Mondelēz International is hoping that a new ‘power brand’ of healthy snacks will help reverse decline in its net sales.
The Véa range of crackers and crisps, which it first unveiled in February, will be available to American and Canadian consumers this month.
So will this new offering, designed to be a ‘key pillar’ of Mondelēz’s efforts to grow its share of the wellbeing snacks market, finally put an end to the company’s sluggish performance and provide the impetus needed to lift its biscuit sales?
There are two core parts of Mondelēz’s business: biscuits and chocolate. Between them, the two categories accounted for 71% of sales in 2016 – up from 60.3% four years ago. The bakery segment led with 41% of revenue, followed by confectionery on 30%.
Mondelēz’s brands in gum, beverages, cheese and general grocery accounted for the remaining 29%.
But despite accounting for a larger proportion of Mondelēz’s total sales, volume decline in developed markets like North America and Europe mean that they have both lost revenue against 2013. Four years ago, biscuit sales were $11.65 billion, compared to $10.66 billion last year. Confectionery sales were down from $9.64 billion to $7.8 billion.
And there’s been a similar trajectory in Mondelēz’s group-wide revenues: in 2013, the company turned over $35.3 billion – but by last year, that figure had fallen drastically to $26 billion.
It has put pressure on embattled CEO Irene Rosenfeld, amid calls from a small faction of investors for her to step down.
Reports in April suggested that Mondelēz had already begun the process of finding a replacement, but for now her 11-year tenure – first as CEO of Kraft Foods and then as head of the spun-off Mondelēz – seems assured.
Critics will point out that, under Rosenfeld’s leadership, Mondelēz has never made an acquisition in the biscuit or confectionery space. A $23 billion play for Hershey failed, leaving the firm’s 2014 merger with Jacobs Douwe Egberts its only acquisition of note.
Instead, Mondelēz – like many food companies – has focused on consolidating its losses through aggressive cost-cutting measures and chasing growth, where it can, through innovation.
‘A desire for Véa to do well’
There’s clearly a desire from Mondelēz for Véa to come good. At best, we’re expecting to see it slow Mondelēz’s freefall – nobody believes that a single brand launch is capable of clawing back the $1 billion that’s been wiped from Mondelēz’s biscuits division since 2013. Clearly, further innovation is needed.
So what makes New Jersey-headquartered Mondelēz so sure that Véa is the start?
Well, it fits neatly into the trend for natural and healthier snacks, where Mondelēz will be in good company. PepsiCo CEO Indra Nooyi has previously signalled her intention to move the business away from colas, which make up less than a quarter of its sales, and focus instead on healthy beverages and low-in-sodium snacks.
Likewise, Campbell’s and General Mills – itself feeling the squeeze – have both outlined plans to focus on healthier categories, while Nestlé revealed a plan to focus on high-growth segments and geographies under pressure from new investors Third Rock.
Amid increasing consumer health awareness, packaged food companies are backing natural and guilt-free lines in order to unlock growth.
The opportunity here lies with millennials: increasingly influential, their fleeting behaviours and preferences are driving the food industry agenda. The desire for free-from alternatives as a lifestyle choice and protein enrichment in almost every food category would barely have been foreseeable a decade ago.
Véa’s millennial credentials
Capitalising on changing consumer demand is imperative. In natural and organic snacks, there is genuine potential.
Speaking earlier in the year, chief growth officer Tim Cofer said: “Wellbeing is a significant growth opportunity for us, both in developed and emerging markets. In fact, 2017 will be our biggest year ever in the wellbeing space with unprecedented innovation and renovation of our portfolio.
“I’m really excited about this launch. We created Véa from scratch with a truly global perspective and it truly underscores the best of what we’re doing across a wide range of growth capabilities, including breakthrough innovation and fearless digital marketing.”
Mondelēz is betting on Véa but will need to do more to pull itself out of this rut. In the long term, it may try and use initial enthusiasm for Véa to extend the brand into other product categories – beyond just crackers and crisps.
That would offer a platform to recover growth – but today is just the very beginning of that steep, steep climb.
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