Mondelez targets cakes and pastries category

Mondelez International sees cakes and pastries and baked snacks as key categories for growth and potential acquisitions, top executives said at the Barclays Global Consumer Staples Conference in Boston.

Dirk Van de Put, chairman and chief executive officer, told investors in a Sept. 4 session at the event that Mondelez’s strong market share in the chocolate and biscuit categories — and its recent acquisitions in the baked snacks arena — offer a springboard for expansion into soft baked treats like cakes and pastries.

“If you imagine the biscuit aisle, which is probably crackers and sweet biscuits in Europe, particularly a little bit less in the US, across from that aisle, you will find a whole space with softer offerings — cakes and pastries, basically,” Van de Put said. “It’s a natural extension of the biscuits space. It’s a space that’s very fragmented. It’s about an $80 billion market globally, slightly smaller but not a lot than chocolate and biscuits. But in certain markets, like China, where chocolate is $4 billion and biscuits is $8 billion, cakes and pastries is a $30 billion market.”

Offerings in the cakes and pastries segment are “sometimes quite basic products,” presenting expansion opportunities for Mondelez’s chocolate and biscuit brands, said Van de Put.  

“For us to come in with high-value brands with innovations that premiumize that category gives us the right to play,” he said. “So we’re quite excited. It’s a category that’s growing well in line with the biscuit category globally, a higher net revenue per kilo than biscuits. These are all the reasons why we like this space.”

As an example, Van de Put cited Mondelez’s January 2022 acquisition of Chipita Global SA, described at the time as a “high-growth leader” in the Central and Eastern European croissant and baked snack markets. Mondelez noted that Chipita offers expansion possibilities for its Cadbury and Milka chocolate brands in croissants and 7Days packaged croissants and bake rolls brand in baked snacks.

“It’s largely a packaged croissant,” he said of Chipita’s offering. “It’s more of a meal replacement snack, a mid-morning snack with a coffee, at an acceptable price point, (with) very high penetration in middle- and lower-class consumers. The opportunity there is to innovate with some of our chocolate brands, have a higher distribution in the existing countries and then extend worldwide. We’re testing several countries around the world. But even before we bought the company, they were already having success in Mexico, Malaysia and Saudi Arabia, and they’re doing well in India. We see this as an item that could go worldwide.”

Mondelez’s April 2020 acquisition of Give & Go, a North American maker of sweet baked foods, including the brands two-bite (brownies) and Create-A-Treat (cookie and gingerbread decorating kits), also plays in a promising growth space — the in-store bakery, said Van de Put. US and European in-store bakeries have been shifting to “freeze-and-thaw” models in which finished cakes and pastries are shipped frozen to stores, thawed during transport and presented fresh to consumers in the bakery department, he explained.

“That is very interesting for the retailer, because if they have to make it in-store, that has a lot of labor related to it, a lot of waste,” Van de Put said. “So we see a shift gradually over time toward that freeze-and-thaw approach. Give & Go, the company that we bought, was about a $400 million company four years ago. It’s already a $700 million company now. It’s the biggest player in this space in North America. We’re the same thing in croissants, brownies, biscuits and so on. It’s what you find in the bakery space.”

Mondelez already has been branching into the in-store bakery area via extensions of its popular packaged snack brands, such as Oreo cupcakes and muffins.

“That is a high-value-added, high-net-revenue-per-kilo segment that spikes the interest of the retailers,” Van de Put said. “We’ve started to bring in our brands, Oreo and so on. We think that’s going to be a development space globally in cakes and pastries.”

Eyes open on the acquisition front

Luca Zaramella, chief financial officer, said at the conference that Mondelez would consider acquisition opportunities in markets where it’s at-scale by adding high-potential assets and in markets where it could boost scale by building out its brands. He cited the company’s April 2022 purchase of the Ricolino candy and confections business and its August 2022 acquisition of energy and snack bar maker Clif & Co.

“We like mostly bolt-on acquisitions of the likes we have done in the last few years, if you think about Clif, Ricolino, Give & Go,” Zaramella said. “The way we look at this is, in markets where we don’t have enough scale, we are not necessarily obsessed with acquiring biscuits, chocolate or baked snacks. In the case of Ricolino, for instance, it was a presence in the candy sector. But again, that would allow us to go and distribute Oreo and to make Oreo much bigger in Mexico. So, in these markets where we don’t have enough scale, we are looking at our core categories, but not necessarily. We are looking at adding scale and making sure that we can get revenue synergies to our core categories.

“In markets where we are at scale, we are looking for assets that are chocolate, biscuits, and importantly, in cakes and pastry. We keep on being very excited about cakes and pastry. It is a massive category. It is a category that grows very fast. It is a category that allows branded products that we have in our portfolio to really thrive. So that’s really the focus.”

Zaramella also pointed to snack bars as a growth opportunity, but likely less so on the acquisition front given its purchases of refrigerated nutrition bar brand Perfect Snacks in July 2019 and then Clif three years later.

“As a category, we are looking at snack bars,” he said. “At this point in time, between what we acquired through Clif and what we have with other brands like Grenade and Perfect Snacks, I think we have, in our set of brands, enough platforms that we could roll out geographically and expand, given that the category is nascent in many places. But it is still quite a big opportunity in our eyes.”