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2021 Processor of the Year: Mondelēz North America

Dec. 15, 2021
Finances, product development and manufacturing all made for a stellar year for the snacking giant.

There once was a company named Nabisco, a company with beloved brands such as Oreo, Chips Ahoy and Ritz. A company so beloved there was a 1993 movie made about it ("Barbarians at the Gate" starring James Garner).

Through a series of mergers and acquisitions over the next two decades, the brands survived, but the vision of a powerhouse company focused solely on snacks largely disappeared. Nabisco became just a masterbrand.

After 12 years of ownership by Kraft Foods, and with the key additions of England's Cadbury brands and France's Lu, a bigger, more global company separated itself from Kraft and called itself Mondelēz International (monde for "world" and delez “a fanciful expression of delicious"). But its soul and business plan evoked nostalgic thoughts of Nabisco.

Keep Reading

This is part one of our three-part series on Mondelēz North America. You can read about R&D at Mondelēz here as well as learn more about the company's plant operations here

As a bigger and more global company, Mondelez International is able to wield its power for financial success and good causes across the globe. But the North American business has been particularly stellar over the past year. Because of that segment's business success, prolific product development and manufacturing that rose to the challenges of the pandemic, as well as its support of charitable and social causes, we've named Mondelēz North America our 2021 Processor of the Year.

The global view

Monde, indeed. Mondelēz International is one of the world's largest food companies. Its global sales last year were $26.6 billion, income was $3.6 billion. Two-thirds of revenue is from developed markets, one-third from emerging markets (the latter of which is growing at better than 12%). It has 133 manufacturing plants on five continents and approximately 79,000 employees around the world. Its products are sold in more than 150 countries.

Delez, indeed. Mondelēz International is overwhelmingly (though not entirely) snacks, primarily "biscuits" (cookies, crackers and salted snacks), chocolate, gum & candy, as well as a few cheese, general grocery and powdered beverage products. It still carries a few Kraft legacy products in certain markets, such as Philadelphia cream cheese and Tang powdered mixes outside the U.S.

Favorite Nabisco brands like Oreo, Chips Ahoy and Ritz remain, but they are part of a broader snacking portfolio within Mondelēz International that includes other global brands: Cadbury from England, Toblerone and Milka from Switzerland, BelVita from France, Freia from Norway, Kinh Do from Vietnam and 7Days from Greece, to name a few. They may not be household names in the U.S. but they are in their home countries.

Mondelēz International has four billion-dollar brands: Oreo, Milka, Cadbury Dairy Milk and Ritz. Many of them are more than 100 years old. It claims the No. 1 position globally in biscuits and No. 2 in chocolate, candy & gum.

While the pandemic created financial and operational difficulties for many companies, Mondelēz International was one of the beneficiaries. For consumers, 2020 was a time of great challenges but also of great snacking, and Mondelēz International's brands delivered comforting, trusted rewards, which lifted global revenues by nearly $700 million last year.

Nowhere was that more apparent than in North America, where sales increased $1 billion to $8.157 billion (placing Mondelēz International North America 19th on our 2021 Top 100© list). North America is one of four operating segments (the others being Europe, Latin America and AMEA (Asia, Middle East and Africa) and it accounts for about 31% of global revenues (Europe is the biggest segment at 38%).

Focusing on North America

Mondelēz North America includes the U.S. and Canada; headquarters is in East Hanover, N.J., the historic home of Nabisco, although the company’s global headquarters is in Chicago, not far from where Mondelēz International was created from its predecessor organization, Kraft Foods.

Irene Rosenfeld, chairman and CEO of Kraft Foods since 2006, largely created Mondelēz International by hand-picking the sweeter, snackier assets from Kraft. When the separation was imminent (October 2012), she went with Mondelēz International, which she led as chairman and CEO until her retirement in 2017.

The company boasts of its "unique portfolio of iconic global and local brands, our attractive global footprint, our market leadership in developed and emerging markets, our deep innovation, marketing and distribution capabilities, and our margin expansion in recent years that allows us to make ongoing investments in our brands and capabilities."

