How Clif Bar Is Helping Mondelez's Profits Soar
On June 21, Mondelez officially bought Clif Bar, the American energy food and drinks company. According to the BBC, the purchase came in at $2.9 billion. The plan was to integrate the energy bar into Mondelez's broader strategy to win "the future of snacking."
Clif Bar made similar comments to CNN before the purchase was made. "Our purposes and cultures are aligned and being part of a global snacking company with broad product offerings can help us accelerate our growth," Sally Grimes, chief executive officer of Clif Bar & Company, said. CNN also noted that the Clif Bar acquisition would be the ninth deal made in four years.
Some may question whether a strategy of such dogged expansion is prudent when Mondelez feels the need to raise the prices of the snacks. In November, they were hinting that Oreos, Ritz, and Sour Patch Kids would cost more (per CNBC). The BBC piece also noted that Cadbury, the chocolate company Mondelez owns, was cutting their chocolate bars from 200 grams to 180 grams.
Mondelez expects profits despite Clif Bar's previous performance
As one might expect, however, Mondelez expects to profit from their acquisition of Clif Bar. During a July 26 conference call, Dirk Van de Put, chairman and chief executive officer of Mondelez International, explained that Clif Bar met every criteria for a good purchase (per Food Business News). It was a snack. It could be synergized with the snacks Mondelez already owned. And Mondelez expects that it can offer Clif Bar unique opportunities to grow.
The last point is the one which might cause some uncertainty. Food Dive reported that analysts questioned the wisdom in purchasing a snack bar brand that has suffered a downturn in the last few years. Mondelez, however, believes the snack bar is making a comeback.
Part of the rationale is that people are moving about again, meaning that the demographic for Clif Bars is returning. The other point is that even with the increase in prices, people still see snack bars as an inexpensive indulgence. "When we look at the details, we believe that there is a big opportunity to expand distribution in existing and alternative channels, but also improve the quality of the distribution of where Clif is present," Van de Put explained.
Of course, considering that Mondelez is one of the ten most dominant food brands on the planet, it is hard to dispute that they have the resources to do this. Moreover, any setbacks will not be the end for them.