Cadbury and Oreo owner Mondelez International is putting more money behind advertising during the second half of 2020 in a bid to keep the new consumers attracted to its brands in a year shaped by Covid-19.
The US snacks giant has seen the “household penetration” of its brands increase since the onset of the pandemic, as well as a rise in consumers re-buying their products. New consumers have been drawn in, too, and Mondelez is upping its expenditure on marketing to try to retain their custom.
“We’re a global company, so the situation is different from market to market, but, in general, I would say, in our two biggest markets North America and Europe, we are seeing big increases in penetration and in repeat buying of our products,” Mondelez chairman and CEO Dirk Van de Put told the online Barclays Global Consumer Staples Conference.
“We pulled back a little bit in the second quarter in our media investment and we’re re-shifting that into the second half. The second half compared to last year, or to any year, is going to show a very big increase in our working media.”
Mondelez’s spending on advertising its US biscuits – a collection of brands that has seen that household penetration rise – will grow by 60% in the second half, Van de Put said.
Noting how some of Mondelez’s “local brands” had also seen sales rise in 2020, Van de Put said US biscuit brand Honey Maid will receive “four times the level of investment” it had last year.
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He added: “In Europe, our working media are going up by 30% versus last year, so big increase and we believe that will create a big buzz around our brands.”
The threat of macroeconomic pressure hitting consumer spending is causing executives in the packaged-food industry to weigh up their strategies around pricing and promotions. Mondelez, Van de Put said, is “keeping an eye on value” as a way to attract consumers.
“In the US, that takes the form of multi-buys where we are trying to link brands with each other, so, for instance, buying Oreo and Ritz together, or more multi-packs and family packs as part of our assortment,” he said. “In Europe, that means we’re shifting our portfolio more to in-home consumption because that’s going to help the value drive.
“And then also pushing more, as well as our global brands, our local brands in Europe because they usually come at the lower price point. For instance, in Russia, we have Milka and Oreo but we also have Alpen Gold and Jubilee, which are the lower-value brands.”
Mondelez’s performance in emerging markets, part of the longer-term investment thesis for the business, is closely watched by the market. The company saw the biggest impact from Covid-19 on its emerging markets in April but the situation in most countries improved during the rest of the second quarter and into the third.
“Two-thirds of emerging markets we feel pretty good about the return to normality,” Van de Put, calling out Russia, China, south-east Asia and India, before adding: “India is probably the one in there that you want to sort of think a little bit through because, yes, it’s going better and we returned back to growth in June – not the same percentage growth as last year but pretty good – but there’s still a significant amount of the traditional trade that is closed and it remains to be seen at which level the consumption will settle.”
In the other third of Mondelez’s emerging markets, there is, he added, still some uncertainty about the outlook due to the presence of the virus.
“The other group, which is Middle East, Africa and Latin America, [they] are the markets where we think that the effect will be bigger and they’re not over their peak yet. [Covid-19] is still quite active and, on top, they will be hit by a stronger recession, which will affect the consumer more and, as a consequence, to our opinion, it’s going to take them longer to recover,” Van de Put explained.
“I don’t know about our colleagues but probably most companies were not having great momentum in Latin America before all of this started. That also will mean that it’s going to go a little bit slower.
“Now, Latin America is only 13% of our net revenue; Africa, Middle East is more the unknown. It’s not that it’s particularly negative at the moment, but it’s unclear how to exactly forecast what’s going to happen. It’s a smaller part of our portfolio and certainly of the emerging markets. We believe that, overall, emerging markets will come back quite well for us.”