Mondelez Overhauls Snack Line as Deal Talk Rattles Food Industry
(Bloomberg) -- While merger discussions roil the food industry, Mondelez International Inc. is doing its best to increase sales on its own.
The company is introducing a new line of crackers and snack bars made without artificial ingredients and GMOs, and it’s revamping some of its existing products to better appeal to millennials. The rollout is Mondelez’s biggest since it was created by splitting with Kraft Foods in 2012.
The maker of Oreo cookies and Triscuits, which has posted declining sales the past three years, is renovating its portfolio as consumers increasingly demand less-processed snacks. The new products, called Vea, were developed in-house by a “startup” team -- a sign the food giant is trying to be more entrepreneurial.
Vea arrives as traditional packaged-food companies have been gobbling up upstart brands in response to the changing tastes, and as Kraft Heinz Co.’s freshly abandoned courtship of Unilever raises the prospect of bigger realignments in the industry. Tim Cofer, Mondelez’s chief growth officer, said the Deerfield, Illinois-based company considered making an acquisition but ultimately decided to develop the new food line itself.
“There was nothing out there that hit this space as well as what we developed,” he said.
The Vea products are slated to reach shelves across the U.S. in July, and they will eventually be expanded to overseas markets -- where the company generates most of its revenue. Mondelez also is removing genetically modified organisms from Triscuits and will tout that the crackers are made from just three ingredients.
Mondelez’s profit margins have lagged behind competitors, and the company is under activist pressure to improve its performance. Chief Executive Officer Irene Rosenfeld has been cutting costs to boost results, but the strong dollar has battered the company, which generates more than 70 percent of its sales outside North America.
Last year, Mondelez made a failed bid for Hershey Co., an attempt to crack the U.S. chocolate market. The merger approach was also seen as a defensive move: By bulking up, Mondelez would be less of a takeover target itself.
Kraft Heinz, which was formed when Kraft Foods merged with Heinz in 2015, made a $143 billion takeover bid for Unilever last week, but formally pulled the offer after it was rejected. Mondelez has been seen as a possible target of Kraft Heinz as well.
Ultimately, companies have to figure out a way to increase sales if they want to keep investors happy, said Asit Sharma, an analyst at the Motley Fool.
“Investors understand that cost-cutting and productivity initiatives have a limited shelf-life in boosting earnings,” he said. “Sooner or later, revenue growth will be top of mind for investors.”