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Mondelez International Inc (MDLZ): This Sweet Business Is Poised for More Growth

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Your investment could be sweet. Mondelez International Inc (NASDAQ:MDLZ) is a sweet business ready for solid growth. After spinning off from Kraft Foods Group Inc (NASDAQ:KRFT), Mondelez is a global snacking powerhouse and a leader in chocolate (owing around 15% of market share), gum (7%), biscuits (18%), candy, coffee, and powdered beverages. Mondelez offers investors stability and stable income through its diversified, well-known brands, such as Cadbury, Milka chocolate, Nabisco and Oreo biscuits, Trident gum, and Jacobs coffee.

Mondelez International Inc (NASDAQ:MDLZ)

Growth targets and margin improvement

Mondelez is aiming for organic net revenue growth of 5% to 7% for the top line. For the bottom line, management is aiming for double-digit EPS growth. Mondelez will need to achieve a high single-digit increase in operating income with 20 to 30 basis points in operating income margins to achieve the top-line and bottom-line goals. How can Mondelez do it? It is actually not hard, according to management.

By taking a look at category mix, Mondelez International Inc (NASDAQ:MDLZ) just needs to maintain its current share and grow mid- to high-single digits for biscuits, chocolate and beverage categories and mid-single digits for gum, candy, cheese, and grocery categories. Geographically, low- to mid-single-digit growth for developed markets and double-digit growth for emerging markets are required to meet the target. Growing revenues in emerging markets is critical to the success of overall growth strategy, and management has executed well on this end. For the first quarter 2013, the company delivered solid double-digit growth for the emerging markets, led by China, India and the Philippines.

To expand the overall gross margin, Mondelez needs to improve its North American and European operation by reducing supply-chain costs. Mondelez International Inc (NASDAQ:MDLZ) needs to streamline its overhead cost and reinvent the supply chain. Management also plans to use 20 to 30 basis points of base-margin expansion to improve manufacturing efficiency. In short, management expects to expand operating income margin by about 20 to 30 basis points per year for the next few years and to reach 13% margin by 2015.

To counter increasing competition, Mondelez continues to innovate in its marketing. It has worked with a number of start-up technology companies to explore and leverage proprietary technology to drive “mobile-at-retail” consumer experiences. Strategically, Mondelez is moving aggressively into mobile and has recently signed a global strategic agreement with Google, focusing on mobile search, mobile display and mobile websites. Mondelez plans to allocate 10% of its global marketing budget into “mobile only” media. Mondelez International Inc (NASDAQ:MDLZ) has also partnered with International Business Machines Corp. (NYSE:IBM) to establish three SAP instances in three years to improve its efficiency and optimize its resources.

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