A year ago, Mondelez International (NASDAQ: MDLZ) had just finished calving off its coffee business, and speculation was that at the urging of activist billionaire investor Nelson Peltz, the global snack foods giant would also shed its cheese and European grocery business in a bid to focus on snacks, which includes brands such as Oreos, Ritz crackers, and Trident gum.
While some analysts thought there were just too many moving parts at the time, it seems they've come to a halt as Reuters reports rumors are flying once again that Mondelez is ready to spin off its European cheese and grocery operations, which generated over $1.4 billion in revenue last year.
Analysts estimate the businesses could fetch about $3 billion, and first in line to bid on them would be Kraft Heinz (NASDAQ: KHC), which has the right of first refusal as a result of the 2012 spinoff of the old Kraft Foods consumer products giant that created both Mondelez and Kraft. Heinz bought the latter this year in a $36 billion deal backed by Warren Buffett.
Not only has Mondelez felt pressure from Peltz, who joined the board of directors in 2014 as a bit of a peace offering after Peltz pestered PepsiCo to sell its Frito-Lay snacks business to Mondelez, but also from hedge fund operator Bill Ackman, whose Pershing Square investment vehicle has amassed a $5.5 billion stake in the company.
Snacks accounted for 85% of Mondelez International's $34.2 billion in 2014 revenue, but so-called healthy snacking is where the real growth in the industry is happening, advancing at around twice the rate of the regular snack business.
Mondelez wants to cash in on that trend by reducing the amount of saturated fats and sodium in its snacks by 10%, increasing the use of whole grains by 25%, and removing artificial colors and flavors.
It was quick to note it's not becoming a health foods company -- Mondelez executive VP and chief growth officer Mark Clouse has been quoted as saying "there's a proper place for treats in a balanced diet" -- but the company says it wants to make half of its profits selling such snacks by 2020.
Shedding the non-core businesses of groceries and cheese, which includes brands like Philadelphia cream cheese and Cheez Whiz, will go a long way toward achieving those goals.
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Rich Duprey has no position in any stocks mentioned.
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