Mondelez International, a global snack food company created in November when it split off from Kraft Foods, has earmarked $100 million for investment in emerging markets this year, according to a report in FinancialMail.
The company, whose name means “delicious world” in Latin and other Romance languages, has developed a huge appetite for the Southern and Central East African markets, the report said.
It is not alone. Competition in developing African economies is heating up for a share in the candy or “sweets” market.
The most compelling markets for Mondelez are South Africa, Nigeria and Egypt, given their populations, economic growth and consumption patterns, the report said. South Africa is considered a key hub in Africa, said Mario Adams, director of strategy. Mondelez also has hubs in Nigeria, Egypt and Morocco.
Sales growth in developing markets is expected to be disproportionately higher than in Europe and North America, Adams said.
The group’s Port Elizabeth plant, which manufactures chocolate, is one of its biggest facilities globally. It also has sites in Swaziland and Botswana.
Over the past five years Mondelez has invested more than $100 million in capital expansions in Southern Africa.
“It’s important how we use these facilities as a supply and export hub and how we penetrate Africa from here,” says Gawad Abaza, who took over in April as Mondelez South Africa managing director.
In October, Kraft Foods split into two Nasdaq-listed companies: Kraft Foods, the mature North American grocery business; and Mondelez International. Kraft Foods South Africa changed its name to Mondelez South Africa at the end of July.
Hershey is also expanding into emerging markets with plans to expand international sales to 25 percent of global sales by 2017, up from its current 10 percent. Nestlé and Hershey are in acquisition talks, according to financial services company Motley Fool, the report said. Nestlé wants to buy Hershey, which has strong brand recognition in North America and has been growing in China.
Swiss-listed Nestlé has been in Nigeria for almost a century, with two factories and a distribution center. The group is expanding operations in Zambia and last August opened a factory in Angola, following the start-up of two manufacturing units in South Africa.
Key to the success of companies selling snacks and sweet treats in Africa is tailoring their propositions and localizing product, the report said. This includes changing pack sizes and making prices relevant to the market.
Mondelez offers Lunch Bar and P.S. chocolates in an affordable mini-format, while another big player in the African market, South African company Tiger Brands, adapts the ingredients of its bread to match local taste profiles in markets such as Nigeria.
Marcia Mogelonsky, director of insight at Chicago-based Mintel, a market research firm, said pickings are rich, but this must be tempered with the reality of doing business in Africa, where risks such as lack of infrastructure, income disparity, cross-border commerce and red tape are prevalent.
But as one of the last “untapped” frontiers, “it is likely that Africa will prove irresistible to multinationals looking for new horizons,” she said.