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2021 Processor of the Year: Plant Operations at Mondelēz

Dec. 15, 2021
Demand during the pandemic boosted Mondelēz’s sales, but meeting that demand was a challenge for manufacturing.

The pandemic created a lot of opportunity for Mondelēz International North America because people were stuck at home. It also created a lot of challenges, because people were stuck at home.

The opportunity came from homebound people snacking furiously. The challenge came from adjusting to COVID’s impacts on Mondelēz’s operations, especially its workforce. The former led to increased sales and a healthy bottom line; the latter, compounded with challenges facing the CPG industry as a whole, led to supply chain challenges. Both are still being sorted through on multiple levels throughout the Mondelēz International organization and its supply chain, as is the case for the broader food and CPG industry.

The entire food industry faced, and is still facing, these challenges. They’re made more challenging by Mondelēz International’s sprawling immensity – 133 manufacturing plants on five continents, including 23 in North America – plus the age of some of its legacy plants and the iconic status of many of its consumer brands.

“As we have navigated changes over the past 18 months, we’ve seen some interesting consumer trends, including an increase in snacking behavior globally, with many consumers turning to snacking for comfort and a sense of connection with something familiar, with people seeking out beloved brands and products they know and trust,” says Glen Walter, EVP and president for North America. “We saw many of our brands – including Oreo, Ritz and beyond – being there for consumers in meaningful and engaging ways throughout the pandemic.”

For many reasons, fulfilling the increased demand for Mondelez’s beloved brands became a challenge during the pandemic. Mondelēz found that concentrating on core brands was the best strategy, especially with direct store delivery (DSD) sales capabilities for its cookies and crackers.

“With the increase in consumer demand, we focused our manufacturing efforts on our core products, and benefitted from our DSD model, which helped us to get many of our products quickly stocked on store shelves,” Walter says.

Another initiative that helped Mondelēz keep their products on shelves: reducing SKUs. When the pandemic hit, Mondelēz International was in the process of SKU rationalization globally – a process that “happened to benefit us during the pandemic as demand increased,” according to a spokesperson. Cutting back on marginal SKUs allowed the company to concentrate on the more mainstream ones, for which demand had spiked. This portfolio pruning will probably be permanent, at least in some aspects, Walter says.

“Our SKU reductions were part of a broader simplification program to drive topline and bottom-line growth globally,” says Walter. “This includes a goal of 25% reduction in product offerings across each region within our global business, including North America. By doing this, we are able to create a larger presence of higher velocity SKUs in store that can drive incrementality and has several benefits for inventory, manufacturing, and with customers.”

The Mondelēz Workforce

As Mondelēz strived to fill the increases in demand for its products, the pressure inevitably filtered down to its workforce. The company instituted a number of enhanced measures to support employees from a health and safety perspective, as well as appreciation bonuses, additional paid leave and adding 1,000 employees to the U.S. workforce.

During the pandemic, as the company negotiated new contracts with the Bakery, Confectionery, Tobacco Workers and Grain Millers’ International Union—which represents employees across three Mondelēz U.S. bakeries and three U.S. sales distribution facilities—workers in those locations went on strike. Ultimately, those workers voted and ratified new contracts and normal operations resumed in mid-September.

As the pandemic continues, the tight labor market is something companies across the food industry, as well as those in other manufacturing categories, have been facing.

“Like many organizations across the CPG industry and other sectors in the U.S. today, there is high demand for labor overall and our business is no different,” Walter says. “Some of this is more pronounced in temporary part-time roles, such as sales merchandisers, as well as in the broader U.S. supply chain, in areas like transportation and logistics. We believe we are relatively well-positioned, but need to continue to keep a close eye on things to ensure we have the right people in the right place to support our business.”

Despite being an international company with a global footprint, Mondelez International is committed to the U.S.— which is home to the company’s global headquarters (Chicago), North American headquarters (East Hanover, N.J.), and Latin American headquarters (Miami).

Mondelēz dates back to just 2012, but some of the Nabisco factories it inherited are more than 75 years old. In early February, the company announced plans to close two of its legacy biscuit facilities in Fair Lawn, N.J., and Atlanta, which were 63 and 80 years old, respectively, with Atlanta being the oldest bakery in the company’s U.S. network.

As part of that announcement, the company reinforced the importance of its U.S. manufacturing, identifying strategic biscuit manufacturing hubs on the East Coast (Richmond, Va.), Midwest (Chicago and Naperville, Ill.) and West Coast (Portland, Ore.). The company also confirmed no U.S. jobs will go to Mexico related to these two closures, and U.S. biscuit production levels will be maintained.

Mondelēz remains focused on modernizing its manufacturing and supply chain footprint, including making capital and capability investments in its U.S. business. Since 2012 alone, the company has invested nearly $700 million in its U.S. bakeries.

One example is the upgrade it recently announced to its production and distribution facilities in Henrico County, Va. The plans include a 68,000-sq.-ft. expansion of the company’s Richmond bakery, which will add a high-speed Oreo production line. It will also be opening a new sales fulfillment center close to the Richmond bakery. Other investments were made at bakeries in Naperville, Ill., and Portland, Ore.

"The U.S. is our largest market and we have made a robust commitment to manufacturing in the U.S.," said a spokesperson. "We’re also incredibly proud of our frontline workers who have been at the forefront of this pandemic in helping to keep our operations running and helping to secure the global food supply during what has been a very challenging time for everyone."

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Other challenges

The company is working to deal with other production challenges, further in the future, through strategic capital spending. In 2016, it announced plans to invest $65 million in a Research, Development & Quality network housed in nine centers around the world, including East Hanover, N.J. One goal of this investment was to recruit and retain technical talent from around the world.

In 2017-18, it undertook an information technology upgrade to more than 50 production lines in 14 North American plants. The improvements included establishing a communications protocol for equipment and controls, standardizing the architecture for a control network and developing consistency in the collection and use of data on quality and equipment performance.

As America emerges from the pandemic, Mondelēz considers itself in a good position to face the future, Walter says.

“We have a bright future as a snacking leader here in the U.S., and our more than 16,000 U.S.-based employees across our operations – including those in offices and across our frontline in sales, manufacturing and distribution – play an important role in that future,” Walter says.

“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.”

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