“We’ve been doing a lot of work on our overall marketing approach and … understanding the consumer and connecting to the consumer as a key stepping-stone of our approach” in becoming “what I would call ‘margin-centric’ to ‘consumer-centric,” Van De Put told investors gathered at the Alliance Bernstein 37th Annual Strategic Conference June 2.
He explained when he took the company’s helm almost four years ago, Mondelēz had just completed a “very successful period where it was focused on margin expansion,” and was ready to transition to a more locally-based business model that delivered consistent, operational excellence to win with consumers.
To do that, the company reorganized, “came up with a good list of growth drivers and growth enablers,” shifted the culture to empower local teams and strengthened its supply chains – all moves that served Mondelēz well during the pandemic.
It also adopted a new marketing approach that more effectively communicates the company’s values and how its products meet consumers individual needs, Van De Put said.
He explained the first step in this transformation was “getting clear on what our brands stand for, what is their purpose, how do we drive that purpose, [and] how do we explain that to the consumers.”
Mondelēz’s answer was to increase to 60% its overall marketing investment in digital marketing – 35% of which is personalized – to drive “very high engagement,” Van De Put said.
Because “digital creative excellence is very different from TV or print,” and personalization requires a deeper understanding of consumers, he explained that Mondelēz also invested more heavily in better insights and analytics, and hired a marketing team that is digitally savvy and understands how today’s consumers communicate.
To provide sufficient support for the marketing team and new approach, Mondelēz is reinvesting half of its annual increase in gross profit into the business, including a stepped-up A&C investment, Van De Put said.
“You need to keep on investing in your brands and differentiating them and make sure that the consumer really keeps loving them,” he explained.
So far, this approach is paying off with strong returns on investment, Van De Put noted. He explained: “We’ve done a 14% improvement in the last five years per year, and last year was a real balanced year with a 25% improvement in our ROI in marketing. For instance, in creative, 50% of our creative is now in the top tier of creative scoring, and so that has been a big help in improving our ROI.”
He added the company “also worked hard on our partner ecosystem, the agencies we work with, and simplified it, made it more efficient and improved it.”
‘Where consumers buy around the world has been shifting’
In addition to expanding and fine-tuning its marketing efforts, Mondelēz also is exploring how to expand distribution beyond grocery, where it currently primarily plays.
“Where consumers buy around the world has been shifting a lot. It shifted one way before COVID. It shifted another way after – during COVID. We’ll see where we end up after COVID,” he said. But to ensure that Mondelēz is covered, Van De Put said the company is “shifting our presence and our focus from channel to channel and getting our fair share in every channel,” which is not the case, yet.
E-commerce will play a “big part” in this strategy with the “biggest opportunity” for the company focused on special e-packs and selling more volume per consumer through online.
“But then there are other channels, like discounters in Europe, traditional trade in emerging markets and clubs and c-stores in the US,” he added.
Other white spaces that Van De Put sees for Mondelēz are increasing premium offerings, such as in chocolate where Toblerone could take the lead, and entering adjacent categories to those in which the company already plays, including bars – both candy and health bars – and in cakes and pastries, which align closely with the company’s existing strength in biscuits.
Gum business: 'We are performing a strategic review'
Asked about the gum business, which includes brands such as Trident and Dentyne, CFO Luca Zaramella said: "We are performing a strategic review. As we said many times, the number one priority we have at this point in time is to fix the business and allow the business to return back close to 2019 levels, i.e. pre-COVID levels.
"Obviously, it is a business that has been disproportionately impacted by COVID, given the fact that it is consumed for the vast majority on the go. It has clearly a meaningful presence in developing market, allowing us to get scale. And for developed markets specifically, we are assessing whether there are other options than keeping and retaining the business. It is 5% of total revenue."
He added: "From a profit standpoint, given the reduction in size that we have faced in 2020, it is pretty much in line with the rest of the company at this point, so not disproportionately higher. But, as we said, we have to fix the business and then potentially assess whether there are other avenues for us to create more value for Mondelēz shareholders."