- Mondelez International said it is conducting a "strategic review" of its gum segment that includes brands such as Trident and Dentyne, Luca Zaramella, the company's CFO, said at a Wall Street conference.
- The snack giant is focused on restoring the segment to pre-COVID-19 levels before it decides to "potentially assess whether there are other avenues for us to create more value for Mondelez shareholders," Zaramella said. A company spokesperson told Food Dive Mondelez is "looking at all options to improve value" in gum and that "there are no foregone decisions."
- Gum has been one of the hardest hit segments during the pandemic as consumers spend less time on the go where much of the consumption in the category takes place.
As consumers started spending more time snacking, Mondelez embraced the trend with an enviable portfolio of brands including Oreo, Ritz and Triscuit.
But Mondelez also has looked to stoke growth by acquiring brands, including Hu, a maker of premium snacks and chocolates made from simple ingredients, and a majority stake in Perfect Snacks, the manufacturer of organic, non-GMO, nut butter-based protein bars and bites. Earlier this week it snapped up Chipita, a Greek company that makes croissants and baked snacks.
The strategy to double down on snacks has made its gum business, which also includes Bubblicious and Stride, somewhat of an out-of-place category at the Chicago-based company. Its troubles were further exacerbated during COVID-19.
While Mondelez hasn't definitively decided what it will do after the review — it could ultimately decide to keep gum — a sale would be the most likely option given the position in its portfolio and the cash a sale could generate. The money could be spent on innovation or to purchase other snacking brands.
Gum as a whole has struggled. Candy Industry noted the whole gum category generated $2.88 billion in the year ended June 14, 2020, down 8.2% from the prior year, citing data from IRI. Unit sales dropped 14.6% to 1.52 billion during the same period. According to Nielsen data, the gum segment saw the largest sales decrease amid the pandemic during the 31-week period ending Oct. 3 compared to the same time period in 2019.
Mondelez said in its recent earnings in April that the gum and candy business business declined approximately 16% during the quarter and 8% on a two-year basis. Zaramella said "comparisons will become easier as we move into the second quarter, though we are expecting a gradual recovery."
Gum is 5% of Mondelez's total revenue, Zaramella said at the conference. With Mondelez posting sales of $26.6 billion in 2020, an increase of 2.8% from 2019, gum would have posted revenue of roughly $1.3 billion.
With Mondelez expecting a rebound in gum and candy from its pandemic-induced drop, it makes sense for the company to look for ways to improve the segment by boosting sales and profit margins. Then once its health has improved, it could move forward on a sale or another option.
Possible acquirers of the gum business include a sale to Ferrera, a division of Nutella-maker Ferrero that has been bulking up its U.S. presence through a series of deals, a smaller candy company or a private equity firm. Mars Wrigley, which owns Big Red, DoubleMint and Juicy Fruit, among other gum brands, also would likely be interested given its presence in the category and close relationships with retailers and convenience stores.