ZURICH (Reuters) - Mondelez International Inc MDLZV.O, which ranks as the world’s biggest chocolate, candy and biscuit maker after being carved out of Kraft Foods Inc KFT.O, is optimistic busy consumers will keep driving booming demand for snacks despite the downturn.
Mondelez, whose stable of brands includes Cadbury and Milka chocolate, was launched on Tuesday after a demerger from Kraft’s North American grocery business, still called Kraft.
Creation of the two entities gives investors the option to either bet on fast-growing snacks or the more stable dividends offered by groceries.
“There is no question these are very challenging times for us in Europe ... The good news is people must eat and drink,” Tim Cofer, head of Mondelez Europe, told Reuters in a telephone interview.
“Snacking categories are growing faster than non-snacking categories,” Cofer said. “We see consumers increasingly having busy lifestyles and evolving over time from three fixed meals to many meals, or snacking in between when they don’t have time for a fixed meal.”
Mondelez, which also takes in Jacobs coffee, Trident gum, LU and Oreo biscuits, has annual revenue of about $36 billion - more than a third from Europe - and about 100,000 employees in more than 80 countries.
Cofer said Mondelez had taken action to address a poor performance in the gum business, which is particularly exposed to the downturn and rising unemployment given people tend to chew gum while at work, or on their way to work.
“Given the current economic environment, particularly in southern Europe, where unemployment and youth unemployment is high, we do see an impact,” he said. “Having said that, I do feel very good about our innovation pipeline in gum,” such as a breath-freshening version.
Kraft has said extra costs associated with the demerger will hurt earnings in the near term, but it forecasts long-term earnings-per-share growth in the double digits for Mondelez and in the mid-to-high single digits for Kraft.
“We feel very good about our prospects to deliver on that long-term guidance,” said Cofer, who is based in at Mondelez’s European headquarters in Zurich.
“The benefits associated with the split certainly outweigh the costs ... The benefits will be evident from year one.”
Kraft warned last month that 2013 earnings for Mondelez - to be headed by Kraft Chief Executive Irene Rosenfeld - would likely be lower than some forecasts due to the weakening of various currencies versus the U.S. dollar.
Cofer said Mondelez was well positioned to cope with volatile commodity prices but declined to give an outlook for those markets.
“We have proven over the last couple of years our ability to pass on those higher costs in order to retain good margins,” he said. “We have robust risk management structures to manage the volatility and to ensure margin.”
Editing by David Holmes