Deutsche Bank Global Consumer Conference

Mondelēz eyes Central and Eastern Europe for investment opportunities

By Douglas Yu

- Last updated on GMT

Mondelēz's Central and Eastern European markets post high single-digit sales growth. Pic: ©GettyImages/stormwatch153
Mondelēz's Central and Eastern European markets post high single-digit sales growth. Pic: ©GettyImages/stormwatch153
Mondelēz plans to invest in Central and Eastern Europe by acquiring local brands in high-growth categories as these regions are showing a healthy growth trajectory, especially in the snacking space.

During the recent Deutsche Bank Global Consumer Conference, president of Mondelēz Europe Hubert Weber said Europe accounts for roughly 40% of Mondelēz’s total sales, and Central and Eastern European markets post high single-digit sales growth year-over-year.

Weber did not specify what new food categories Mondelēz Europe might tap into, but said, “we’re looking for specific growth in adjacent categories in which we’re either not playing or playing to a limited extent.

“We would also buy all sorts of capabilities and maybe some brand credentials,”​ he added.

Weber noted the recovering economy is the reason why Mondelēz decided to invest in this region.

“The economy in Europe has strengthened in recent years, and consumers are snacking in between their meals. That’s why the overall snacking segment growth has accelerated both on the volume and value sides,”​ he said.

“In Russia in particular, the economy is being backed up to the same level of where it was before the [financial] crisis due to international economic sanctions… Central Europe, which includes Germany, Poland and Czech Republic, also shows nice growth trajectory,”​ added Weber.

In the coming years, he noted Europe would have wealthiest retirees among the world, which bodes well for the value-added snacking space, such as chocolate.

Using growth margins from Western Europe

Despite high growth, per capital consumption of Mondelēz’s products in Eastern Europe is still relatively lower than its western counterpart, according to Weber.

He said one of the ways to tackle this is to invest some of its growth margins from Western Europe to the east without jeopardizing the company’s overall profitability.

“Western Europe’s margin upped 600 basis points in total over the past five years… but there is more room for us to grow and reach a healthy profitability for our business by reinvesting [some of those margins] in our brands in Central and Eastern Europe to increase our regional market share,”​ said Weber.

However, the challenge for Mondelēz might be the increasingly popular discount channels in Western Europe. Will that eventually take a toll on the company’s growth margin?

“The discount channel has been a reality in Europe for more than 50 years. Aldi, for example, accounts for 40% of the total retail market in Germany, and Russia has the highest share of discounters – close to 50%. Discounters also see a double-digit growth in the UK and France [every year],”​ said Weber.

“Consumers like discounters not only for their value priced offerings, but also because a lot of them have expanded to include fresh baking stations, and quality fruit and vegetables.

“They are also very important for the snacks category because of impulse purchase. We cannot afford not be to in the discount space… discounters work in line with our profit agenda. We are also looking at differentiation from pack size and innovation perspectives [to continue to profit from this channel],”​ he added.

Europe: The heart of innovations

Weber said there is a continued pipeline for innovations as consumers want to see new food formats.

“A lot of the heritage invention and innovations, especially in snacking and biscuits, have been in Europe and later gone to the rest of the world,”​ he said.

Chocobakery​for example, which is at the sweet spot for our leading chocolate brand and our biscuits and baking capabilities, is now a $1bn business in Europe.

“Now you will see more products [from this business, including Milka Brownie and Cadbury Roundies] in Australia, Brazil and other places,”​ added Weber.

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