BOCA RATON, Fla. – At the Consumer Analyst Group of New York (CAGNY) conference on Tuesday, executives of Mondelez International reinforced the company’s long-term growth strategy.
They also highlighted progress to expand margins through its supply chain reinvention and overhead cost-reduction initiatives.
Irene Rosenfeld, Chairman and CEO reiterated the company’s long-term targets of Organic Net Revenue growth at or above category growth rates, high-single digit Adjusted Operating Income growth at constant currency and double-digit Adjusted EPS growth at constant currency.
“In 2015, however, we’ll continue to prioritize margin expansion and earnings growth while delivering modest organic revenue growth, as we progress our transformation agenda to focus our portfolio on snacks, reduce costs and invest for long-term growth,” Rosenfeld said.
With respect to portfolio focus, the company is expected to close its coffee joint venture with D.E Master Blenders 1753 later this year and will add two acquisitions in snacking, Kinh Doh in Vietnam and U.S.-based Enjoy Life Foods.
Supply Chain Reinvention on Track to Achieve Margin Goals
Daniel Myers, Executive Vice President, Integrated Supply Chain, provided an update on the company’s journey to reinvent its supply chain, which is on track to deliver $3 billion in gross productivity savings, $1.5 billion in net productivity and $1 billion in incremental cash flow over three years.
Myers highlighted how the company is transforming its manufacturing processes to develop more efficient, modular designs for global product platforms, called “Lines of the Future.” These advantaged lines are cutting conversion costs by 30 percent in biscuits and 20 percent in chocolate and in gum as they replace older, more inefficient assets.
“Our Lines of the Future are driving significant savings in reduced engineering, installation and start-up costs. And we’re reducing conversion costs through increased throughput, less waste and lower staffing per line,” said Myers.
At the same time, Mondelez International is restructuring its end-to-end supply chain network. From 2013 to 2015, the company will have funded and built 11 new or expanded manufacturing plants around the world, including in Bahrain, Brazil, China and India. By 2018, the company expects to build another five sites.
“When we started our journey, only 15 percent of our Power Brands were produced on advantaged assets,” said Myers.
“By 2018, we expect that number to be about 70 percent.” Myers said the goal is to have all of the company’s Power Brands produced on advantaged assets in advantaged locations at advantaged costs. Revenue per plant is expected to increase more than 50 percent from $200 million per plant in 2012 to more than $300 million by 2018.
Finally, Myers emphasized the team’s significant cash flow progress. Since 2012, the company has reduced its cash conversion cycle by 23 days, resulting in $600 million in incremental cash last year.
Affirmed 2015 Outlook
The company affirmed its 2015 outlook:
- Organic Net Revenue growth of at least 2 percent, after accounting for the company’s strategic decision to exit certain lower-margin revenue
- Adjusted Operating Income margin of approximately 14 percent
- Double-digit Adjusted EPS growth at constant currency
Reinvesting in the business to drive growth will remain the top priority for cash
The company will also continue to explore opportunities for acquisitions to strengthen capabilities in its snacks categories.
Finally, the company expects to continue to return capital to shareholders in the form of share buybacks and dividends while maintaining an investment grade credit rating.
An archived replay of the CAGNY presentation with accompanying slides will be available on the website (www.mondelezinternational.com).
