Oreo Invasion

Mondelez is ready for Europe's snack attack

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Snack time. Source: Bloomberg

Ten years ago, Oreo cookies were all but unknown to Germans. The beloved black-and-white twistable sandwich cookies have been a staple in American pantries for a century, but just started making inroads in Europe this decade. An Oreo popup shop in Berlin before Christmas last year lured pedestrians in with packets of free cookies and a branded ball pit. Brand ambassadors shoved multiple blue packs of biscuits into the hands of anyone who would take them. Free cookies always spread goodwill.

Mondelez has a simple goal: It wants to become Germany’s market leader for cookies. “From our current perspective, the major restructuring measures are behind us,” Hubert Weber, head of the group’s business in Europe, told Handelsblatt ahead of a trade fair for sweets and snacks in Cologne this weekend. “The focus now is on investing in business growth.”

Mondelez has been in a state of restructuring for a while. Spun off from its better-known parent Kraft in 2012, the American snacks and sweets manufacturer started focusing more on its global business. And a former chief, Irene Rosenberg, sold off the group’s coffee business, centered around the German Jacobs brand. Now the $67-billion company has settled down, and new CEO Dirk van de Put is set on growing the business.

Mr. Weber sees opportunities in changing lifestyles: Europeans are eating smaller meals, creating more demand for snacks.

Despite Oreo coming late to the game, “now we’re the market leader on the continent,” Mr. Weber said. Mondelez’ total European sales amount to nearly €7 billion ($8.7 billion), more than a third of its revenue. Two strong rivals are keen to defend their hold on Germany’s domestic market: Bahlsen, the leader for sweet cookies with a market share of just under 11 percent, and Griesson, the No. 2 with a share of about 7 percent.

According to market research firm Nielsen, the two family-owned German companies maintained their positions in 2017, and Mondelez had a share of only around 6 percent in the market for sweet cookies. But Mr. Weber includes salty snacks and small cakes in his evaluation, boosted by the group’s strong cracker brand Tuc.

Mr. Weber plans to focus on existing brands rather than introduce new ones. He reported that premium chocolate brands with a high cocoa content are currently selling particularly well. The group’s Milka brand will soon join its Cocoa Life sustainability program that supports small farmers in Africa, a move executives hope will make the brand more valuable. Rivals such as Mars and Nestlé have introduced similar schemes, and German chocolate manufacturer Ritter Sport is in the process of switching over to sustainable cocoa completely.

Analysts expect Mondelez to seek to increase its sales initially, even if its potential to gain market share is limited. As a multinational group, they say, Mondelez has higher requirements in terms of its return than smaller regional operators. Experts at JP Morgan believe divisions that aren’t performing well, such as the chewing gum business, may be sold in the medium term. They said the company needs growth to boost its share price, which took a battering last year. Analysts consider Mondelez shares undervalued.

mondelez snack market

Mr. Weber is satisfied with the group’s current growth, saying Mondelez was responsible for a large portion of growth in the market for chocolate in Europe and had knocked Lindt out of the No. 2 spot in France. In Germany, he added, Milka beats out Ritter Sport as the leading chocolate bar.

Mondelez is also benefiting from another trend: a preference for brand-name snacks. According to Michaela Ebsen, an expert at Nielsen, there’s been a significant drop in sales of chocolate and cookies at discount grocers, while branded products continue to sell well in supermarkets. Unlike the German cookie producers Lambertz, Bahlsen and Griesson, Mondelez does no business with unbranded products. Mr. Weber praised German retailers, saying they have helped manufacturers build quality product ranges. He believes they have successfully broken the spiral of falling prices and dwindling variety seen in the 2000s.

Mondelez’ European chief sees Britain as the market most putting downward pressure on prices: Supermarkets there are battling for customers as the pound is falling. Mr. Weber is more hopeful about prospects in southern and eastern Europe: After coming out of the recession, customers there are willing to spend more money on high-quality confectionery.

Mr. Weber, who is also president of industry association Food Drink Europe, is concerned about trading difficulties on the European internal market. “In the last two to three years, we have increasingly seen attempts in Europe to rebuild national barriers,” he said. Countries such as Portugal and France are asking to be allowed to use different nutritional labeling, making it difficult for medium-sized companies in particular to export goods. “One of the great achievements of Europe is that consumers can shop Europe-wide,” Mr. Weber said. “Brexit shouldn’t cause us to lose sight of the fact that there is also a trend towards renationalization in the remaining countries.”

Christoph Kapalschinski covers consumer goods, textiles and food for Handelsblatt. To contact the author: kapalschinski@handelsblatt.com

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