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.
Today (23 December) is just-food's last day before closing for Christmas. We'll return, raring to go on Tuesday 3 January - but of course there's been plenty of top-notch content that has gone live in...
The plethora of food manufacturing associations in the UK has been argued by some to be an impediment to the industry coming to a coherent position on the aftermath of Brexit and on what the sector sh...
- 2017: three major drivers of M&A strategy
- Comment: Premier has more to ponder than Brexit
- The food market in 2017 - consumer trends and M&A
- Food market in 2017: need-to-know US trends
- Trump seen as negative for global food trade
- Premier Foods issues profit warning
- Nestle mum on Mead Johnson takeover talk
- Mondelez sells Vegemite to Bega
- Kellogg to slash 250 jobs
- Lindt sees FY sales acceleration on Europe growth