In 2018, Mondelez ended four years of declining performance and began to recover. Its star product Oreo, despite being over a century old, has been "playing" with everything from wasabi and spicy chicken wing flavors to music box cookies and an edible Forbidden City. In the context of a collective downturn for FMCG brands, what's new about Mondelez's path to breakthrough? Compared to the recent bad news about Quanjude, Mondelez International, which has served human taste buds for a century, is seeing a turnaround after years of decline. Its 2018 annual report showed revenue of $25.938 billion, ending the decline that began in 2014. The recently released Q2 2019 financial report showed revenue of $6.062 billion, with net profit attributable to the parent company of $807 million, a year-on-year increase of 153.8%. China's growth played a significant role in this achievement. Before discussing its "resurrection," some might wonder who Mondelez is. This seemingly unfamiliar company actually owns many well-known brands: Oreo, Chips Ahoy!, Trident, Prince, Ritz, and Trebor. As a global leader in chocolate, biscuits, gum, and candy (Mondelez's four core businesses), its predecessor was Kraft Foods, the largest food company in the US and second largest globally. In 2012, due to listing requirements, it split into Kraft Foods for North American grocery operations and Mondelez International (hereafter referred to as Mondelez) for global snack business. Mondelez entered China in the 1980s, but before 2005, its share of the domestic snack food category was only a single digit. Two "localization" operations in the Chinese market revitalized it, with 2018 being a significant year in its localization efforts. Mondelez's 2018 financial data shows that due to 80% growth in e-commerce business, Mondelez achieved six consecutive quarters of growth in China, indicating initial success of its localization strategy. In recent years, not only Mondelez but also Coca-Cola, Nestlé, Unilever, P&G, Ting Hsin, and Taiwan's "Three Musketeers" have all experienced declining performance. Mondelez's self-rescue has some unique aspects. First Localization: Taste Localization In 1903, James Kraft, who was in the cheese wholesale business, founded Kraft Foods in Chicago, which was the predecessor of Mondelez. In 1924, Kraft Foods went public, and like many FMCG brands, it adopted an acquisition strategy to expand its business territory, even beyond food. In the 1980s, with China's reform and opening up and its huge demographic dividend, Mondelez began to enter the Chinese market, operating as a joint venture. In 1984, Mondelez began producing solid instant beverages and coffee in mainland China and continued to expand its business through acquisitions. In 1994, with the deepening of reform and opening up and increased government efforts to attract foreign investment, the friendliness towards foreign enterprises grew. Mondelez acquired its partner's equity and began independent development. Starting in 1988, Mondelez tested the waters in Beijing and Tianjin with Ritz and Ritz crackers. In 1995, it launched "Guilian Dudu" in Beijing. In 1996, Mondelez completed biscuit factories in Beijing and Suzhou, and with great anticipation, introduced Oreo, a brand that had been successful in the US for nearly a century, to China. However, it did not replicate its American success and sales remained sluggish. By 2005, Oreo had only a 3% market share in the Chinese biscuit market. After market research, Mondelez found that Chinese people do not prefer sweet foods; the sandwich cookies that Americans found delicious were considered tooth-achingly sweet by Chinese consumers. The "maltose" that had dominated the US market for a century became "arsenic" in the Chinese market. Biscuits accounted for nearly half of Mondelez's revenue, so reversing the decline was critical. To change the situation, Mondelez began its first "localization transformation." Starting with Oreo's flavors, they developed over 20 unique local recipes based on surveys of "Chinese tastes," creating a distinctive "Chinese flavor" exclusively for the Chinese market. The modified Oreo cookies became smaller and less sweet, better matching Chinese preferences. Combined with the "Twist, Lick, Dunk" advertising campaign, they quickly captured consumers' minds and taste buds. Oreo's overall sales increased by 80%, and in some regions, by threefold. In 2012, Oreo ranked first in biscuit sales in China. The failure of this century-old brand in China served as a reminder to Mondelez about the diversity of eating habits and preferences, elevating the importance of flavor diversification to an unprecedented level. To meet the needs of more consumers, Mondelez established factories and R&D centers across China—east, west, south, north, and central—to study different consumers and produce targeted products. In 2012, as one of Mondelez's four core businesses, the gum business was launched, and Trident officially entered China. Its localization transformation became crucial for its survival. At that time, the Chinese gum market was nearly saturated, with Wrigley's Doublemint and Extra holding 70% market share, while brands like Lotte, Mentos, and others competed fiercely for the remainder. Through consumer surveys, Trident found that Chinese consumers preferred fruit flavors over mint. Trident positioned itself as a combination of "fruit candy and gum," and with aggressive marketing, captured consumer mindshare. Additionally, to improve Mondelez's low presence in the chocolate market, the company spent considerable time understanding Chinese consumers' tastes and habits, such as their preference for milky, mildly sweet, and melt-in-the-mouth textures, providing a basis for flavor adjustments for its UK R&D team, preparing for the launch of Milka in China in 2016. Second Localization Revolution: Deep Alignment of