Mondelēz is leaning into strategic collaborations to excite consumers and drive sales in an increasingly difficult economy as many shoppers are pulling back on spending, large CPG companies are uncoupling and acquisitions are harder to finance.
The strategy also helps preserve financial flexibility at a time when commodity costs, including cocoa, are higher because of supply chain challenges, climate change and tariff uncertainty.
While collaborations offer significant gains, partnering with competitors can be fraught unless carefully structured as a “win-win” in which each side can grow without cannibalizing sales and consumers from the other, Mondelēz CEO Dirk Van de Put said Wednesday at the Barclays 18th Annual Global Consumer Staples Conference.
Standard price promotions are no longer enough
Collaborations are emerging as a go-to strategy for CPG brands to elevate product visibility in stores and spur sales in a way that price promotions once did but no longer can, Van de Put said.
He explained that consumer spending has held steady for the past two to two and a half years despite price hikes across the board – effectively reducing how much they are able to buy and causing volumes to drop.
“The basket of the consumer, the money they spend when they do their shopping trips – it doesn’t depend on which social class they are in – in the last 24 to 30 months has not gone up. So, the consumer is spending almost exactly the same amount of money now for 2.5 years. And if you think about it, in those 2.5 years, prices of everything have gone up. The consequence of that is that the quantities they have bought overall have come down and they have mixed a little bit in what they buy,” he said.
“They have no inclination to increase their spending. They are very aware that they need to be careful. They are unsure about what is going to happen or when those tariff effects are really going to hit them. And so, I think, for the foreseeable next six to 12 months, until they start to feel different about the future, they are not going to change the way they shop. If anything, they could become even more careful,” he explained.
As a result, many of the strategies CPG companies once used to drive volumes are no longer working, he said.
“Your typical price promotion of 20% off is not necessarily cutting it anymore. So, what we need is promotions that have the price off, but that also have a big theme around them that gets big presence in store and will make the consumer – even if they are not planning to buy Oreo on that trip – still do it,” Van de Put said.
And the way to do that, he added, is through collaborations.
What makes a successful collaboration?
A successful example includes Mondelēz’s collaboration with performer Selena Gomez to create a horchata-inspired Oreo that blends chocolate and cinnamon-flavor crème with another layer of sweetened condensed milk flavor crème.
Another is the collaboration between Oreo and Reese’s in which Oreo cookies are filled with Reese’s peanut butter cream and Oreo cookie crumbs, and Reese’s Oreo Cups, in which Reese’s peanut butter cups are layered with white crème and mixed with Oreo cookie pieces.
This builds on a collaboration last year with Coca-Cola in which the brand’s Zero Sugar beverage and Oreo created a limited-edition beverage blending the iconic flavors and a black-and-red cookie that was co-branded.
“We are trying to create events that will draw in the consumer,” Van de Put said.
While these collaborations created buzz and drove volume by combining the star power of high-profile brands in different categories, Mondelēz has also pursued partnerships with brands that appear at first blush to be direct competitors.
In these cases, Van de Put said, the key is to respect each other’s territories.
For example, in the collaboration between Oreo and Biscoff, the brands respected each other’s different usage occasions while leveraging each other to access new geographic regions.
“Biscoff, in a good market, will reach a 2% to 3% market share. Oreo, in a good market, can reach 20% market share. Now, of course, Biscoff wants to increase their market share and we want to increase ours. But we are not in the same territories,” which is where there is opportunity, said Van de Put.
He added: “Biscoff wants to be globally present, but they accept that emerging markets are going to be difficult for them. We are good in emerging markets. So there’s certainly an opportunity there. In a country like India, you really want to produce in India.”
He continued: “For them to put down manufacturing assets is a real big deal. So I think there’s a win-win in developing emerging markets with them. And then on the other side, I think our chocolate with Biscoff, which is the other example that we have here, is a really exciting chocolate innovation.”
Why collaborations are more effective now than acquisitions
Collaborations also are gaining prominence now, in part because they can generate the same level of consumer excitement as mergers and acquisitions once did but for a fraction of the price and with less red tape.
“In a world where M&A is more difficult and very expensive, collaborations are a way to get the excitement without having to go to M&A, and every company feels good with what we are doing,” he said, adding: “I’m seeing us doing more of these in the future.”
This does not mean Mondelēz is anti-acquisition. However, the company is careful to ensure potential mergers and acquisitions offer the right value proposition.
“As we put together business propositions, we are fairly thorough. We have an M&A department that conducts very thorough due diligence,” Van de Put said.
He added: “At this point in time, I wouldn’t rule anything out, but quite frankly, if you ask me, likely that if we do M&A, it is more on the bolt-on areas” with a focus on assets that play in chocolate, biscuits and baked snacks, including cakes and pastries.
