Mondelez International, which was recently formed following the separation of the confectionary and grocery businesses of American food major Kraft, has announced that it will invest $400 million (or Rs 2,200 crore) into cocoa production in India, Ghana and the Dominican Republican over the next ten years in a move aimed at securing supplies.
The company, which has brands such as Cadbury and Oreo, will work closely with cocoa producers in these countries as well in the Ivory Coast, which is the largest cocoa-producing country in the world. The development comes at a time when Mondelez is looking to increase revenues from emerging markets.
The company already derives a sizeable chunk of its $35 billion revenues from markets outside the US. But faced with the prospect of slow growth in developed markets, it has been turning its attention to markets such as India, China, Brazil and Russia in the last few years.
During her first official visit to India last year, Kraft's global chairperson, Irene Rosenfeld, who initiated the split between the confectionary and grocery businesses and has been put in charge of Mondelez, had said that she was keen to see the company in the top five list of food majors in the country. India currently remains small when compared to Brazil, Russia and China for Mondelez.
But the business in India has been growing at over 25 to 30% per annum over the last few years. The company closed the 2011 calendar year with sales of Rs 3,359 crore - a growth of 35% over the previous year. The company is likely to retain this momentum in the current calendar year too despite a slowdown in discretionary food spends.
This has partly to do with the action initiated by the company on the brand front. Mondelez has integrated Kraft brands - Oreo, Tang and Toblerone - which were distributed independently in the country prior to the $19.7-billion acquisition of Cadbury in 2010.
Since then Mondelez has rapidly gained share in categories such as biscuits, which were new areas for it. In chocolates, it retains leadership through Cadbury, which has an over 70% share in India. In biscuits, it has a share of about six to seven%.
In a recent interaction with Business Standard, the company's director, snacking & strategy, Chandramouli Venkatesan, had said that it was looking to consolidate its presence in cookies and creams, which constitutes 40% of the Rs 12,000-crore biscuit market by value, higher than the staple glucose segment. Oreo is a cream cookie.
The company recently launched a chocolate cream variant of Oreo in addition to the classic vanilla variant, which is popular across the world. Kraft had priced this new variant at a slight premium to its vanilla flavour available at Rs 5, Rs 12 and Rs 25 respectively. The Rs 5 price point has been done away with for the new variant, with the company opting instead for price points of Rs 15 and Rs 30.
It has also been pushing the new variant aggressively at retail outlets in a bid to improve penetration. The company also continues to innovate in categories such as powdered beverages with a thick format of Tang introduced earlier this year.
