Food & Beverage

Mondelez to boost ad spending, healthier offerings

MDLZ unwrapping healthier snacks

Snack maker Mondelez International will spend more on advertising its brands, increase healthier offerings and expand its e-commerce business to boost sales as consumers eat less processed food, an executive overseeing the company's growth strategy said.

Mark Clouse, Mondelez's chief growth officer, said in an interview that the company plans to increase its advertising spending to 10 percent of revenue by 2018, up from 8 percent last year. The maker of Oreo cookies, Cadbury chocolate and Triscuit crackers also aims for its e-commerce business to grow to $1 billion in 2020 from $100 million today.

Additionally, Clouse said that in the next five years, Mondelez hopes to generate half of its revenue from snacks perceived as healthier, up from a third currently. This includes individually wrapped snacks that are 200 calories or less and products that have nutritional attributes, such as fewer ingredients and no artificial flavors.

"If you look at where consumers are going, we have to better position the portfolio to fully unlock the potential for growth," Clouse said.

Since it became a stand-alone company in 2012, Mondelez has mostly focused on improving its profit margins through reducing its expenses. The company is in the midst of a plan to cut about $3 billion in costs by the end of 2018 through measures such as opening more efficient manufacturing plants and zero-based budgeting, which requires expenses to be justified for each new period.

Until now, it hasn't given many details on how it plans to invest those savings to achieve higher sales growth. Clouse said the approach involves changing existing products to suit consumer needs and moving into new markets and categories that offer growth potential. In February, Mondelez said it was buying Enjoy Life Foods, the maker of allergen free snacks, for an undisclosed amount.

The efforts come at a time when packaged food companies, faced with sluggish growth, are increasingly under pressure from investors to change their offerings and slash costs.

In August, billionaire investor William Ackman's hedge fund Pershing Square Capital Management disclosed that it spent $5.5 billion for a 7.5 percent stake in Mondelez in what was seen by Wall Street as an attempt to push the company to increase its margins further or potentially sell itself. Investors and analysts have speculated that the company could combine with Kraft Heinz.

Kraft and Mondelez used to be the same company until their split in 2012. Last March, Kraft said it was merging with ketchup-maker H.J. Heinz in a deal backed by 3G Capital, a Brazilian private equity firm known for cutting costs.

Clouse said of 3G's abilities that "there's no doubt that those are our fundamental capabilities and skill sets that are really important in today's world."

He added, "The key is, can you bring the same operational discipline and clarity to a growth agenda that allows you to sustain it over time. I think that's really what we're shooting for."