News Column

Mondelez making changes to European cheese, grocery unit

July 11, 2014

By Jessica Wohl, Chicago Tribune



July 11--Mondelez International Inc. said Friday it plans to start running its European cheese and grocery products unit separately as it gets ready to send its coffee business into a new company.

Shares of Mondelez jumped briefly midday on Friday after Bloomberg reported that the plan to separate the European cheese and grocery business may lead to a sale or spinoff, citing a person familiar with the matter.

A spokesman for Mondelez, asked about the Bloomberg report, said that the company does not speculate on market rumors. He said that Mondelez "continually" reviews its brands and products and their roles in its business.

The company's European business is already being managed by category and the decision to create a separate unit for cheese and grocery was made in May, when Mondelez decided to push its coffee business into a new venture, the spokesman said. Other categories, such as gum and candy, chocolate and biscuits, tend to have more similarities when it comes to selling and distributing them to retailers, he added.

Deerfield-based Mondelez, led by CEO Irene Rosenfeld, faces pressure to improve from activist investors Nelson Peltz, who joined its board in January, and Ralph Whitworth. In May, the maker of Oreo cookies and Cadbury chocolate announced a restructuring plan along with the plan to separate the coffee business, which will make Mondelez even further focused on snacks.

JP Morgan analyst Ken Goldman was quick to quash the idea of a divestiture of the business in a note to clients entitled "Does the Cheese Story Have Holes?"

"We think management feels it has enough on its plate already ... and is not actively looking to sell grocery/cheese," Goldman wrote.

Goldman said that he spoke with Mondelez management on Friday after the Bloomberg report came out and that "overall, the company's tone seemed sufficiently definitive that we are guessing a divestiture of grocery/cheese does not happen in the near future (though of course in today's heated M&A environment, one can never be certain)."

Under the plan announced in May, Mondelez announced that it plans to push its $3.9 billion coffee business into a new company next year being formed with D.E Master Blenders 1753 BV. Mondelez will retain a 49 percent stake in the coffee-focused company, which will be called Jacobs Douwe Egberts, after brands from both companies, and be led by executives from D.E Master Blenders, the international coffee company that used to be part of Sara Lee.

Cheese and grocery accounted for just 8.8 percent of Mondelez's total sales in 2013. The European cheese and grocery business is Mondelez's largest regional business in that category, making up 3.9 percent of the company's total sales last year. European chocolate and North American biscuits, or cookies and crackers, are its two largest categories, each with 15.3 percent of sales.

Creating a standalone for cheese & grocery is only happening in Europe at this time, not in other markets, the spokesman said.

Shares of Mondelez were up 1.1 percent at $38.40 after rising higher on Friday.

jwohl@tribune.com

Follow @JessicaWohl Follow @chibreakingbiz

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Source: Chicago Tribune (IL)


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