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Mondelez to Restructure Supply Chain

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Mondelez International, Inc. (MDLZ - Free Report) recently discussed its strategies to restructure its supply chain in order to drive long-term growth at the Barclays Capital Back to School Consumer Conference. The restructuring of its supply chain is expected to generate $3 billion in gross productivity savings, $1.5 billion in net productivity and $1 billion in incremental cash over the next three years. These savings are expected to generate 60 to 90 basis points annual increase in operating margin.  

The company intends to reinvent its supply chain strategies by upgrading its managerial talents, manufacturing process and developing partnerships with suppliers to improve efficiency. For instance, the company is installing Oreo manufacturing lines, which would require 30% less capital and thereby reduce operating costs significantly. The company further plans to expand these transformation initiatives to other categories like biscuits, chocolate and gum. The company also intends to drive its volume and revenue growth by investing in 14 greenfield plants by 2020.

Mondelez International intends to use margin growth in the developed markets of Europe and North America to boost growth investments in emerging markets.

In North America, MDLZ expects to generate 500 basis points (bps) expansion in operating margin by 2016, a year earlier than previously guided, on the back of new production lines and a revamped supply chain network. In Europe, the company targets 250 bps expansion in operating margin by 2016 by streamlining its supply chain and reducing overhead costs.

Mondelez International reaffirmed its fiscal 2013 organic net revenue growth guidance, at the low end of long-term targets of 5% to 7%. Adjusted earnings per share are expected to be in the range of $1.55 to $1.60.   

Mondelez International carries a Zacks Rank #3 (Hold).

Other consumer staples stocks that are worth considering include Boulder Brands, Inc. , Pinnacle Foods Inc. (PF - Free Report) , and Dole Food Company Inc. . All the three companies carry a Zacks Rank #2 (Buy).


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