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Mondelez International is the global snacking group created at the end of 2012 by the break-up of the old Kraft empire. It is the undisputed global leader in biscuits, and joint #1 in confectionery alongside Mars. Following the split, a slimmed-down Kraft Foods retained a collection of well-established grocery products sold primarily in North America, before itself being acquired in 2015 by Heinz. The Mondelez portfolio is built on three main pillars of biscuits, chocolate and sugar confectionery. It contains Kraft's faster-growing cookie business, comprising the heritage Nabisco portfolio and the substantial Lu division acquired from Danone in 2007. Key brands include Oreos, Prince and Chips Ahoy. It also houses the extensive Cadbury confectionery division and the former Suchard chocolate brands in Europe. However, not all of Mondelez' inherited brands fitted comfortably with the snacking strategy. In 2014, the group agreed to inject its international coffee brands into smaller rival DE Master Blenders 1753 to create joint venture Jacobs Douwe Egberts, now the global leader in that sector ahead of Nestle. Yet Mondelez is itself still under repeated pressure from activist investors pushing for a break-up of the business or sale to another similarly minded group, such as PepsiCo.
Despite its size and its strength in North America, the old Kraft had found it hard to develop exciting new brands in the first few years of the new century, and instead depended heavily on milking its existing products for all they were worth, with a steady stream of spin-offs and variants, few of which enjoyed significant success. A far more productive route, especially outside North America, was acquisition. Kraft bolstered its international portfolio considerably in Europe and Asia with the purchase of sweet treats Lu and Cadbury. As a result, the proportion of sales generated outside North America had risen from less than a third in 2006 to more than half by 2010.
To resolve this imbalance, and also to enhance the group's value, Kraft announced plans to split into two entirely separate businesses during 2012. The heritage collection of grocery products sold mainly in North America, including the Kraft masterbrand, were demerged into a new company which adopted the name Kraft Foods Group. At the same time, the old corporate parent renamed itself Mondelez International, and now houses the global snacks businesses, including Cadbury, Lu and the old Nabisco cookies business in North America. The split was completed at the beginning of October 2012. All the old Kraft's global snacks brands, as well as all operations outside North America, transferred to Mondelez International. This new giant is built around two core components of biscuits and confectionery.
Mondelez' biscuits business is the clear #1 in global cookies and crackers, with total worldwide sales of $10.59bn in 2016 (though that figure has declined by almost $1bn over two years). More than half that total is generated in North America, and a quarter in Europe. It houses the Oreo megabrand, a multi-billion-dollar-brand in its own right, as well as Lu, Prince, Chips Ahoy!, Ritz and many others. According to IRI figures (in Grocery HQ), Mondelez was the dominant player in US cookies in 2016 with sales in excess of $2.9bn, equivalent to over 39% market share. Nearest rival Keebler (owned by Kellogg's) had just 7.3% share. Oreos (and variant Oreos Double Stuff) were the top-selling US cookie brand by far with sales of $926m. International markets contribute at least the same again in sales. Chips Ahoy! was the #2 brand with sales of $619m. The group has continued to introduce a steady stream of new products. Pringle-shaped Eo chocolate biscuits were launched in 2008, followed in 2009 by Belvita, a new sub-brand designed originally as a "breakfast biscuit". Belvita has grown to become Mondelez's third biggest-selling product in the US with sales over $270m in 2016, and its global #2 with a total of around $600m. These are supported by Nilla vanilla wafers (the group's #4 US brand at $153m), Fig Newtons, Snackwells, Barnum's Animals, Nutter Butter, Ginger Snaps and many others.
In 2018, the group added premium manufacturer Tate's Bake Shop, best-known for luxury "homemade" cookies and baked goods made with natural ingredients. The price tag was $500m, around 7 times revenues. Tate's was founded in 2000 by Kathleen King - an earlier venture, Kathleen's Bake Shop collapsed following a legal dispute with her business partners - and went from strength to strength after raising funding from private equity firm Riverside in 2014.
