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TEACHING NOTE
CASE 21
Mondelēz International
Overview
Mondelēz International was among the world’s largest snack foods makers with seven billion-dollar
brands including Cadbury, LU, Milka, Cadbury Dairy Milk, Trident, Nabisco, and Oreo. The company’s
brand portfolio in 2016 included another 44 well-known brands such as Triscuit, Toblerone, Wheat
Thins, Ritz, Philadelphia, Nilla, BelVita, Chips Ahoy!, and Tang. Even though some of its brands had histories
dating beyond 100 years, the company had only come into existence in 2012 after a corporate restructuring at
Kraft Foods. Kraft Foods Inc. was the world’s second largest processed foods company in 2012 with annual
revenues of more than $54 billion in 2011. The company’s global lineup of brands included Maxwell House,
Oreo, Cadbury, Chips Ahoy!, Honey Maid, Dentyne, Velveeta, Cheez Whiz, Oscar Mayer and Kraft. In all,
the company had 12 brands with annual revenues exceeding $1 billion each and approximately 80 brands that
generated annual revenues of more than $100 million each. The majority of Kraft Foods’ brands held number-
one market shares in their product categories, which created strong business units in North America, Europe,
and developing markets.
Even though Kraft Foods’ business units produced strong profits, slow growth in the processed foods industry
in North America and parts of Europe had restricted the company’s ability to deliver increases in shareholder
value. In fact, the trading range of the company’s shares in 2011 was relatively unchanged from that in 2007
when it became an independent company after a spinoff by the Altria Group (formerly Philip Morris). Some of
the lackluster growth in its share price could attributed to the economic slowdown that began in 2007, but the
company’s upper management and its board believed the underlying cause of its poor market performance was
a corporate strategy that was not sufficiently focused on growth.
The company implemented a corporate restructuring in 2012 to create a high growth global snacks business and
a high margin North American grocery business. The new snacks oriented company would include all of Kraft
Foods’ business units and brands in Europe and developing markets, plus its U.S. snacks business and would
be named Mondelēz International. Mondelēz (pronounced mohn-dah-Leez) was a newly coined word that drew
upon mundus, the Latin root for the word “world”, and “delez” was meant as an expression of “delicious.”
The creators of the name added “International” to capture the global nature of the business. The remainder of
the company’s Kraft Foods North American business unit would become known as Kraft Foods Group upon
completion of the spinoff.
By 2016, Mondelēz International had successfully achieved its internationalization goals, with 79 percent of
its revenues generated outside the United States in 2015. But the United States remained the company’s largest
market, making up 17 percent, 18 percent, and 21 percent of its sales in 2013, 2014, and 2015, respectively. No
other country accounted for 10 percent of Mondelēz’s sales.
Corporate Restructuring Produced
Shareholder Value?
: Has
Case 21 Teaching Note Mondelēz International
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However, the overall effectiveness of the corporate restructuring was questionable with the company’s stock
performance largely tracking the S&P 500 and its revenues in decline. The company’s income from continuing
operations grew from 2014 to 2015, but only because of a $6.8 billion pre-tax gain from the spin-off of its cof-
fee business in France. Drawing focus on the need for improved performance, activist investor William Ackman
took a $5.5 billion stake in the company in July 2015. Mr. Ackman believed that management should dramati-
cally improve the company’s performance or that the company should be a candidate for acquisition by a better
performing industry rival.
Suggestions for Using the Case
The case is ideal for use in your module on corporate diversification strategies and illustrates concepts from
Chapters 1, 4, 5 and 8. It can be used to illustrate industry analysis and to examine corporate structure as well as
strategy. The case gives ample financial data to analyze the various business segments and whether the spinoff
might unlock the growth of the snack operations.
Students are typically surprised to learn the breadth of the holdings in Mondelēz International’s global lineup
of products. The array of household names in Mondelēz International’s stable of products is quite impressive.
