Mondelez International, Inc. (MDLZ) recently announced the introduction of a new range of espresso capsules, which will be compatible with Nestle S.A.’s coffee making machine Nespresso. The company will launch these espresso capsules in two of its premium coffee brands of Jacobs and Carte Noire in Austria, France, Germany, and Switzerland in the later half of 2013. In addition the company intends to increase investments in its Tassimo coffee making systems, to make it a billion dollar brand.
Machines like Nespresso and Tassimo brew espresso from coffee capsules which are single-use container of ground coffee and flavorings. The launch of espresso capsules for use in the already popular Nespresso machines will boost sales of Mondelez’s premium coffee brands of Jacobs and Carte Noire. As such, its will help Mondelez International to penetrate further into the promising single serve coffee market.
As a part of its long term strategy, Mondelez intends to improve margins in Europe and North America by shifting the products mix towards high margin products. Margins on these products are 100- 200 basis points higher than other products. The company further intends to focus on reducing cost and improving savings in order to drive margin expansion in the long term. The introduction of these premium coffee brands espresso capsules comes in line with the company’s long term strategy.
Mondelez International focuses on the global food and snacks business of the erstwhile Kraft Foods. It markets products in fast growing food categories like chocolates, biscuits, gum, candy, coffee and powdered beverages, which include several popular brands like Tang, Oreo, Cadbury. On Oct 1, the erstwhile Kraft Foods spun off its North American grocery business into a separate independent company, Kraft Foods Group, Inc. (KRFT)
Mondelez International carries a Zacks Rank #3 (Hold).
Other food companies that have been doing well consistently are Flower Foods Inc. (FLO) and Omega Protein Corp (OME) both carrying a Zacks Rank #1 (Strong Buy).
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