- Mondelez International Inc. CEO Irene Rosenfeld has decisively cut costs throughout the company, but according to some, more may be necessary to keep up with other companies, as Mondelez's margins still lag behind the competition.
- Activist investor William Ackman announced his company's $5.5 billion, 7.5% stake in Mondelez earlier this month, and has said that Mondelez should either cut costs considerably or sell itself to a competitor.
- Mondelez's operating profit margin was about 12% in 2014, whereas the average for major U.S. food companies was around 15.8%, Bernstein analyst Alexia Howard told The Wall Street Journal.
Some investors believe that Mondelez could "pare expenses, including by reshaping distribution, or shed business lines to concentrate more on snacks," The Wall Street Journal reported.
"We think Mondelez has by far the greatest cost-saving opportunity among its peers," Ali Namvar, a partner at Pershing Square, said during an investor conference call earlier in August.
Mondelez has followed investors' advice in some respects, having completed a merger of its coffee business with D.E Master Blenders 1753 BV to create Jacobs Douwe Egberts, now the global leader in pure-play coffee, which Mondelez can still profit from with its 44% stake. Following this deal, approximately 85% of Mondelez's net revenues now come from its snacks segments, including biscuits, chocolate, gum, and candy.
This and other efforts enabled Mondelez to increase its adjusted operating margin by 2.7 percentage points to 15.2%, with the company on track to generate $1.5 billion in net annual savings by 2018.
Other cost-cutting measures came in the form of shutting down older factories in the U.S. in 2013 and opening new, more efficient facilities in more cost-friendly places, such as Mexico and Russia. Mondelez also hired consulting firm Accenture in 2014 to put into place zero-based budgeting, a severe cost-cutting method adopted by other major food companies as well, including Coca-Cola, Campell Soup, and 3G Capital's acquired food companies, such as Heinz and now looks to be happening at Kraft, where jobs and cost-cutting has already begun.