Mondelēz Eyes Innovation, Beats Earnings Amid Snacking Growth

Amid new product launches and strong performance from emerging markets, Mondelēz International Inc. reported better-than-expected earnings, but fell short on revenues for the third quarter. The snack maker, which has iconic brands such as Oreo in its portfolio, reported revenues of $6.30 billion and earnings per share of 62 cents compared to estimates of $6.32 billion and 61 cents.

In an effort to drive innovation, Mondelēz Chairman and Chief Executive Dirk Van de Put said in the company’s third-quarter conference call that it will unlock further growth by contemporizing the brand, capitalizing on untapped opportunities in channels and overhauling its marketing and innovation agendas. The executive said the company will implement a more agile innovation model focused on a test, learn and scale approach, while staying grounded in local consumer insights.

As an example of that strategy in action, Van de Put pointed to the introduction of Joy Fills, a product format that launched in Europe under the Oreo, Cadbury and Milka brands at the same time. He described the products as crispy, pea-sized biscuits with a creamy filling or a “light, but indulgent, treat.” Of the launch, Van de Put said, “our European team has taken this idea to market in record time, creating an entirely new product format for consumers to munch on.”

Beyond Europe, he noted that the Lickables product in India continues to do well with consumers, and helped to deliver 90 basis points of chocolate share gains year to date in a market where the company already has strong leadership. And in the United States, Van de Put noted that Oreo is posting mid-single digit growth in the third quarter. At the same time, the company is gearing up for the “biggest Oreo cookie yet,” called the Most Stuff edition.

While using the test, learn and scale strategy, Van de Put said the company is simultaneously increasing its commitment to innovation with a SnackFutures program, dedicated to finding growth in snacking operations around the world. In the call, Van de Put noted that “SnackFutures will bring together internal and external talent” and will focus on three mandates.

For starters, the strategy will focus on inventing new businesses and brands in key strategic areas. Secondly, it will involve reinventing smaller brands with untapped potential, and lastly, it will focus on creating ventures with early-stage entrepreneurs to seed new business. “We are excited about the potential of this platform to help us drive the future of snacking,” Van de Put said.

At the same time, Van de Put noted that M&A is another way to drive growth. He mentioned Tate’s Bake Shop, whose acquisition was completed late in the second quarter, as having strong double-digit growth above the company’s expectations as it continues to ramp up distribution in the United States.

The Future of Snacking

Going forward, Van de Put said the company is well-positioned to lead the future of snacking due to its unique, iconic portfolio of global and local brands, as well as its geographic footprint. He also noted that 40 percent of the company’s revenues come from fast-growing emerging markets.

During the quarter, the executive noted that emerging markets saw an increase in revenues of 6 percent, with growth driven by strength in Russia, India, Mexico, China, Southeast Asia and Africa. And, excluding Argentina, emerging markets grew 4.5 percent.

On another note, Van de Put said the company will create a new commercial structure at the beginning of January to help reduce the complexity driven by organizational overlap. However, the company will continue to manage operations by region to leverage regional operational scale, crafting 13 geographical business units that will report to one of four regions. Van de Put said the move makes accountabilities clearer.

The CEO also noted that the company plans to align its incentive structure to “drive greater ownership of local business results.” Facing snacking’s future, Van de Put remarked that the new structure will “create a more agile company” that can react to consumer preferences on a local scale without losing the benefits of its global scale from marketing, manufacturing and innovation.