Mondelez Looks to Expand Into New Markets Following Coffee Business Merger
Mondelez International Inc. ( MDLZ ) and its Dutch coffee partner will focus on countries like Brazil and Russia as they look to grab market share from rivals in developed markets, according to the head of the food and beverage multinational’s European coffee business.
Roland Weening, president of Mondelez’s coffee business in Europe, said Mondelez and D.E. Master Blenders 1753 BV will be able to take advantage of their joint experience and resources to expand into new markets when the two businesses combine next year.
“You can deploy brands and technology where otherwise it would have taken too long or would have been too expensive to do so,” Mr. Weening said in an interview, noting Brazil, where Mondelez doesn’t have a presence, and Russia, where D.E. Master Blenders 1753 is absent.
Deerfield, Ill.-based Mondelez and D.E. Master Blenders 1753 are in the process of completing a $5 billion deal to unite their coffee businesses into the world’s second-largest coffee company by sales. The new company, to be called Jacobs Douwe Egberts and headquartered in Amsterdam, is due to start operations next year.
Jacobs Douwe Egberts will control around 15.9% of the $81 billion global coffee market, according to Euromonitor International, a market research company. Nestle, which owns Nescafe instant coffee, leads the market with 22.7%.
The union comes as global sales of coffee products slowed to 6.9% in 2013, after rising 8.5% a year earlier, according to Euromonitor. The growth rate is expected to slow further to 6.1% by 2018, according to Euromonitor’s forecasts.
Mr. Weening said the new company will be able to spend more to develop products and bolster marketing in order to entice coffee drinkers. Mondelez is currently focusing on capsule coffee–pods that slot into coffee makers–as it tries to grab market share from rivals in developed markets.
Growth in the capsule coffee market, which is dominated by Nestle SA’s Nespresso machines, is outstripping growth in the broader market. Capsule coffee is seen growing at an annual rate of 10.8% between 2013-18, according to Euromonitor.
Mondelez, whose food operations include Oreo cookies and Cadbury chocolate, is already trying to cut into Nestle’s business, expanding the number of countries in which it sells capsules that can be used in Nespresso machines. In some markets it sells more of its capsule coffee machines than Nestle’s rival Dolce Gusto system.
“We don’t see Nestle as the enemy,” Mr. Weening said. “But the Nespresso-compatible market was too sizable to ignore.”
Patrice Bula, the head of coffee at Nestle, said in a statement the food giant “always welcomes competition.”
Mr. Weening also said sales of Mondelez’s capsule machine, Tassimo, have increased by roughly a quarter in Europe over the past year. He didn’t disclose the amount of sales Tassimo generated.
The company has increased its spending on marketing, research and development and production capacity by 40% in the last 12 months, and will continue to spend at this elevated levels this year, Mr. Weening said. He declined to say how much the company spends on those fields.
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