new, trendy brands, revamping existing Mondelez brands and partnering with startups that are already capitalizing on new trends.
From cutting costs to growing sales
Mondelez International (MDLZ) has only existed as an independent company since 2012, when it split from Kraft Foods. It spent the first years of its new life cutting costs.
In that time, the company stayed focused on the power brands it brought over from Kraft — like Oreo and Chips Ahoy! — but neglected its smaller, more regional brands, said Alexia Howard, an analyst at AllianceBernstein. She said that led to sales slips.
Now, she said, “the idea is to get back on track.”
The company’s snack business rose more than 2% in 2016 and in 2017. In the first half of 2018, snacks were up 3%, Van de Put said. He added that he expects about 3% growth per year in the long term.
Van de Put also said that while snacks already make up 85% of Mondelez’s business, that percentage could still increase.
The goal of becoming the world’s largest snack provider is within reach. Right now, Mondelez is second only to PepsiCo in the global snacks market, according to research from Euromonitor International. And the margin is slim: PepsiCo has 7.6% of the market and Mondelez 7.4%. Mars, in third place, is far behind with 4.9% of the market.
SnackFutures could help Mondelez expand their portfolio.
A comprehensive strategy
Mondelez isn’t the only food company that is trying to stay ahead of the curve with the help of either innovation hubs or venture capital teams.
Chipotle (CMG), Chobani, Land O’Lakes and Pepsico (PEP) have launched accelerator programs designed to help innovative food and beverage startups grow their businesses with cash and mentoring. Through the hubs, these companies hope to learn which new food and flavor trends resonate with customers and how young, nimble companies solve problems.
General Mills (GIS) invests in new companies through 301 Inc., its venture capital arm. Coca-Cola (KO) invests through its Venturing & Emerging Brands unit. For Coca-Cola, VEB is also a place to nurture acquired brands like sparkling water company Topo Chico and Honest Tea.
Mondelez, meanwhile, is setting itself apart by trying it all.
With SnackFutures, Mondelez plans to develop “an ecosystem of partners” that will allow the company to keep tabs on “what ingredients are hot [and] what trends are popping across the world,” Tim Cofer, the company’s chief growth officer, told CNN Business.
Cofer said that Mondelez can decide whether it should build products on its own, or partner with a business already working in that space.
The SnackFutures team is going after three key areas: premium snacks, digital platforms and healthier foods.
About 20 people work on the team, said Cofer, who added that it is made up of the “biggest innovators in our company.”
It’s already making moves. Cofer said the team has “put a few successes on the board” that may roll out next year.