Mondelez slims down after biscuit sector crumbles

Oreo cookies on a supermarket shelf in Shanghai. [Photo provided to China Daily]

Global snack leader Mondelez International Inc is slimming down its corporate operation in China to cope with failing revenue and rising costs.

The maker of leading biscuit brands, such as Oreo and Chips Ahoy, plans to close down its Shanghai factory and switch production to Suzhou in Jiangsu province of East China.

At one point, the Shanghai operation had four production lines with 400 employees.

Moves like this will save Mondelez 30 percent in labor costs, according to Zhu Danpeng, a food industry researcher with 21food.cn, an online blog focusing on the food industry.

"To further optimize our supply chain, Mondelez China has decided to shift certain production from our Shanghai facility to other manufacturing plants," Mondelez China said in a statement without disclosing exact figures of the cost-saving plan.

"We are in regular dialogues with employees who are affected by the change to ensure (they) are treated with respect and are provided settlement plans according to Chinese law and regulation."

Mondelez has considered it necessary to "adjust" its "sales model", so the company can "reinvest in brands" that appeal to consumers and fend off rivals in a highly competitive marketplace.

"Biscuits have become a secondary option in snack consumption," Zhu said, adding that consumer tastes have changed.

Costumers are now looking for more healthy options. Data from Kantar Worldpanel, the global consumer research company, showed that yogurts continued to post strong growth in China, while chocolates and biscuits dipped.

Biscuits sales growth dropped from 9.9 percent in 2013 to 8.4 percent last year. While the growth in cheese snacks climbed from 17.7 percent to 23.9 percent during the same period, according to Kantar.

Figures from Euromonitor International, the worldwide market intelligence firm in the United Kingdom, showed that Mondelez's share in the biscuit sector in China fell from 13.4 percent in 2013 to 10.3 percent this year. Market share of Mondelez has been declining due to weak performance of its main brand Oreo, Euromonitor pointed out.