The Spin-Off

“Market Cap $59.23 B As of May 2014

At a Glance

Industry: Food Processing #148 Global 2000

Founded: 1896
Country: United States #258 in Sales
CEO: Irene Rosenfeld #160 in Profit
Website: www.kraft.com #345 in Assets
Employees: 107,000 #156 in Market value
Sales: $35.3 B #52 Innovative Companies (#63 in 2012)
Headquarters: Deerfield, Illinois
Forbes Lists #46 World’s Most Powerful Brands (2012)
The Industry
Vision& Values
• The Vision for our organization: to build the best snacking
company in the world.
• Mondelez Values:

- Discuss , decide and deliver

- Lead from the head and the heart
- Act like owner
- Tell it like it is
- Keep it Simple
Mondelez Strategic Choice

• Mondelez international apply the broad differentiation strategy in

order to compete with low cost competitors.

• Mondelez apply the related diversification strategy as a

Multibusiness international company.

• Accordingly the broad portfolio of brands they have comes from

series of merger and acquisitions.

• Mondelez top management goal from this diversification is to

increase the Shareholder value.
Mondelez Strategic Options used in Diversification

Sticking with the existing business ( snack food maker)

and pursuing opportunities presented by this business.
Example: Acquisition of US Enjoy life food / divestiture of it is 50%
interest in Japanese coffee join venture

Strategic Options Retrenching to a narrower scope of diversification by

divesting poorly performing businesses
Example: Spin off the coffee business in France, result in $ 6.8
billion pretax gain
 Tests for building shareholder value through
diversification

Tests for building

shareholder value through
diversification

Industry Cost-of-entry Better-off

attractiveness test test test

We didn’t found any reference that Mondelez apply the last two tests in all of the series of merger
and acquisitions they did, and this due to the following:
- They expanded to industries have same value chain “ strategic fit”
- They apply the horizontal strategy in order to eliminate and control the competition
Approaches to Diversifying the Business Lineup

Options for entering new industries and

lines of business

Diversification by acquisition of an existing business like

the acquisition of Enjoy life food by this they added
allergen free, gluten free chips, nut free chocolate.
Advantages of related diversification used by
Mondelez

• Enhance the shareholder value by capturing cross-business strategic fit.

 Transfer skills from business to another

 Share facilities and resources to reduce the cost
 Leverage the use of common brand name “ Mondelez”

• Strategic fit exists when the value chains of different businesses present
opportunities for cross-business skills transfer, cost sharing, or brand sharing
and this the case in all acquisitions and merger that Mondelez or Kraft were
did in order to reach this broad product range
The Ability of Related Diversification to Deliver Competitive Advantage and Gains
in Shareholder Value

• Cross-business strategic fit :

• Builds shareholder value in ways that shareholders cannot replicate by simply

owning a diversified portfolio of products.
• Captures benefits that are possible only through related diversification.
• Does not automatically result in benefits, it must be pursued by management in
order to capture the greater profitability of cross-business benefits
Evaluating the Diversified Strategy of Mondelez

Step1: Evaluating Industry Attractiveness

Measures used to evaluate industry attractiveness:

1- Market size (attractive)

• Big industries are more attractive than small industries.

• Mondelez had operations in more than 80 countries and sold it is products in 165 countries

2- Intensity of competition (unattractive)

• Industries in which competitive pressures are relatively weak are more attractive.
Mondelez industry is intense with competitors. (Hershey Co, Procter & Gamble Co, Pepsico Inc).

• Comparing the results to its competitors, Mondelez International Inc reported Total Revenue increase in
the 2 quarter 2018 by 2.1 %.
Industry Attractiveness – North American Markets
Industry Attractiveness – European Markets
Industry Attractiveness – Developing Markets
 Evaluating the Diversified Strategy of Mondelez
Step2: Evaluating Business-Unit Competitive Strength
Measures used to evaluate Competitive Strength:
1- Relative market share (weakness)
• High relative market share comparing with competitors considered as a competitive strength.
• Market share per segment for 2017 Segment Market share
Cheese & Grocery 3.29%
Biscuits 7.78%
Beverages 2.64%

2- Brand image and reputation (Strength)

• Powerful brands of snacks foods across the 165 countries.

