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Mondelēz Faces Opportunities and Challenges in Emerging Markets

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Multiple pack sizes and price points

Mondelēz’s (MDLZ) chief growth officer, Mark Clouse, also spoke about the company’s growth opportunities at the Barclays Global Consumer Staples conference on September 10.

Mondelēz is looking to attract more customers (XLP) (VDC) (FXG) through varying pack sizes and price points. The company’s recent changes in manufacturing and supply chain management would act as key enablers for these initiatives. These are particularly relevant for Emerging Market countries like Russia, China, India, and Brazil, where a larger pack size and a higher price point isn’t affordable for many consumers. The company derives almost 40% of its sales from Emerging Markets.

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Innovation in “must-win markets”

According to Clouse, Mondelēz’s rollout of innovative products like Oreo Thins, belVita, and Barni “have all been highly successful, but are still available in only a fraction of our must-win markets.” The global snacks powerhouse can leverage its geographic infrastructure to make these products available in more markets. This would fuel revenue upside.

Innovation, combined with more pack and price point choices, will likely provide opportunities for curious consumers to try the company’s products. It may also encourage other consumers to trade-up to the company’s more premium offerings.

Geographic reach

Geographic diversity in sales is one of Mondelēz’s chief strengths, unlike its peers Hershey (HSY), Hain Celestial (HAIN), and McCormick (MKC). They derive most of their sales from North America. Besides, Mondelēz’s diverse product platform gives it a much larger demographic for marketing its products.

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Outlook and prospects

While Mondelēz has been upbeat on prospects for Emerging Markets, its growth has faced significant challenges lately. The higher US dollar has been the chief headwind facing the company. This could continue to pressure sales in the coming quarters.

Mondelēz has tried to mitigate the impact of a higher dollar by raising the prices of its products. While this strategy may provide a short-term fix, it isn’t ideal. It doesn’t help the company raise penetration rates and grow awareness of its products.

This is particularly relevant as most Emerging Markets—including the larger ones of China, Russia, and Brazil—face challenging macroeconomic conditions at home. Higher prices may drive sales towards more affordable local products. Brand loyalty is critical for sustained sales momentum in an industry where consumers are fickle and switching costs between products are low.

Investor interest in Mondelēz has increased lately. Next, we’ll discuss the trends that are shaping the industry.

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