Industry Trend Analysis - Growth Opportunities For Mondel?z In Emerging Markets - DEC 2017

BMI View: Mondelez has a well-diversified geographic portfolio, without a heavy reliance on one region or market. We still see strong potential for confectionary growth in emerging markets, as incomes rise and Mondelez tailors its products to the local markets. In developed markets, its well-established brand name and quality will protect it from private label imitations, however, it needs to adjust its products to reflect changing consumer preferences.

In 2016, 37.6% of Mondelez's revenues came from its Europe unit, with 26.9% from North America, 22.4% from AMEA and 13.1% from Latin America. Combining these last two regions means that Mondelez derives 35.5% of its revenues from faster growth emerging markets. This number is actually slightly higher because it does not include Russia, Ukraine, Turkey, Belarus, Georgia and Kazakhstan, which were combined into its Europe unit in October 2016. This makes around 40% of revenue coming from emerging markets, a particularly high figure compared to its US-based food rivals. We believe that this offers a good balance, with DMs providing strong, higher income, regular cash flows, and EMs the long-term growth potential.

Despite the recent economic slowdown in key emerging markets, we still see strong potential for Mondelez to push its products in EMs. Expanding in EMs is a key strategic orientation for Mondelez, which is investing heavily in these regions. Typically, its capital expenditure (as a proportion of revenue) has been highest in Latin America and Asia, the Middle East and Africa (AMEA), well above capital expenditures in Europe and North America.

Emerging Markets Showing Stronger Opportunities
Sugar & Sugar Products, USDmn y-o-y (%)
f=BMI forecast. Source: BMI

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