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Oreo maker selling cheese, grocery businesses
Food » Mondelez International separates European operations for potential sale.
First Published Jul 11 2014 06:11 pm • Last Updated Jul 11 2014 06:11 pm

London - The maker of Oreo cookies is separating its European cheese and grocery business in a move that may lead to a sale or spinoff, according to a person familiar with the matter.

The creation by Mondelez International Inc. of a stand-alone unit with about $1.4 billion in sales comes as the company jettisons coffee and focuses on faster-growing snack brands amid pressure from activist investors Ralph Whitworth and Nelson Peltz. The strategy may pave the way for an exit from the cheese and grocery business, said a person with knowledge of Mondelez’s deliberations, who asked not to be identified as the plans are private.

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Detaching cheese and grocery operations in Europe comes two months after Mondelez agreed to split off its coffee unit to form a new entity, along with D.E Master Blenders 1753 BV, to be called Jacobs Douwe Egberts. Mondelez generated 3.9 percent of its $35.3 billion in revenue last year from European cheese and grocery, according to its annual report.

"Given the impact of the coffee transaction on our European operations, we’ve decided to create a predominantly stand-alone cheese and grocery category in Europe," Mondelez spokesman Mike Mitchell said. "We continually review the brands and products within our portfolio and their role."

The unit includes Philadelphia cream cheese, a brand founded in 1880 that Mondelez sells outside North America, as well as regional cheese brands Sottilette and El Caserio. Mondelez, based in Deerfield, Illinois, split off from Kraft Foods Inc. in 2012.

Thomas Armitage, a spokesman for Mondelez Europe, declined to comment on whether the separation is intended to lead to a sale or spinoff.

Cheese and grocery, the company’s smallest segment, will account for only 10 percent of Mondelez’s European sales once the coffee business departs, Mitchell said. Chief Executive Officer Irene Rosenfeld is increasingly focusing on faster- growing, more profitable snacks like biscuits, chocolate and gum, which account for three-quarters of sales. In a 2013 investor presentation, the company said cheese and grocery was its slowest-growing segment.

Rosenfeld is under pressure from Whitworth and Peltz, who want the company to improve margins and deepen cost cuts. Peltz joined Mondelez’s board this year. The company has forecast adjusted operating income margins to widen from 12 percent last year to between 15 percent and 16 percent by 2016. Margins narrowed 0.2 percentage points last year.

The cheese and grocery division will be part of Mondelez and its chief, who is yet to be named, will report to Mondelez Europe President Hubert Weber, Mitchell said.

Asked in a May teleconference about a possible divestment of the cheese and grocery business, Rosenfeld said the coffee sale was a "unique opportunity for us to create value, and we are not going to get into any other hypotheticals at this point in time."

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