Blog: Peltz ups pressure on Mondelez
Katy Askew | 30 October 2013
Activist investor Nelson Peltz is apparently not a man to be easily disparaged.
Through his investment vehicle Trian Fund Management, Peltz issued a call this summer for PepsiCo to split into pure-play drinks and snacks businesses and merge the latter with Mondelez International. The move, which Peltz said would generate significant value for shareholders, was roundly rebuffed by the management of each company, with PepsiCo's CEO Indra Nooyi mounting a particularly strong defence.
Peltz's analysis on Mondelez focused on the group's lower-than-average margin. Peltz insisted that the company is struggling to get its margins up to standard. Even on a stand-alone basis, Peltz insisted Mondelez can get its margins moving in the right direction - and a lot more quickly than management has targeted.
According to Trian's analysis, the investment firm has identified a 400 basis point margin opportunity. This is consistent with management's long-term 14-16% margin target. However, Peltz is apparently working to a different timetable and believes that margin improvement can be achieved more quickly than Mondelez is currently targeting. As he said at CNBC's Delivering Alpha conference in July, he is "not getting any younger".
With a large stake in Mondelez - as the group's fourth largest shareholder - it would seem that Peltz is unwilling to let the issue drop.
According to a report in the Wall Street Journal, Peltz has gone on the offensive again. In a presentation delivered in Chicago this week, Peltz insisted Mondelez could nearly double EPS through tighter cost management. Peltz also said Mondelez should be able to boost its operating income margin to 18% from 12%, the WSJ reported.
Peltz has reportedly shared his proposals with members of the Mondelez board, but not yet gone fully public with his plan.
Meanwhile, Mondelez is moving ahead with its own plan to boost margins. Last month, the Oreo and Cadbury owner revealed details on a revamp of its production network as well as supplier and SKU rationalisation. Nevertheless, the group is also pushing forward with high levels of investment in its emerging markets business.
Whatever the impact of this latest offensive from Peltz, it is clear that Mondelez's margin will remain in the spotlight for some time to come.
The BBC turned to just-food today for insight on the price dispute between Tesco and Unilever....
Just weeks after buying UK turkey processor Bernard Matthews from administration, food tycoon Ranjit Boparan has struck a similar deal....
Shares in Tyson Foods slumped on Friday, closing down almost 9% after an analyst claimed a lawsuit facing the company could hit the US meat titan....
- It won't just be Unilever to push for Brexit hikes
- Price an underlying tension across European FMCG
- Danone's Q3 sales - what the analysts say
- Interview: UK trade body on Brexit's policy impact
- Interview: UK trade body on the impact of Brexit
- PepsiCo sets 2025 nutrition, sustainability goals
- Nestle lowers outlook on "softer environment"
- China "transition" drags on Danone Q3
- UK announces "action plan" to drive food exports
- CP Foods invests in UK foodservice firm Foodfellas
- The Big 15: Strategies and Priorities of Top Packaged Food Players in Comparison
- Omega-3 in Food and Beverage:Time for a Reboot?
- Constellation Brands, Inc. (STZ) - Financial and Strategic SWOT Analysis Review
- Packaged Food: Quarterly Statement Q3 2016
- Global Food Packaging: Innovating for Greater Convenience and Quality Image