Investors Will Want Mondelez International's (NASDAQ:MDLZ) Growth In ROCE To Persist

Mondelez International, Inc. (NASDAQ:MDLZ) has been making waves in the snack and confectionery industry, with a notable increase in its Return on Capital Employed (ROCE) over the past five years. This growth, driven by operational efficiency, product innovation, and expansion into emerging markets, has caught the attention of investors. As we delve into the factors behind Mondelez's ROCE growth and compare it to its competitors, it becomes clear that investors will want this trend to continue.



Mondelez's ROCE growth can be attributed to several key factors:

1. Improved operational efficiency: Mondelez has increased its returns without significantly increasing capital employed. This suggests that the company has become more efficient in its operations, likely through cost-cutting measures, process improvements, or better utilization of assets. For instance, the company's cost of goods sold as a percentage of net sales has decreased from 57.4% in 2019 to 55.2% in 2024, indicating improved operational efficiency.
2. Product innovation and brand strength: Mondelez's strong brand portfolio and continuous innovation have driven consumer demand and increased market share. The company's focus on understanding and responding to consumer trends has led to successful product launches and improved brand equity. For example, Mondelez's Oreo brand has consistently maintained a high level of consumer loyalty and market share.
3. Expansion into emerging markets: Mondelez has expanded its presence in emerging markets, where growth opportunities are often more significant than in developed markets. This expansion has contributed to the company's overall revenue growth and increased ROCE. In 2024, emerging markets accounted for 45% of Mondelez's total revenue, up from 40% in 2019.



To maintain its ROCE growth trajectory, Mondelez can consider the following strategic initiatives:

1. Innovation and Product Development:
- Invest in research and development to create new products and flavors that cater to evolving consumer preferences.
- Leverage consumer insights and market trends to identify gaps and opportunities for innovation.
- Example: Mondelez's partnership with Post Consumer Brands to create cookie-inspired breakfast cereals demonstrates a proactive approach to innovation.
2. Cost Optimization and Efficiency:
- Streamline operations and supply chain to reduce costs without compromising product quality.
- Negotiate better terms with suppliers to manage input costs, as seen in Mondelez's ability to partially offset higher raw material costs through input cost-driven actions.
- Example: Mondelez's focus on optimizing its supply chain and managing costs contributed to a 7.2 percentage point increase in revenue growth during the first nine months of 2024.
3. Expansion into Emerging Markets:
- Increase market penetration in emerging markets, where growth opportunities are often more significant.
- Tailor products and marketing strategies to local preferences and cultural nuances.
- Example: Mondelez's strong presence in over 150 countries, including emerging markets, highlights the potential for further growth in these regions.
4. Sustainability and Social Responsibility:
- Enhance sustainability initiatives to reduce environmental impact and improve community well-being.
- Implement sustainable sourcing practices and invest in renewable energy and waste reduction efforts.
- Example: Mondelez's commitment to sustainable sourcing and environmental initiatives resonates with consumers, driving brand loyalty and market share.
5. Mergers and Acquisitions (M&A):
- Consider strategic acquisitions or partnerships to expand product offerings, enter new markets, or gain access to new technologies.
- Example: Mondelez's acquisition of Cadbury in 2010 expanded its product portfolio and strengthened its presence in key markets.

In conclusion, Mondelez's ROCE growth is driven by improved operational efficiency, product innovation, and expansion into emerging markets. These factors are sustainable as long as the company continues to invest in its core competencies, adapt to market changes, and effectively manage risks. By focusing on strategic initiatives such as innovation, cost optimization, and expansion into emerging markets, Mondelez can maintain its ROCE growth trajectory and continue to attract investors.