Mondelez is equally dominant in the cracker segment with combined US sales of $164bn in 2016, equivalent to 33% share (compared to Kellogg's 26%). Among individual brands, the top two places are held by competitors (Cheez-It and Goldfish respectively), but Ritz was America's #3 cracker brand in 2016 with sales of $486m, supported by Triscuit ($342m), Wheat Thins ($303m), Premium Saltines and Honey Maid Grahams. In order to defend its brands against increasing health concerns, the company introduced several "healthy" cookie and cracker varieties in the 2000s, as well as reformulated versions of major existing brands.
Many of the group's best-selling brands are also now available in "100 Calorie Packs", packed in individual sachets each containing only 100 calories, for weight-conscious snackers. There are also wholegrain variants of main brands including Oreos and Fig Newtons, as well as "Thins" versions containing lower calories. New "wellbeing" launches for 2017 were the Vea range of crunch bars, crackers and crisps, made from natural grains; and Good Thins corn and potato crisps.
Latin America was the main international market for the original Kraft/Nabisco portfolio until 2007. Key regional brands include Express, Kraker and Club Social crackers, and Trakinas cookies. Lucky is the leading biscuit brand in Taiwan, while Pacific is the leading soda cracker brand in China. The group owns a range of Scandinavian salty snacks including Estrella and Maarud. After 2005, however, the group sought to strengthen its presence in Europe, where previously it had only been represented via licensees. In 2006, the group paid $1.1bn to reacquire control in the UK of its Nabisco brands, previously marketed under license by United Biscuits, as well as UB's operations in Spain and Portugal. This includes seven of the ten best-selling biscuit brands in Spain, including Fontaneda, Artiach and Royal, and leading Portuguese brand Triunfo. In 2007, Kraft also made a €5.3bn offer to acquire the European biscuits and crackers portfolio of Danone, then the worldwide #2 in the sector. That deal was completed at the end of the year. The Danone portfolio encompasses a huge range of cookies, savoury snacks, crispbreads and cakes in Europe and Asia. (The purchase did not include Danone's subsidiaries in Latin America and India). Combined sales for the Danone biscuit division were €2.2bn in 2006. The main international brand is Lu, with sales of around €1.2bn.
The Lefevre-Utile biscuit company was originally established in the mid-19th century by French husband and wife Jean-Romain Lefevre and Pauline-Isabelle Utile. The Lu name caught because advertising posters for the company's Petit Beurre biscuits featured the company's initials. The family-run business was eventually absorbed into French conglomerate Generale Biscuit in the 1960s before being acquired by Danone in 1985. Important sub-brands include Mikado (the European version of Japanese snack Pocky, marketed by Lu under license), Prince, Paille d'Or, Grany and Pims sweet biscuits; and Cracotte, Belin, and Tuc crackers.
Other brands make up a huge collection of regional snacks under brands including Opavia in Eastern Europe and Saiwa in Italy. A small portfolio of Scandinavian buscuit brands were sold in 2016 to local rival Fazer.
In the UK, Mondelez still lags behind main rival UB. Belvita is its top-selling brand, and the local #4 in 2016 (Nielsen, The Grocer) with sales of £77m, slightly ahead of Cadbury Biscuits with £61m. Previously produced by Burton's under license, Mondelez reacquired full rights in 2017. Also in the Top Ten was Oreo with £47m. Ritz crackers contributed £18m.
The biscuit business is partnered within Mondelez by a huge confectionery division, now joint global leader with rival Mars. See separate profile for Cadbury. Even before the Cadbury takeover, Kraft was already a leading player in the global confectionery market, mainly outside North America. Its existing products were merged into the Cadbury's portfolio in 2010. As a result, it is now the global #1 in chocolate and in candy, and the #2 worldwide in gum. Combined global confectionery sales totalled $11.66bn in 2016, including $7.75bn from chocolate and $3.91bn from candy & gum. More than 62% of the group's chocolate sales are generated in Europe, but just 3% in North America, mostly Canada. Only a tiny proportion of its chocolate brands are sold in the US. However gum & candy revenues are split almost equally between Mondelez' four main global regions. Euromonitor estimated 14.5% share of the global chocolate confectionery market in 2013.