Students are often perplexed how such an array fails to produce shareholder value. Professors should be prepared
to spend a little time ‘unwrapping’ the vagaries of the processed food business. Owning 7 brands with sales
exceeding $1 billion each did not shield the company from maturity. Professors may want to query their classes
whether they (or their parents) have altered their consumption patterns over the past several years. Professors may
even as the students to conduct a census of the of Mondelēz International products in their home or apartment
pantry.
Answers to these questions will help highlight the role of processed foods in our daily lives and set the stage for
a discussion of the challenges that faced Mondelēz International.
Videos for Use with the Mondelēz International case. There are two videos that you can show in class
(or have students view on their own):
A 2:51-minute 2015 CNN Money interview with CEO Irene Rosenfeld concerning the company’s
turnaround entitled “Be Straight with People,” that can be accessed at https://www.youtube.com/
watch?v=Lo–USeFhCE.
A 2:51-minute Bloomberg 2016 video concerning “Why Hershey Rejected Mondelez’s $23 Billion
Takeover Offer” that can be accessed at https://www.youtube.com/watch?v=pZ2I1Y4RGqc.
Links to the two videos are also posted in the instructor resources section of the Connect Library.
One option is to show either or both videos right before you ask the class for action recommendations, but you
can also show them at the beginning of the class period if you prefer.
The Connect-based Exercise for the Mondelēz International case. We developed an exercise for
Mondelēz International for inclusion in the publisher’s Connect™ Management web-based assignment and
assessment platform because of the case’s focus on Mondelēz International’s diversification strategy and its
effectiveness in drilling students in applying the core concepts and analytical tools discussed in the Chapter 8.
This particular Connect-based exercise focuses on the following five questions:
1. What is your assessment of the long-term attractiveness of the industries represented in Mondelēz
International’s business portfolio?
2. What is your assessment of the competitive strength of Mondelēz International’s different business units?
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3. What does a 9-cell industry attractiveness/business strength matrix displaying Mondelēz International’s
business units look like?
4. Does Mondelēz International’s portfolio exhibit good strategic fit? What value-chain match-ups do you see?
What opportunities for skills transfer, cost sharing, or brand sharing do you see?
It should take class members roughly 45 minutes to complete the exercise, assuming they have done a conscientious
job of reading the case and absorbing the information it contains. All of the questions are automatically graded,
and the grades are automatically recorded in your Connect grade book, which makes it easy for you to evaluate
each class member’s ability to apply many of the concepts and analytical methods in Chapter 8.
What to Tell Students in Preparing the Mondelēz International Case for Class. To give students
guidance in what to do and think about in preparing the Mondelēz International case for class discussion, we
strongly recommend two things:
1. Have class members complete the Connect-based exercise for the Mondel
ē
z International case in the
event you have adopted the Connect software for your course.
OR
2. Provide class members with assignment questions and insist that they prepare good notes/answers
to these questions before coming to class. Our recommended assignment questions for the Mondelēz
International case are presented in the next section of this TN. You may wish to have the class concentrate
their attention on a subset of these questions, depending on what you want to concentrate on during the
class discussion.
To facilitate your use of assignment questions and making them available to students, we have posted a file
of the Assignment Questions contained in the instructor resources section of the Connect Library for the 21st
Edition.
In our experience, it is quite difficult to have an insightful and constructive class discussion of an assigned case
unless students have conscientiously have made use of pertinent core concepts and analytical tools in preparing
substantive answers to a set of well-conceived study questions before they come to class. In our classes, we
expect students to bring their notes to the study questions to use/refer to in responding to the questions that
we pose. Moreover, students often find that a set of study questions is useful in helping them prepare oral
team presentations and written case assignments—in addition to whatever directive question(s) you supply for
these assignments. Hence, we urge that you provide students with assignment questions—either those we have
provided or a set of your own questions—for all those aspects of a case that you believe are worthy of student
analysis or that you plan to cover during your class discussion.
