Chocolate and Cheese: The Way Forward for Mondelez International

October 25th, 2012

IntroArticle_136x136_ChocAnalyst Insight By Lee Linthicum, Global Head of Food
Research at Euromonitor International

It’s official. Some fourteen months after
first making its intentions known, Kraft finally split into two separate
businesses on 1 October 2012. The company formerly known as Kraft Foods Inc is
no more, having spun off its North American Grocery unit as Kraft Foods Group.
Meanwhile, the remaining business has formally changed its name to Mondelez
International Inc, with a focus on snacks including biscuits, chocolate, gum
and sugar confectionery.

Moving forward, the two new – and
separately listed – companies will focus on their unique strengths and growth
strategies, as per their distinct product portfolios. That being said, the food
is under no illusions that Mondelez is where the real potential lies.

The formation of Mondelez follows logically
upon Kraft’s acquisitions of Danone’s international biscuits business in 2007
and Cadbury Plc in January 2010. Both takeovers greatly increased the company’s
presence in the dynamic and high margin world of global snacking, while also
allowing it to move well beyond the sizable, but relatively staid, North
American grocery market
. They also gave Kraft a truly global footprint, not
least in emerging markets across Asia Pacific, Latin America and the Middle
East and Africa, all regions where Cadbury in particular already enjoyed an
established consumer following with supply chain networks to match.

Just over a year after buying Cadbury, for
example, Kraft introduced its iconic Oreo cookies to India during March 2011,
albeit under the purple banner of Cadbury rather than the red and white colours
of Nabisco. Given Cadbury’s pre-existing equity in India, the country-specific
branding comes as no surprise. It also looks to be working relatively well,
with Oreo carving out just over 1% of India’s sizable retail biscuits market
within 18 months of its debut, on sales of more than US$40 million. While a
fraction of domestic biscuit behemoths Parle and Brittania – both of which
stand to chalk up retail value sales of more than US$1 billion in 2012 – Oreo
has consolidated its position as the sixth biggest biscuit brand in India, with
sales up 40% year-on-year from 2011.

Prior to acquiring Cadbury, Kraft had no
meaningful presence in India. In 2012, the company’s combined retail value
sales should push US$1 billion, a nominal increase of more than 60% since 2010.
While the majority of sales –and growth – still derives from Cadbury’s legacy,
Oreo forms a key part of Kraft/Mondelez’s wider strategy of using Cadbury’s
historic local strength to properly crack India’s virginal packaged food
market. It also provides a vital test of how Kraft can better play in other key
emerging markets around the world
, and make the most of recently acquired

Wider geographic reach aside, what else can
Mondelez do to consolidate its leadership position in global snacking?
Meaningful innovation and new product development, alongside extensive
marketing support, obviously factors large. Between them, Danone’s former
biscuits business, Cadbury and Kraft have an undoubted wealth of experience and
consumer insights on what makes for a tasty snack worldwide, which gives
Mondelez a significant competitive advantage.

One of Kraft’s biggest product launches
since the Cadbury acquisition has been the co-branding of Philadelphia cream
cheese with Cadbury chocolate (co-branded with Milka across mainland Europe and
the US). Philadelphia cream cheese with Cadbury/Milka unquestionably merges two
extremely well-known packaged food brands into a single novel product that
combines the spirit of snacking with a staple food item. It’s also proven
enormously popular in markets including the UK and Germany since its 2011
debut, with sales smashing initial expectations and forcing rivals like Ferrero
– with its signature Nutella chocolate spread – to sit up and take notice. And
yet, despite all its undoubted strengths, one still has to wonder: Is chocolate
flavoured cream cheese really the best they could do?    

With the formation of Mondelez
International now complete, the new company will need to be at the top of its
game to maintain its leadership position in the global snacking arena.
Complacency, not least in terms of product development, is not an option,
especially as competition is properly heating up. PepsiCo continues to focus on
the emotional resonance of snacking through novel flavours and marketing, to
enormous global success. Since acquiring Pringles from Procter & Gamble,
Kellogg has made its intentions fully known by expanding its Special K
breakfast cereal and snack bars line to savoury snacks and biscuits. In
confectionery, Hershey and Ferrero are moving boldly beyond the comfort zones
of their respective home markets into unchartered territory in India and Latin
America. Even Nestlé, with its focus on global nutrition, is taking a closer look at snacking alongside health and

Let the snacking games begin…


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Lydia Gordon

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