“We are a totally different company than we were just a few years ago. We have successfully transformed this region into a resilient, reliable driver of growth and we are well-positioned to take our performance to the next level,” North America President Gustavo Valle told investors at the Consumer Analyst Group of New York conference last week.
He explained that the North American business is now a “very strong contributor” to the overall company’s business, bringing in more than 30% of total net revenue, after growing at a compound average growth rate of nearly 8% for the past four years.
Part of this growth he attributed to Americans’ demand for snacks, which he said 95% of US consumers enjoy at least once per day and 70% consume as a meal replacement at least once a day.
“As people juggle increasingly busy schedules across work, school and family, they have even more occasions to snack,” which represents “a very attractive runway to further accelerate growth,” he said.
How Mondelez ‘fixed the foundations’ of its North American business
Also important to the the turnaround of Mondelez’s North American business was the company’s efforts to successfully evolve the business from one focused on cost reduction to one centered on value creation to drive reliable growth.
Valle said the company “fixed the foundations” of the North American business by investing in manufacturing flexibility, improving sales execution, improving its pricing power and expanding its portfolio beyond biscuits.
Within manufacturing, the company streamlined the number of sites in North American from 16 in 2017 to 12 in 2023 and adopted a more flexible approach to designing new packaging formats, which resulted in an 11 percentage point increase in capacity use since 2017 and a 35% increase in Oreo capacity in pounds since 2017.
The company also “dialed up front-line sales and execution” by leveraging its direct store delivery as a “key competitive advantage in biscuits” so that it could reach 25,000 outlets spanning 170,000 routes, Valle said.
The business also improved its ability to take and even lead price increases by working with media to communicate the benefits of its brands, rightsizing packaging to keep opening price points accessible and targeting new occasions with special packs, among other promotional activities.
Finally, the division reshaped its portfolio to play to its strengths and consumers needs.
For example, it cut its SKUs by double digits in the US and Canada between 2020 and 2023 to “do fewer things, bigger and better,” Valle said. It also snapped in strategic acquisitions that allowed it to play beyond biscuits to include cake, pastries and snack bars.
These changes allowed the business to improve top and bottom-line growth so that North America revenues reached $11.1bn in 2023.
Four pillars to accelerate growth
Mondelez plans to further accelerate growth with a four-pillar plan that includes revenue growth management, channel expansion, leveraging digital tools across the value chain and producing “best-in-class consumer marketing,” Valle said.
He explained that within the first pillar, Mondelez does not view revenue growth management as a way of doing business in the short-term to address immediate margin challenges, but rather as a longer-term but also more targeted and strategic approach.
“We are dialing up analytical rigor powered through technology to create the right pack for the right consumer at the right time. This will help us proactively engage with our customers as category captains,” Valle said.
As part of the business’ second pillar for growth, Mondelez North America will focus its channel expansion on the $1.5bn net revenue opportunity it sees in convenience, value and club.
“We aim to earn our fair share of convenience by ramping up frontline sales infrastructure, while innovating in the small pack format that fulfill growing consumer demand for immediate consumption moments. At the same time, we are accelerating our presence in the fast-growing club and value channels,” he said.
The third pillar in Mondelez’s strategy to grow its North American business is to use machine learning and artificial intelligence to optimize demand planning, improve sales productivity and elevate in-store execution. Valle said the company also is eager to apply lessons learned from pilot programs in other markets to the US market.
The last pillar involves increasing consumer engagement with the brands through “bolder” marketing, including its recent Super Bowl ad for Oreo, as well as partnerships such as between Oreo and Super Mario and increased personalization, such as through customization.
Reflecting on the past four years and those to come, Valle acknowledged that “the market obviously is developed,” but he added “it still offers a lot of opportunity.”