• Brands such as Oreo, Milka, Cadbury, Nabisco and Tang are Popular in almost all markets where the
company competed.
Competitive Strength
Competitive Strength
Competitive Strength
Nine cell industry attractiveness and Competitive Strength Matrix
 Evaluating the Diversified Strategy of
Mondelez
Step3: Determining the Competitive Value of Strategic Fit in Multi-business Companies

Mondelez provide competitive advantage through :

 Mondelez International portfolio exhibits good strategic fit because 12 of their brands have
annual revenues exceeding $1 billion each and approximately 80 brands that generated
annual revenues of more than $100 million each.

 When it comes to value, chain match ups all business units share marketing power,
distribution channels to create strong selling capacity. All business units share direct or
indirect customer service with the Mondelez brand name.

 Being that they are a multi business organization, they have the ability to share skills that
could help create stronger operation performance .
 Evaluating the Diversified Strategy of
Mondelez
Step 4: Evaluating Resource Fit
-A diversified firm’s lineup of businesses exhibit good resource fit when:

• Each of a firm’s businesses, individually, strengthen the firm’s overall mix of

resources and capabilities.

Mondelez the brands Oreo, Milka, Cadbury, Nabisco and Tang are the main
strength of the firm’s overall mix resources and capabilities .

• A firm has sufficient resources that add customer value to support its entire group
of businesses without spreading itself too thin.

Mondelez was committed to provide additional resources to expand marketing and

sales in the emerging markets to add customer value .
 Evaluating the Diversified Strategy of
Mondelez
Step 4: Evaluating Resource Fit cont .

- Use a portfolio approach to determine the firm’s internal capital market requirements:

• Which businesses are cash hogs in need of additional funds to maintain growth and
expansion?
• Which businesses are cash cows with cash flow surpluses available to fund growth
and reinvestment?
 Evaluating the Diversified Strategy of
Mondelez
Step 5: Rank the performance of the businesses from best to worst and determine a
priority for allocating resources.

• For the last four years, the global snacking powerhouse has seen a decline in net
revenue. Like other companies operating in the chocolate industry.

• The company Net revenues was dropping as following:

 
2016 2015 2014
Net Revenue $25,923 $29,636 $34,244
Cost of sales 15,795 18,124 21,647

Gross Profit 10,128 11,512 12,597

Net Earnings 1,669 7,267 2,184

• The deconsolidation of the global coffee business in 2015,
• The deconsolidation of Venezuela operations beginning with our 2016 results,
currency and other items significantly affect the comparability of our
consolidated and segment operating results from year to year.

Our brands span five product categories:

• Biscuits (including cookies, crackers and salted snacks)

• Chocolate
• Gum & candy
• Beverages (including coffee through July 2, 2015 and powdered beverages)
• Cheese & grocery
 Evaluating the Diversified Strategy of Mondelez

Step 6: Crafting New Strategic Moves to Improve Overall Corporate Performance

1. Stick closely with existing business lineup and pursue opportunities it presents.

• Offer attractive growth opportunities, good earnings, and cash flows.

• Are in a good position for the future and have good strategic and resource fits.
• Have resources that management can steer into areas with the greatest
performance and profit potentials.
• Example: Acquisition of US Enjoy life food
2- Divest some businesses and retrench to a narrower base of business operations.

Retrenchment to focus resources on building strength in fewer businesses requires divesting or

eliminating:

• Once-attractive businesses in deteriorating markets

• Businesses that will have a poor strategic or resource fit in the firm’s future
portfolio
• Cash hog businesses with poor long-term investment returns potential
• Weakly-positioned businesses with little prospect for earning a decent
return on investment
• Example : Spin off the coffee business in France, result in $ 6.8 billion
pretax gain
 Conclusion and 2018 Fact Sheet
• Summary :

We noticed continuous decline in revenue [2014-2016] regardless the spike

increase between due to pre-tax gain of $ 6.8B result from the spin off coffee line .

Meanwhile the stock value shows continues increase during 2014,15,16 due to the
following rumors involving :

1- Attempt to acquire Hershey

2- Kraft-Heinz was planned to acquire mondelez
3- Kraft-Heinz plan to merge with Unilever
 Building the Best Snacking Company in the World

Mondelēz International, Inc. (NASDAQ: MDLZ) is one of the world’s largest snacks companies, with
2017 net revenues of approximately $26 billion

Strength :
A Portfolio of Consumers’ Favorite Brands
 Building Positive Impact for People and our Planet

Building positive impact for people and our planet is at the core of
who we are. We call this Impact For Growth – our commitment to
driving business growth with positive change in the world. Guided
by integrity and transparency, we’re focused on making an impact
across four areas: