Mondelez Raises Targets for Ad Spend and Digital Media

Oreo Maker's Other Goals Include More Healthy Snacks and Online Sales

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Mondelez International announced several new targets Thursday including plans to increase spending on advertising and consumer support and allocating a much larger percentage of its total media budget to digital.

The efforts, announced by Chief Growth Officer Mark Clouse at a Barclays conference, come as the maker of Oreo cookies continues to cut costs and sets plans to reinvest some of those savings into areas such as advertising and consumer support.

Mondelez is under pressure to find savings and show improvement in its plans, due in part to investments from activists Nelson Peltz and Bill Ackman and slowing growth in emerging markets.

Among other cost-cutting moves, Mondelez confirmed to Ad Age in August that it is planning organizational changes in its North America marketing department that will go into effect at the beginning of 2016, but would not say how many layoffs could be involved.

Now, Mondelez is increasing its emphasis on advertising and consumer support, which includes working media and non-working media such as production costs, along with consumer promotion costs related to incentives such as coupons, contests or sweepstakes. The company's advertising and consumer support does not include in-store promotions or slotting fees.

On July 30, Chief Financial Officer Brian Gladden said spending on advertising and consumer support increased to more than 9% of revenue in the second quarter, and suggested that spending would continue to rise in the latter half of the year. At that time, he said higher advertising and consumer-support spending trimmed second-quarter adjusted profit by about four cents per share.

Mr. Clouse said Thursday Mondelez plans to increase advertising and consumer support to over 10% of revenue, which would be up from more than 9% in the second quarter and from more than 8% in 2014.

The company is also moving more of its spending to digital, which Mr. Clouse said typically costs less than traditional media but has twice the return on investment. By 2018, Mondelez expects digital media to represent around 30% of its total media spend, about double the rate from the end of 2014.

One of the other goals announced Thursday is a push to have 50% of the portfolio be in the well-being space by 2020, up from more than 33% currently.

"Consumers want ingredients that they recognize and if it's on our ingredient line, a consumer should be able to find it in their kitchen," Mr. Clouse said.

Over the next five years, Mondelez plans to focus 70% of its new-product development push on well-being areas while working on reducing levels of saturated fat and sodium and increasing whole grains, removing artificial colors and flavors on many brands. Still, the cookie and chocolate maker is not abandoning indulgent areas.

"I'd like to clarify one important element," Mr. Clouse said. "We're not turning everything into health food. Indeed, there's a proper place for treats in a balanced diet."

Another goal is to grow e-commerce from less than $100 million in revenue to as much as $1 billion by 2020. Mondelez already has Buy Now buttons on digital media platforms across 25 markets. It is also pushing unique products to drive e-commerce purchases. For example, later this year it will sell Trident gum with Star Wars characters on bottles, but some versions will only be available online.

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