The company's vision is "to empower people to snack right by offering the right snack, for the right moment, made the right way."

Rosenfeld was replaced by Dirk Van de Put, a Belgian businessman who at the time was CEO of McCain Foods, and who earlier worked at Coca-Cola, Mars and Danone.

The first five years as a company were important for solidifying the business, improving profit margins and setting the stage with consumer-centric investments in growth. Rosenfeld was an aggressive acquirer.

Mondelez International Profile

www.mondelez.com

Executives: Chrmn & CEO: Dirk Van de Put; EVP & Chief People Officer: EVP & Pres-Asia, Middle East & Africa: Maurizio Brusadelli; EVP & Pres-Europe: Vince Gruber; EVP-Research, Development & Quality: Rob Hargrove; EVP & Chief Supply Chain Officer: Sandra MacQuillan; EVP & Chief Strategy & Transformation Officer: Minsok Pak; EVP & Global Chief Marketing Officer: Martin Renaud; EVP-Corporate & Legal Affairs and General Counsel: Laura Stein; EVP & Pres-North America: Glen Walter; EVP & Pres-Latin America: Gustavo Valle; EVP & CFO: Luca Zaramella

Operating segments: Latin America, AMEA, Europe, North America

Leading brands--Biscuits: Barni, Bel Vita, Chips Ahoy, Club Social, Honey Maid, Lu, Nabisco, Newtons, Oreo, Ritz, Tates, Triscuit, Tuc, Wheat Thins; Chocolate: Cadbury, Cadbury Dairy Milk, Cote d’Or, Lacta, Milka, Toblerone; Gum & Candy: Cadbury, Chiclets, Halls, Sour Patch; Stride, Trident; Grocery: Carte Noir, Jacobs, Kenco, Philadelphia, Tang, Tassimo

Product Areas: Biscuits (cookies and crackers), chocolate, gum & candy, beverages

Plants: 133 manufacturing and processing facilities in 45 countries and 111 distribution centers and depots worldwide owned or leased.

Source: Mondelēz International North America, Food Processing Top 100

But since, Mondelēz International has become a bit smaller (sales in 2012 and 2013 were $35 billion) but more profitable. It's taken a very disciplined approach to bolt-on M&A, increasing exposure to incremental, fast-growing snacking segments such as well-being and premium. Mondelez has acquired brands that have further growth opportunities and can benefit from the company's global platform.

2021 acquisitions include Chipita, a Greek baker of packaged cakes and pastries; Gourmet Food Holdings, an Australian maker of premium biscuits and crackers; Hu Master Holdings, a U.S. "lifestyle" brand of chocolate and other confections plus crackers; and a majority stake in Grenade, a UK maker of high-protein bars.

In North America, other recent acquisitions include Tate’s Bake Shop, Give & Go and Perfect Snacks, which align with the company's priorities of the well-being and premium snacking segments, as well as adjacent categories like in-store bakery

In 2015, an interesting addition was Enjoy Life Foods, which makes snacks that are non-GMO and free from 14 major allergens. Mondelēz International's financial backing quickly made possible a 200,000-sq.-ft. allergy-friendly bakery in Jeffersonville, Ind.

"Our nine global brands account for around 43% of our net revenues while our local 'jewel' brands represent approximately 49% of our net revenues," says a company spokesperson. "Our local jewel brands are intertwined with the fabric of particular countries and play a unique role to satisfy consumers’ demands for local taste."

A few years back, Mondelēz International aimed at "healthy snacking," as did many companies then; but now it has a more general view of what's good for consumers, as many companies do now.

"Consumers have a more holistic view of well-being today and consume multiple types of snacks throughout the day to meet a variety of functional and emotional needs," says a company spokesperson. "Approximately 30% of our core snacks revenue aligns to our four well-being pillars:

  • Functional nutrition
  • Permissible indulgence
  • Portion control
  • Well-being credentials

About half the company's products have well-being credentials, such as organic, gluten-free, baked-not-fried, dark chocolate and reduced sugar. And about half achieve a healthy halo from portion control -- individually wrapped portions under 200 calories.