Mondelez maintained control of all the old group's international coffee and soft drinks businesses, becoming the global #2 in coffee behind Nestle with combined retail share of around 10.8%, according to Euromonitor. Brands included Jacobs, Kenco, Gevalia and Tassimo. Combined sales were $3.77bn in 2014. In May that year Mondelez and rival DE Master Blenders 1753 agreed to pool their respective coffee businesses to create a jointly owned company that will leapfrog Nestle to become the global #1 in that sector with revenues in excess of $7bn. Mondelez injected its global portfolio into DE Master Blenders in return for around $5bn in cash and what was originally a 43.5% equity stake in the merged business, which adopted the new name of Jacobs Douwe Egberts. That deal was finally completed in July 2015. A year later, following the acquisition of rival coffee company Keurig Green Mountain by JDE's controlling shareholder JAB Holdings, Mondelez agreed to reduce its holding in JDE to 26.5% in return for a 24% stake in Keurig. That became in turn a 14% holding in Keurig Dr Pepper following the company's acquisition of Dr Pepper Snapple Group.
In 2013, Mondelez received a windfall from the resolution of a lawsuit brought by the old Kraft against Starbucks for the termination of their North America packaged coffee joint venture. An independent arbitrator ordered Starbucks to pay substantial damages of $2.8bn, or $1.6bn after costs and taxes.
The soft drinks collection is led by Tang. Although it's only a minor product in the US, Tang is a blockbuster brand internationally. Sales have more than doubled since 2005, breaking the $1bn barrier in 2011. It is available in more than 100 countries worldwide, in a wide variety of local flavours including mango in the Philippines, soursop in Brazil, horchata in Mexico and pineapple in the Middle East. The group also manages a large portfolio of other powdered soft drinks in Latin America including Clight, Maguary, Ki-Suco, Fresh and Verao. In 2006, the group acquired leading Spanish juice brand Fruco as part of its takeover of United Biscuits' operations in that market. Combined revenues from non-coffee drinks totalled $1.45bn in 2016.
Finally, Mondelez continues to market the old Kraft's international cheese brands under license. These include Philadelphia worldwide, Dairylea in the UK and El Caserio in Spain. In the UK, Philadelphia contributed sales of £92m in 2016, but has slipped behind Dairylea spreads, together with its various snack pot spin-offs, at £94m. Global sales of cheese and other grocery products were $2.65bn in 2016.
Mondelez' reported revenues have drifted steadily lower since the spin-off of Kraft, the coffee business and other products. For 2014, net revenues dipped 3% to $34.24bn, largely as a result of currencies. (Organic growth excluding currencies was 2.4%). Net earnings plunged 44% to $2.18bn. The previous year was flattered by a $1.6bn gain from Kraft's lawsuit against Starbucks. For 2015, revenues excluding the demerged coffee businesses were $29.64bn. Net earnings more than tripled to $7.27bn as a result of a whopping $6.8bn gain from sale of coffee and other assets.
Revenues for 2016 took another blow from currency devaluations, slumping almost 13% to $25.92bn. Without the gain from the coffee sale, net income plunged by 77% to $1.67bn, the lowest level since 2012. Performance for 2017 was flat. Organic revenues were up less than 1%, as solid performance internationally was offset by a 2.4% decline in North America. The reported figure slipped to $25.90bn. Net earnings recovered to $2.92bn.
Mondelez UK Ltd reported turnover of £1.65bn in 2016. Net profit was 21.9m. The previous year's profit of £187m included a £152m gain from the sale of local coffee brands.
For 2018, group revenues were virtually unchanged at $25.94bn as a result of currency headwinds, but on an organic basis rose 2.4%. Net income rose 19% to $3.38bn, but only as a result of a one-off gain from revaluation of its investment in what is now Keurig Dr Pepper. Pretax income fell 1%. Europe is the group's biggest region, contributing 39% of revenues in 2018 ($10.1bn), and nearly half of operating profit. It is followed by North America (27% of revenues) and Asia/Middle East/Africa (22%).
Last full revision 31st October 2017
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