Systems and Concepts In 2012, Mondelez achieved great success, but a new crisis was brewing. In 2012, the growth rate of China's biscuit market fell from 44.72% two years earlier to 8.76%, and Oreo began to decline: its market share dropped from 48% in 2013 to 35% in 2016. Mondelez's business in China continued to decline. In 2015, Mondelez China experienced layoffs and factory closures. Data shows that from 2014 to 2017, Mondelez International's overall revenue declined year by year: $34.244 billion, $29.636 billion, $25.953 billion, and $25.896 billion, with year-on-year decreases of 2.99%, 13.46%, 12.53%, and 0.1%, respectively. Biscuits, gum, and chocolate, which are "impulse purchases," became less noticeable at checkout with the rise of e-commerce. Moreover, as nuts and premium leisure snacks entered consumers' snack lists, the overall decline of traditional snack businesses became inevitable. As performance declined, Mondelez International made frequent personnel changes, replacing its global CMO and China managing director. It began to focus on the fastest-growing Chinese market and launched a series of localization initiatives. To reverse the decline, Mondelez had a solid foundation. First, its global and local brand matrix provided substantial revenue security. Each brand is a rich resource, easily expanding into adjacent categories through product crossovers, generating substantial profits. For example, at a milk tea shop, you can order an Oreo-flavored drink; at a fast-food restaurant, there is Oreo ice cream; and during Mid-Autumn Festival, there are even Oreo mooncakes. Since the split from Kraft, Mondelez has been effective in reducing costs, and the next step is to seek growth. Emerging markets account for nearly 40% of Mondelez's share, with China, Russia, and Brazil as key battlegrounds. After over 30 years of growth, China has become one of Mondelez's largest product sales markets globally. Therefore, China's success is crucial for Mondelez. Respecting local consumer tastes is one of the key tools for continued deep cultivation of the Chinese market. In April 2018, the Suzhou Mondelez Global R&D Center was officially launched, primarily supporting innovation and development of Mondelez's biscuit category. To support this production need, the company also made major management adjustments, adopting a "local-first business model" that empowers management in innovation, product portfolio, and investment priorities to act quickly. This move reduced many regional organizational structures while enabling faster realization of more localized and personalized innovation. In 2018, Milka chocolate launched strawberry and lemon flavors. Oreo introduced wasabi and spicy chicken wing flavors. In 2019, collaborating with fashion photographer Chen Man, they launched two limited-edition LU classic replica gift boxes, Taiping launched New Year packaging, Trident launched ice cream flavor, and Oreo combined with the Forbidden City IP—all local innovation attempts under this decision. "We emphasize the principle of local priority, with both global and local brands. We focus on speed, agility, and process simplification," said a Mondelez executive in an interview. Without the local-first business model, flavors like spicy chicken wing would never have been approved by headquarters. But it is this "decentralized" management that gives the company a shorter reflex arc, faster response speed, and more precise market insight, bringing vitality and affinity to the brand. To accelerate innovation, Mondelez is piloting "cross-functional agile innovation teams," investing in 11 innovation centers globally, and adopting more flexible testing and learning methods to launch small-scale innovations faster and learn from them. "Choosing snacks moderately and appropriately" is another transformation for Mondelez. As consumer diets trend towards health, Mondelez quickly optimized its products. By improving the nutritional composition of core products, increasing whole grain ratios, reducing saturated fat, and launching smaller packages, consumers can choose snacks with more peace of mind. Since 2018, Oreo has achieved nearly double-digit sales growth in China, even driving overall business growth for Mondelez International. To increase penetration, Oreo also launched customized products for e-commerce and convenience store channels. This initiative began in 2016 and has been effective, and has recently been further deepened. "Chinese consumer needs are becoming increasingly complex, so when innovating, there must be some customized elements to attract customers to buy," said Stephen Maher, former president of Mondelez China. Aligning with China's e-commerce trends, Mondelez has shifted most of its business from offline to online, forming synergies from product customization to marketing activities through deep cooperation with JD and Tmall, creating phenomenal marketing scenarios. For example, on Oreo's Tmall Brand Day, the music gift box launched with the star effect of Wang Yuan was quickly sold out and also served as excellent brand promotion. Of course, tailoring multiple products to the market requires support from the company's R&D, marketing, channel, and cultural localization capabilities. Judging from the 80% online growth in 2018, Mondelez's efforts have achieved some results. China's e-commerce, as the main driver of its global e-commerce growth, will greatly benefit its goal of reaching $1 billion in e-commerce sales by 2020. At the same time, Mondelez has not given up its efforts in traditional channels. Mondelez has listed third- and fourth-tier cities as the focus of offline channel expansion, while also focusing on how to achieve the highest efficiency in cost investment, distributing products to more terminal stores, and ensuring good display and presentation in stores. By optimizing product placement and product