Blog: Katy AskewPeltz 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. 

BLOG

Another reshuffling of pack at Hain Celestial

Hain Celestial, under the scrutiny of the investment community in recent months and facing some challenges in its domestic market, has announced another shuffling of its management pack....

BLOG

FrieslandCampina looking to sell final non-dairy asset

FrieslandCampina, which today served up higher profits but lower sales for 2016, is ready to offload the last non-dairy business owned by the Dutch cooperative giant....

BLOG

just-food back up and running

To follow on from our earlier notice and after some hard work from our technical team, just-food is back live after today's power outage....

NEWS

Bahlsen grows sales in 2016, adds to management board

Bahlsen, the Germany-based snacks maker, has reported an increase in sales in 2016 and added two more executives to its management board....

BLOG

Storm Doris causes power outage at just-food

Much of the UK has felt the impact of Storm Doris today - and just-food's head office has been no exception....

just-food homepage



Forgot your password?