Mondelez’s attempts to foster a more cost-focused culture among its marketers are showing signs of paying off, judging by comments made to analysts by its chief executive Irene Rosenfield after her company’s latest quarterly results.
The snack maker hired Accenture in 2014 to introduce a severe cost-control budgeting strategy in a bid to deliver $3bn in gross productivity savings over three years. Brand managers now adopt zero-based budgeting, meaning media plans start from scratch rather than based on the previous year’s spend in order to ensure that resources get bet on those marketers with the better strategies.
These savings allowed Mondelez to ramp up the spend behind its power brands, which grew more than 5 per cent last year. It also allowed the company to put more spend behind what it calls “high-return” marketing initiatives to “accelerate revenue and drive share”. As a result, market share steadily improved in the last six months of 2015, with half of its chocolate revenue gaining or holding share for the full year, up from about 25 per cent in the first half of the year.
“We'll continue to reduce overheads by leveraging zero-based budgeting….we're beginning to institutionalize our approach to cost management,” said Rosenfield.
She went on to assure the main benefits of the strategy would surface this year after the business reported its ninth consecutive quarter of low growth. Shares in the company fell as much 9 per cent in following its latest earnings, hurt by a 17 per cent drop in revenue to $7.36bn in the period – partly due to the sale of its coffee business.
Mondelez isn’t the first to introduce tighter cost control measures. Unilever, Coca-Cola and AB InBev are among those that have adopted zero-based budgeting or applied parts of it over the last 18 months. Rather than be used simply to keep costs down, the process attempts to foster a more considered approach to how campaigns are planned and budgets are spent.