Mondelēz: Growth Drivers Powering the Snack Food Giant
Mondelēz unveils healthy snack food initiatives
At the Barclays Global Consumer Staples Conference held on September 10, snack food company Mondelēz (MDLZ) mentioned that it was targeting 50% of its sales from Well-Being snacks by 2020—up from about one-third today. According to Mondelēz’s chief growth officer, Mark Clouse, the category is growing twice as fast as Mondelēz’s other businesses.
Mondelēz is also aiming to improve the nutrition profile of its current portfolio. This will likely be a critical growth driver for Mondelēz. It will be important in developed markets, where sales volumes are flattening or even falling for snacks companies, as the push to eat healthier takes hold.
Portfolio transformation
The packaged foods industry is seeing changing industry dynamics. Hampered by slowing growth and a consumer shift towards healthier eating options, companies like General Mills (GIS), Kellogg’s (K), PepsiCo (PEP), and Mondelēz are adapting their portfolios to include these options.
PepsiCo’s also focusing on health and wellness foods. This is the company’s attempt to “future-proof” its portfolio. Nutrition accounted for ~20% of the company’s sales in 2014. PepsiCo reported sales of $66.7 billion in 2014.
General Mills (GIS), with its portfolio of organic and health-oriented natural foods, is also rolling out new products in the health and wellness category at a rapid clip. General Mills clocked sales of almost $700 million from these products in fiscal 2015. The company’s projecting the category to grow to $1 billion by 2020.
Mondelēz acquisition
Mondelēz also acquired Enjoy Life Foods earlier this year. The company specializes in allergen and gluten-free snacks. The size of the “free-from” market in the US is estimated at $12 billion. It’s growing at double-digit rates annually.
That said, the revenue trend for Mondelēz has been falling over the past few years. This is largely due to slower growth in developed markets and currency headwinds, as we discussed in Part 2.
Mondelēz, PepsiCo, and General Mills account for 1.40% of the holdings in the SPDR S&P 500 ETF (SPY) and 10.40% of the holdings in the Consumer Staples Select Sector SPDR Fund (XLP).
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