Demand slump not a worry: Mondelez CEO3 min read . Updated: 21 Jun 2019, 10:10 PM IST
- Out of Mondelez’s global revenues of $26 bn, India contributes about $1 bn, largely driven by Dairy Milk chocolates
- Mondelez’s competitors in India include Swiss food and drinks giant Nestle S.A., Italy’s Ferrero SpA and homegrown Parle Products Pvt. Ltd
MUMBAI : The slowdown in consumer demand notwithstanding, India remains one of the fastest growing markets for Mondelez International, one of the world’s largest manufacturers of chocolate confectionary, ready-to-eat snacks and beverages, with revenues of $26 billion.
“We have seen double digit growth in the last three years, where 80% of the growth in the snacks segment will be in developing markets, and India will play a critical role in that," Dirk Van de Put, chairman and chief executive, Mondelēz International said in an interview.
“Globally we are a biscuit, candy and chocolate company. Barring chocolate, we would like to be big in the other segments in India. The growth there is higher, but the base is too small currently," he added.
At present, out of its total global revenues, India contributes about $1 billion, largely driven by Dairy Milk chocolates, a segment where it has been a market leader for a long time.
Mondelez’ competitors in India include Swiss food and drinks giant Nestle S.A., Italy’s Ferrero SpA and homegrown Parle Products Pvt. Ltd. While Mondelez claims it has a 65% share of India’s ₹12,090-crore ($1.73 billion) chocolate confectionary market, Dairy Milk accounts for 42% of the chocolate market.
Nestle India reported a 9.6% jump in net profit for the December quarter at ₹342 crore. In the year-ago period, the maker of KitKat chocolates posted a profit of ₹311.8 crore. For the quarter ended 31 December, Nestle India posted a 12% jump in total income at ₹2972.5 crore up from ₹2,652 crore in the same quarter a year ago.
Challenges remain in expanding the business beyond chocolates. “In the chocolate segment, which is our core strength, we are trying to attract more health conscious customers through innovation," said Van de Put. “For instance, we have recently launched a new variant of the popular Dairy Milk chocolate with 30% lower sugar content."
Mondelez’s efforts to promote new segments comes amid a slowdown in demand for most FMCG companies across segments. Hindustan Unilever (HUL), India’s largest listed consumer packaged goods firm by sales, reported a slowdown in volume growth last month.
The FMCG major reported 13% growth in net profit, while volume growth dropped to 7% in the March quarter, compared to the double-digit growth over several quarters. Its profit reached ₹1,538 crore for the fourth quarter of fiscal year 2019, compared to ₹1,351 crore in year-ago period. While volume growth fell, the Ebita (earnings before interest, taxes, and amortization) margin was up by 90 basis points.
HUL’s earnings are the bellwether for India’s FMCG sector, helping gauge consumer demand and monitor sentiment.
The effect has been observed across all FMCG companies that have released their fourth quarter results. Biscuit maker Britannia Industries Ltd also saw a soft fourth quarter with 7% year-on-year volume growth. Vatika Shampoo-maker Dabur India Ltd also saw its net profit fall by 6.5% from a year earlier to ₹371.5 crore. “We don’t look at our businesses by quarter. For us, long-term growth is more important and we have done reasonably well so far. In a country like India, making these predictions (about slowdown), can go horribly wrong," said Deepak Iyer, managing director, Mondelez India.
To gain market share Mondelez is exploring mergers and acquisitions, as well as strategic investments in consumer startups. “Globally, there have been a number of areas where we are better off making acquisitions, where the company has some technology or an understanding of the consumer that we don’t have," Van de Put said.
In India, “investing in startups, as well as mergers and acquisitions are all on the table. We will do it as and when the right opportunity presents itself, and makes strategic sense for us," Iyer added.