Utilizing the Guide to Case Analysis. If this is your first assigned case, you may find it beneficial to have
class members read the Guide to Case Analysis that follows Case 31 and is also available in the instructor
resources section of the Connect Library. The content of this Guide is particularly helpful to students if your
course is their first experience with cases and they are unsure about the mechanics of how to prepare a case for
class discussion, oral presentation, or written analysis.
You may also find the case suitable for use as a written assignment or oral team presentation. Our suggestions for
assignment questions are as follows:
1. You have been asked by the Mondelēz International’s board of directors to evaluate the attractiveness
of the company’s current business lineup and its proposed spinoff of the North American grocery busi-
ness. Please prepare a 3-page report in executive summary format that describes your assessment of its
business lineup in 2016 and discusses strategic moves to improve the company’s financial performance.
Your recommendations might include an investment priority, moves to exploit strategic fit opportuni-
ties, and suggestions for further strengthening of Mondelēz International’s business lineup and brand
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portfolio. You should also attach exhibits describing the attractiveness and strength of the company’s
businesses (a 9-cell industry attractiveness/ competitive strength matrix), examining the strategic fit
opportunities between various products and brands, and reviewing the company’s recent financial per–
formance.
2. Please prepare a 5-6 page report that evaluates Mondelēz International’s corporate strategy and makes
additional recommendations to improve its financial performance. Your report should assess the attrac-
tiveness of the company’s business lineup in 2016, examine strategic fit, review recent financial perfor–
mance, present an investment priority, consider the further divestitures or appropriate acquisitions, and
make recommendations concerning how to enhance the company’s strategy and future performance.
Please attach whatever exhibits to your report you deem necessary.
Assignment Questions
1. What is Mondelēz International’s corporate strategy? How has its corporate strategy evolved since its
independence in 2007?
2. What is your assessment of the long-term attractiveness of the industries represented in Mondelēz
International’s business portfolio?
3. What is your assessment of the competitive strength of Mondelēz International’s different business units?
4. What does a 9-cell industry attractiveness/business strength matrix displaying Mondelēz International’s
business units look like?
5. Does Mondelēz International’s portfolio exhibit good strategic fit? What value-chain match-ups do you see?
What opportunities for skills transfer, cost sharing, or brand sharing do you see?
6. What is your overall evaluation of Mondelēz International’s corporate strategy and restructuring since
2012? What evidence and/or reasons support a conclusion that Mondelēz International’s shareholders have
benefitted from the spinoff of the company’s North American grocery business?
7. What actions do you recommend that Mondelēz International management take to improve the company’s
performance and boost shareholder value? Your recommended actions must be supported with convincing,
analysis-based arguments.
Teaching Outline and Analysis
1. What is Mondelēz International’s corporate strategy? How has its corporate strategy evolved
since its independence in 2007?
Mondelēz International, as a corporate entity, resulted from the 2012 spinoff of Kraft Foods’ North American
grocery business to shareholders. Students should quickly classify the strategy as one of related diversification
with a focus on snack brands.
Kraft Foods acquired most of its brands through acquisition and mergers. For example, as early as 1928
Kraft Cheese Company merged with Phenix Cheese Corporation (maker of Philadelphia Cream Cheese).
Mergers and acquisitions continued to shape the company’s business and brand lineup through 2016. Key
mergers and acquisitions are listed below:
1988: Philip Morris Companies purchase of Kraft for $12.9 billion. Philip Morris’ acquisition of Kraft
was part of a corporate strategy focused on diversifying the company beyond its well-known cigarette
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2000: Philip Morris’ $18.9 billion acquisition of Nabisco brands. Kraft Foods’ return to independence
began in 2001, when Philip Morris (renamed Altria Group in 2003) began the divestiture of its non-tobacco
2010: Kraft Foods sold its North American pizza business to Nestlé in 2010 for $3.7 billion. Kraft’s
frozen pizza brands included the DiGiorno, Tombstone, Jack’s brands in the United States and the Delissio
brand in Canada. The company’s divested pizza business also produced and distributed California Pizza
Kitchen branded frozen pizzas under license.
