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Mondelez Investing in Company’s Own Organic Growth

Mondelez Investing in Company’s Own Organic Growth

While other snack manufacturers are looking for growth through the acquisitions and mergers of good-for-you brands, Mondelez is taking an internal approach to this changing market. The confectionary giant is putting emphasis on organic growth for the company.

During a meeting with analysts the new CEO of Mondelez, Dirk Van de Put, talked about his plans for the future of the company. Van de Put told analysts about his plan to prepare a three-to-five-year strategy for the company by September 2018 according to Robert Moskow, Research Analyst with Credit Suisse.

“He (Mr. Van de Put) fully supports the 2018 guidance for 17% to 18% operating margin, but he believes that the focus of the organization will need to shift away from cost reduction and back toward growth after that,” Moskow wrote.

“Some will fear that this signals a pre-disposition toward reinvestment and lowering the margin target in 2019. However, Van de Put says he comes to the business with no pre-conceived notions on that possibility. In addition, he made a point to say that he would rather see whether the company can spend its budget smarter before agreeing to plans to spend more.”

Van de Put highlighted the various underperforming brands under Mondelez’s portfolio in the meeting, specifically their chocolate and biscuit products. According to Moskow, although Van de Put seems willing to invest in underperforming brands in order for them to succeed, new management tends to “lop off” underperformers rather than invest in them.

Van de Put also talked about redirecting Mondelez’s distribution program. He referred to Kellogg’s direct to warehouse strategy as a system that the company might adapt to compared to their current direct-store distribution program. Van de Put indicated that their current distribution methods are draining costs and that the company needs to adapt to the change in market by investing in smaller format stores and hard discounters at the very least.

As for appealing to the growing health-conscious market, Mondelez plans on developing a “dual portfolio” of products.

“Having come from a fast-growing French fry company, he (Mr. Van de Put) said he is very comfortable with the indulgent snacks side of the business,” wrote Moskow.

“However, he recognized the need for developing a strong presence in health and wellness and the likelihood that the current stable of brands (Oreos, Ritz, Cadbury) did not have the credentials to extend in that direction.”

Describing their new CEO as “unassuming, straightforward, friendly and a good listener,” the company will follow Van de Put’s lead in bettering the performance of their brands.