"We conduct an annual State of Snacking survey to examine the evolving role snacking plays in the future of food, from serving as a source of comfort during the pandemic, to delivering on consumer trends," says the spokesperson. "One of the trends that we saw in our last report was that, with the rise of at-home snacking, consumers are more interested in mindfulness and wellbeing, including how their snacks are made and where they come from."

“We are proud of the dedication and commitment of our teams during the challenging period we’ve experienced with the COVID-19 pandemic and are proud that we have been able to play a role in supporting the continuity of the U.S. food supply during these trying times,” says Glen Walter, an executive vice president and president of North America. “We are now focusing on emerging stronger and putting our attention towards our snacking growth ambition here in the U.S.”

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Commitment to causes

Mondelēz International has a strong commitment to leading the future of snacking while staying true to the company's purpose and priorities – as well as focusing on key issues and causes.

Mondelez is concerned with such issues as the increasing importance to consumers of health and well-being; the growing focus on the realities of living incomes for cocoa growing communities; the need to address root causes of systemic issues like deforestation and Diversity, Equity & Inclusion; and the importance of working toward collective action to address some of the biggest problems challenging the world today, including climate change and plastic pollution.

The global organization has set 2025 goals including 100% compliance in sourcing all of its cocoa from sustainable sources, supporting child labor due diligence in West Africa, making its packaging recyclable, plus a 10% reduction in carbon dioxide emissions. It recently committed to zero carbon emissions by 2050. Every year of its existence, it's made the Dow Jones Sustainability Index.

In addition to supporting global environmental, social and governance goals, the North America business is fostering partnerships to support underrepresented communities, including a multi-year signature partnership with Boys & Girls Clubs of America as well as the Thurgood Marshall College Fund to help close the gap for youth.

Several of the North American brands have longstanding community partnerships, including the Oreo partnership with PFLAG National to celebrate allies and foster inclusivity; the Ritz partnership with Feeding America to help fight food insecurity for children across America; and the Sour Patch Kids commitment to donate $1 million over the next five years to fund scholarships for students attending historically black colleges and universities.

Looking ahead

Markets across the Mondelēz International business around the world, including the United States, have the opportunity to draw from both global and local resources.

"We have a 'local first, but not local only' operating model and mindset, with our local business units empowered to drive decisions locally closest to our consumers and our customers," says Walter. "The local businesses are engaged with and supported by our global team, who bring the best of our worldwide capabilities and resources to bear in support of our local commercial agendas."

Mondelēz recently announced that, as COVID remains on its downward trajectory, the business is planning to reopen in January its North American headquarters office in East Hanover, N.J., as well as the global HQ in Chicago and an office in Miami. In October, it announced a requirement for all office staff in those sites to be fully vaccinated against COVID.

"Overall, employee feedback since this announcement has been positive and colleagues have expressed support and appreciation for our continued focus on protecting their health and safety as we prepare to reopen offices," says a company spokesperson. "We continue to share information and engagement sessions with independent third-party experts in addition to clear and consistent communications on our plans."

However, the company won’t return to the same in-office working model as prior to the pandemic, Walter says. "We will transition to a hybrid working model that blends the best of in-office collaboration and remote work, using our offices as a place to foster collaboration and creativity and nurture our company culture,” he says.

Mondelēz International faces other challenges that are common across the entire industry, such as dealing with inflation and a constricted supply chain. It recently announced price increases for Oreo and other products, and company executives told investors last month they are considering further price increases for 2022.

Mondelēz International is planning to invest roughly half of its operating profits into marketing next year when prices are expected to increase 6-7% due to inflation.

"The worst you can do, I think, is increase prices and not increase your support for your brand," said Van de Put.

In just nine years since establishing itself, Mondelēz International has certainly covered a lot of ground. With all signs pointing to more, albeit healthier, snacking and more globalization of tastes and consumer preferences, Mondelēz International appears to have a foothold and a critical mass that will keep it among the world's biggest and most successful food companies for many years.

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