2015: The company exited the coffee business with a financial transaction that combined its coffee
brands with those of Netherlands-based D.E. Master Blenders to create a new company, Jacobs Douwe
Egberts (JDE). Mondelēz recorded a pre-tax gain of $6.8 billion in 2015 and retained a 43.5 percent equity
2. What is your assessment of the long-term attractiveness of the industries represented in
Kraft Foods’ business portfolio?
Students will be quick to point out that Kraft executives saw more attractive prospects for all the businesses
targeted for Mondelez. Mondelez would include Philadelphia cream cheese, chocolates, gums and candy,
coffee brands, and snacks such as Oreo, Chips Ahoy!, Newtons, Wheat Thins, etc. along with all Kraft
businesses in Europe and developing markets. The ‘high-margin but slow-growth’ businesses destined for
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Kraft Foods included U.S. beverages, convenient meals, grocery and foodservice. No matter how positive
the executives were concerning the high dividends projected for Kraft Foods post spin-off, the growth
prospects of these businesses were not attractive.
Of course, astute students will question the meaning of ‘attractiveness.” Is it sales growth, profitability
TABLE 1. Compound Annual Growth Rates for Mondelēz International’s Net Revenues by Product
Category, 2013-2015
Product Category
CAGR
(2013-2015)
Biscuits -1.3%
Calculated from case Exhibit 4.
Students may also use subjective assessments of the product markets represented in Mondelēz International’s
business lineup to prepare industry attractiveness calculations as discussed in Chapter 8. Our estimation of
the attractiveness of Mondelēz International’s business segments are presented in Table 2 below.
TABLE 2. Industry Attractiveness Assessment for Mondelēz International’s Business Segments
Intensity of competition 0.2 3/0.6 3/0.6 6/1.2 6/1.2
Emerging opportunities and
threats 0.1 5/0.5 5/0.5 5/0.5 5/0.5
Product innovation 0.25 3/0.75 3/0.75 3/0.75 4/1.0
Social, political, environmental,
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3. What is your assessment of the competitive strength of Mondelēz International’s dierent
business units?
Question 3 is a natural extension of the previous question. Students will readily use the case information that
of Mondelēz International has 7 brands with sales in excess of $1 billion and the majority of the company’s
brands held number-one market shares in their product categories as proof of Mondelēz International’s
competitive strength. While this is certainly true professors should encourage students to bolster their case
with additional numbers. Students should be able to use the case information and the business competitive
strength assessment tools discussed in Chapter 8 to prepare business strength calculations similar to what is
shown in Table 3.
TABLE 3. Competitive Position/Business Strength Calculations for Mondelēz International’s
Business Units
(Scale 1 = very weak, 5 = average, 10 = very strong)
Strength Measures Wgt. Beverages
Cheese &
Grocery
Chocolate, Gum
& Candy Biscuits
Relative market share 0.2 4/0.8 8/1.6 10/2.0 9/1.8
4. What does a 9-cell industry attractiveness/business strength matrix displaying Mondelēz
International’s business units look like?
Students should be able to use industry attractiveness and business competitive strength calculations similar
to what are shown in Tables 2 and 3 to prepare a 9-cell matrix for Mondelēz International’s businesses.
Using the guidelines provided in Chapter 8 along with case information and the information from their
analysis from the two preceding questions in the teaching note, students should be able to construct a
9-cell industry attractiveness/business strength matrix similar to the following. To draw a 9-cell industry
attractiveness/business strength matrix for Mondelēz International, students really need to prepare industry
attractiveness ratings for each of the industries in which Mondelēz International competes and calculate
competitive strength ratings for each of Mondelēz International’s business segments. These ratings should