Mondelez International has gone public with its plan to boost online sales tenfold to $1bn by 2020, signalling its growing confidence in its ability to convince people to buy their snacks online.
The increase would equate to only about 3 per cent of the company’s annual sales. It’s not much but does represent an acceptance that it’s an area it needs to play in quickly rather than use to secure more column inches with projects that aren’t baked in long-term ideas.
The snacks maker has been coy to talk about long-term ecommerce sales targets until now despite being public about its efforts to eventually start selling chocolates and biscuits online. Convincing online shoppers to buy snacks, a purchase often made on impulse in-stores, is at odds with the researching, comparisons and sharing usually comes before an online sale.
However, this is changing, according to Mondelez.
"We estimate that e-commerce could become one of the fastest-growing platforms within our company, increasing from less than $100m in revenue today to as much as $1bn by 2020," said Mark Clouse, the snacks maker's chief growth officer at the Barclays Global Consumer Staples conference yesterday (10 September).
The Oreo maker expects much of these revenues to flow from existing and upcoming initiatives. It is already pinning a ‘buy now’ button to its media across channels like Facebook, Twitter and YouTube and has been testing activity with retailers in several markets also. FMCG companies like Mondelez have been reluctant to race into ecommerce in spite of the macro-economic pressures on them to carve out new revenue streams for fear of upsetting traditional bricks-and-mortars retailers.
And that reluctance to rock the boat was part of the reason vice president of global media and consumer engagement Bonin Bough was tasked with making some headway in the space late last year, his thinking being, that his expertise on media and how people are communicating with brands and each other could unlock new ways of selling goods that are yet to be explored by their rivals.
The shift folds into the company’s efforts to shift more of its budget into digital. Clouse reiterated the company’s belief that online, while on average costing less than traditional media sparks twice the return on investment. Mondelez expects digital media to account for around 30 per cent of its total media outlay, which is double that from the end of 2014.
Like its peers, Mondelez’s digital drive is underpinned by the need to seek out cheaper more effective ways of reaching consumers due to tougher financial constraints. At the event, the business said it was on target to slash costs as a percentage of revenue by at least 250 basis points between 2013 and 2016.
While the business will be hoping the cost-cuts stimulate growth immediately, it’s also hoping healthier snacks will give it the long-term platform to win round more shoppers. It plans to shift 50 per cent of its snacks products into the well-being category by 2020, up from the 33 percent currently.
“Our goal is to simplify and enhance the ingredient and nutritional profile of our base business while also focusing on breakthrough innovation and address consumers’ well-being needs,” said Clouse. He added that this would be backed by up too 70 per cent of its new product developments being focused on well-being platforms.
Clouse went on to clarify that investments do not mean that “we’re turning everything into health food” and added there’s a “proper place for treats in a balanced diet”.