mix, products gain better exposure. Trident has achieved good growth under such new adjustments. Marketing Revolution: A New Understanding of Snack Scenarios In the first 20 years in China, Oreo spent most of its budget on TV ads, which typically showed parents and children enjoying cookies together. Mondelez's marketing strategy, like that of P&G and Unilever, was to play the emotional card, hoping to position the product as a family emotional bond. "Our brand strategy only focused on the cookie itself, which was terrible," said Mary Beth West, then CMO of Kraft. "Oreo didn't play any role in the real world." Moreover, the core positioning of "Twist, Lick, Dunk" was for children, which limited sales. Oreo decided to reposition its core audience to young people with more purchasing power. In 2015, Oreo abandoned its previous parent-child approach, announced a new brand strategy, changed its slogan to "Play with Oreo," and launched personalized customization services. To cater to young people's preference for spicy snacks, Oreo launched "Cool Wasabi" and "Spicy Chicken Wing" flavors, local innovations exclusive to the Chinese market. The launch of the "Oreo Dimension" mini-program also allowed more consumers to participate in flavor creation, generating 72,534 new flavors in China last year. These personalized products also shifted Mondelez's media spending from traditional media to e-commerce channels for optimal interaction. Beyond redefining its snack identity, Oreo, the main brand, has continuously enhanced its "leisure scenario" by designing and constructing new leisure scenarios, creating new communication spaces with consumers. In 2016, following the "Secret Garden" trend, Oreo launched a Guinness challenge for the "world's largest cookie box coloring," offering six customizable coloring packages that attracted many young consumers, nearly crashing Tmall's servers on the day of launch. In 2017, Oreo sold a music box on Tmall that allowed consumers to "listen to music while eating cookies." Biting a cookie placed on the box would change the song. In 2018, the music box was upgraded to a DJ deck that could generate 525 different music tracks based on the size and placement of the cookies. Initially thought to be just a music box packaging, opening the cookie box revealed that you could indeed listen to music while eating cookies, making Oreo truly fun and exceeding consumer expectations. The addition of "fun," "playful," and "black technology" significantly enhanced brand appeal and youthful image, making the brand increasingly important in "play" and "leisure." Mondelez also released New Year packaging incorporating more Chinese elements. Recently, to promote the Oreo and Forbidden City IP collaboration, they launched the "Qi Bing Huang Shang" flavor series and built an "edible Forbidden City" using 10,600 Oreo cookies. This not only highlighted the cookie's local characteristics but also made each small cookie a multi-faceted carrier of taste, games, and culture. Cookies transformed from a food for satiety into a means and carrier for entertainment and happiness, greatly enriching the product's connotation. In addition to product innovation, Mondelez has also excelled in differentiated positioning and innovative communication to stand out in the category. For example, with the launch of Trident gum, the "star economy" generated attention, which is significant for brand building, but its greater wisdom lies in breaking the perception of gum. Trident innovatively positioned itself as a combination of "fruit candy and gum," starting from the scenario of chewing, breaking the traditional "service" boundary of gum and giving it differentiation. Using the slogans "Can't stop at all" and "Deliciously lasting, absurdly long," and the "Fruit Flavor Wave" campaign that understands public taste, Trident successfully differentiated itself in the saturated gum war, achieving second place in the category within just a few years. Summary In the context of traditional large FMCG companies facing a downturn, product innovation is the only way to revive. At the same time, facing the impact of e-commerce and the rise of domestic brands, increasing product localization and online operations has become a magic weapon for companies to reverse their decline. Mondelez is one of the companies that has made significant moves in these areas, institutionalizing innovation and bringing growth to itself. Mondelez's achievements in innovation are inseparable from its conceptual emphasis on the Chinese market. At the same time, product innovation is based on research into the Chinese market and consumer tastes, not just spontaneous innovation. Furthermore, the coordination from systems to organizational structure within the company ensures the implementation and efficiency of innovation. In the face of product decline, redefining itself as a leisure snack has created deeper interaction with consumers, enhancing product recognition and interaction. With Mondelez's strategic emphasis on China's e-commerce, e-commerce channels will become an important driver of business growth. While the rapid development of online channels can temporarily boost sales during promotions, it also puts pressure on the offline channels built over the years. Therefore, while playing with e-commerce marketing, Mondelez must also be wary of growth fatigue after consumer attention fades. In the fierce competition of the existing market, Mondelez not only competes with traditional big brands but also faces countless emerging local internet-famous brands. At the same time, as Mondelez expands into third- and fourth-tier cities, facing fierce competition, it still has a long way to go in cost control, channel management, and consumer communication to achieve good results. Source: Lishi Business Review (ID: libusiness) Tips will be paid 400-2000 yuan for any leads adopted.