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Mondelez' Expansion Plans on Track as Buyout Spree Continues

Zacks Equity Research

Mondelez International, Inc.’s MDLZ strategic acquisitions have been an integral part of its growth strategy. The company has undertaken several buyouts to expand customer base. In fact, management plans to focus on enhancing the snacking portfolio, an area which is growing rapidly globally. Backed by these initiatives, the stock has surged 40.5% in the past six months outperforming the industry’s growth of 13.7%.

In this regard, the company has recently inked a deal to buy majority interest in Perfect Snacks. Being a pioneer in the fast-growing refrigerated nutrition bars segment, Perfect Snacks offers original refrigerated protein bar along with organic, non-GMO, nut-butter based protein bars and bites. Moreover, Perfect Snacks generated revenues of nearly $70 million in 2018, reflecting double-digit revenue growth year over year.

The inclusion of the above-mentioned products is likely to strengthen Mondelez’ portfolio, which already includes global and local brands like Oreo, Cadbury, Milka and belVita, and Tate’s.  Further, this move is in sync with the company’s plans to take on the global snacking industry in wake of the growing popularity of bars and snacking.

Per the deal, Perfect Snacks will operate as a separate business from its existing headquarter in San Diego, CA under the leadership of Bill, Leigh and Charisse Keith and they will retain a minor interest in the company. As of now, the deal is subject to customary closing conditions and is expected to conclude late this summer. Financial details of the transaction have been kept under wraps.

With this acquisition, Mondelez will strengthen presence in the U.S. refrigerated snacks segment that accounts for one third of the total U.S. snacking market and delivers revenues of $20 billion annually. Further, well-being snacks, which include nutrition bars, packs with nuts and fruits, yogurts and hummus, account for $7 billion of total revenues in snacks market.

Speaking of prior developments to bolster presence in the snacks arena, Mondelez invested in Hu Master Holdings — a renowned company offering high quality snacking items in April 2019. By collaborating with Hu Master, the company expects to make wellness-oriented snacks. In fact, Hu Master — the parent company of Hu Kitchen and Hu Products — boasts a portfolio of premium bands that focuses on healthy and vegan/paleo-friendly snacking options.

This apart, Mondelez acquired premium cookie brand, Tate’s Bake Shop for $500 million in June 2018. In the same year, the company launched an innovation hub namely SnackFutures under which it plans to continue innovating products. Additionally, in January 2018, the company teamed up with Post Consumer Brands, a business unit of Post Holdings, to create two new cookie-inspired breakfast cereals. Going ahead, Mondelez plans to offer more good-for-you snacks and expects 50% of its product portfolio to comprise “well-being” items by 2020.

All said, we hope that such well-chalked out efforts will provide support to the Zacks Rank #3 (Hold) stock amid unfavorable currency movement and high input costs.

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