With 70+ brands globally, Mondelez has long pursued a “local-first” strategy with a pipeline of innovation to meet evolving markets and changing consumer needs.
But - unless strategic decisions are taken to remove existing, slower selling lines – innovation quickly leads to brand proliferation, driving complexity, increasing operational costs, and eroding profit margins for branded organisations and retailers alike.
This concept is tied to the familiar pareto “80:20” principle and confectionery is no exception to this rule.
With over 150 brands in the category, just 20 confectionery brands represent ~65% brand £sales [data analysed from The Grocer Top Products reports].
Plus, the top 20 brands in confectionery have increased their share from 63% to 65% since 2011, so the tail of smaller, slower selling brands is getting longer....
Variety is important to consumers, especially in impulse categories like confectionery. But variety doesn’t mean more of the same …
Variety (noun) = the characteristic of often changing and being different
If the options available are not differentiated i.e. they don’t appeal to different consumers’ needs or for different occasions, then variety soon turns into duplication and proliferation.
In the depths of the Mondelez annual report is a section entitled Simplify to Grow a simple yet powerful statement of intent that Mondelez are putting into action.
Dirk Van de Put Mondelez Chairman & CEO explained in an investor interview July 2020
“My experience in many other consumer goods companies is that, in general, what has happened over the years is that people are chasing growth.
Our sales are better, the shelf looks cleaner and we get some benefits from it”
The question many are asking is why hasn’t this happened sooner?
And why aren’t more CPG companies harmonising their portfolios?
In our experience, the answer lies in Michael Porter’s theory on strategy that strategy is about making tough decisions.
Strategy is about making choices, backed by supporting evidence, rigorous thinking and getting others on board.
Strategy is about trade-offs, saying no to certain options and taking calculated risks.
If it was easy, everyone would be doing it.
As these are unprecedented times perhaps there is no better time for brand managers to look at lessons from successful companies such as Mondelez.
Time to take stock, walk away from brands or skus that are a drain on resources and focus their efforts on the markets and the brands that have the propensity for future growth.
The original article was published on LinkedIn on 29 Sep 2020
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