Ackman’s firm Pershing Square Capital Management last week announced it had acquired the $5.5bn take in Mondelēz, a move Lynn Dornblaser, director of innovation and insight at Mintel, said should spark change the company needs.
“Maybe this is the shake up that it needs,” she told BakeryandSnacks.com. “I don’t think it’s logical to assume that the sole reason that Mondelēz is challenged at the moment is because most of its portfolio is treats and sweets. We eat plenty of them here, and there’s nothing wrong with that.
“Obviously they need something to get them to rethinking their positioning to their positioning, to rethink product profit and stay relevant with today’s consumers,” she said.
Return to growth?
The Ritz, BelVita and Oreo maker recently reported its seventh straight drop in quarterly profits. It has been cutting jobs, closing factory doors and trying to improve its operation performance in an effort to help end its recent slide.
Dornblaser said: “It feels like, based on how [Akman] is talking, that it will push Mondelēz to focus very carefully on exactly what they’re doing and how to answer consumer needs in the best way, and therefore increase profits… So I think in the very long-term, it probably will be a good thing.”
However, she said the short-term changes wouldn’t be easy.
“That always happens in this kind of a situation where an announcement is made,” she said. “Changes are made, and that means that can they change direction for some of the brands, shift resources, whether they be money resources, plants, people or whatever. In the short-term, there is always a challenge.”
While short-term challenges may be imminent, Dornblaser said Ackman investing in Mondelēz should help ensure the company is focused on the right things, namely answering consumer demand to make sure shareholders see positive results.
An industry shift?
She said the investment could also create industry waves, particularly if it succeeded in turning profits around.
“I think what that’s going to show the industry is that you don’t have to only focus on health and wellness products; that you can focus on the deliciousness of food and the fun aspect of eating and treat aspect of eating and be profitable doing it,” Dornblaser said.
She pointed out that plenty of small companies had seen big levels of success in sweets and snack but with large portfolios of a vast array of brands, behemoth companies like Mondelēz had been having a rough time for the past one-to-two years.
“It’s one of those funny things to look at products and product trends for as long as I have. It feels like sometimes it goes in waves. You see at some points in time big companies are buying brands and they become absolutely enormous. Then it’s like the big bang theory; they blow apart into smaller parts.
“It feels like we might be in one of those phases where companies are splitting themselves up or selling off or tightening up their portfolios more now. We’ll see what happens,” she said.