Mondelez putting pieces in place for organic growth

by Eric Schroeder
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Dirk Van De Put, Mondelez
Mondelez’s new c.e.o., Dirk Van de Put, is putting the emphasis on organic growth.
 

NEW YORK — While Campbell Soup Co. and the Hershey Co. unveiled details of major acquisitions on Dec. 18, executives with Mondelez International, Inc. met with analysts to discuss the Deerfield, Ill.-based company’s future. According to a research report from Credit Suisse, Mondelez’s new chief executive officer, Dirk Van de Put, is putting the emphasis on organic growth, a shift from the company’s traditional focus on growth through mergers and acquisitions.

During the meeting Mr. Van de Put told analysts that Mondelez expects to roll out a new three- to five-year strategic plan by September 2018, wrote Robert Moskow, research analyst with Credit Suisse, in the Dec. 18 report.

Robert Moskow, Credit Suisse
Robert Moskow, research analyst with Credit Suisse

“He (Mr. Van de Put) fully supports the 2018 guidance for 17% to 18% operating margin, but he believes that the focus of the organization will need to shift away from cost reduction and back toward growth after that,” Mr. Moskow said. “Some will fear that this signals a pre-disposition toward reinvestment and lowering the margin target in 2019. However, Van de Put says he comes to the business with no pre-conceived notions on that possibility. In addition, he made a point to say that he would rather see whether the company can spend its budget smarter before agreeing to plans to spend more.”

An area of concern for Mr. Van de Put is Mondelez’s “long tail” of underperforming brands and categories, specifically in chocolate and biscuits. Mr. Moskow noted that while Mr. Van de Put seemed willing to explore the possibility of giving the underperforming brands and categories more investment to succeed, the reality is that new management tends to “lop off long tails, not invest in them.”

Mondelez Amazon DSD truck
Direct-store distribution may be a financial drain on Mondelez.
 

Mondelez’s distribution program was another area of discussion during management’s talk with analysts. Mr. Moskow said Mr. Van de Put broached the subject of whether the company will stick with its direct-store distribution resources in North America or follow Kellogg’s lead and transition to a direct-to-warehouse strategy. Mr. Van de Put indicated that D.S.D. can be a drain on the cost side, and at the very least Mondelez needs to reroute its sales force to adapt to the shift in channels to smaller format stores and hard discounters.

Mondelez may have a “dual portfolio” in mind when it comes to health and wellness, Mr. Moskow said.

Mondelez International products
Many of Mondelez's current brands lack the credentials to extend into the health and wellness category.
 

“Having come from a fast-growing french fry company, he (Mr. Van de Put) said he is very comfortable with the indulgent snacks side of the business,” Mr. Moskow wrote. “However, he recognized the need for developing a strong presence in health and wellness and the likelihood that the current stable of brands (Oreos, Ritz, Cadbury) did not have the credentials to extend in that direction.”

Overall, Mr. Moskow’s takeaway from the meeting was that Mondelez’s organization and board will embrace Mr. Van de Put’s management style, describing the new c.e.o. as “unassuming, straightforward, friendly and a good listener.” 
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