Van de put, CEO of Yizi, said at the Deutsche Bank global consumer conference that the company wanted to become the “leader” in the chocolate market and get rid of the business that “dragged down” the process. Last month, the snack giant announced the divestiture of the “Lotus” brand, which is also sold in China. The latter is considered to be “selling well” at present.
So, how does this snack giant plan to “climb to the top”? What businesses are you going to sell?
At present, Yizi has a product line of chocolate, biscuits and cookies, solid drinks, gum and candy.
When asked about Yizi’s divestiture criteria for non core assets at the meeting, fengpude said that chocolate and biscuits accounted for about 80% of Yizi’s product portfolio, with “amazing growth” in revenue and share in the past few years and double-digit growth in EBIT. Other categories, which account for about 20% of the product portfolio, are considered non core assets.
“The growth rate of [these categories] is obviously not that fast. And frankly, when we want to establish a stronger position in the chocolate and biscuits field, it is also dragging us down.” Fengpude said that stripping off some non core businesses can “provide (capital) firepower” for more acquisitions.
As introduced by the snack generation, Yizi announced last month that it would divest its chewing gum business from developed countries, but it would not affect China and other emerging markets. In addition, the company also plans to divest the global business of the “Lotus” brand, which mainly sells mint candy in China. Therefore, Yizi’s disposal of assets will also involve the Chinese market.
At the Bernstein strategic decision-making conference in 2022 held earlier this month, Luca zaramella, chief financial officer of Yizi, revealed that the revenue scale of the developed market chewing gum business and the global “Lotus” brand was about 500million US dollars (about RMB 3.357 billion).
He said that in the past few years, although these two businesses showed good signs of recovery from the impact of the epidemic, Yizi hoped that they could achieve a more robust performance than during the epidemic.
Zaramella also said that although it is confirmed that the gross profit margin of the divested business is higher than the average level of the group, Yizi must also consider the potential investment and capital needs. “To tell you the truth, I don’t think (divestiture) will have a significant impact on the company. We will spin off, and this work is being done at this moment.”.
Want to be a chocolate “boss”
In the chocolate and biscuit field that Yizi will focus on in the future, this snack giant is already one of the best.
Fengpude pointed out that Yizi has now ranked first in the global biscuit market, and its share is about five times that of its second competitor (Note: Campbell soup). In terms of chocolate, Yizi now ranks second in the world, “but its growth momentum is stronger than the first (Note: Mars).”.
Top 10 chocolate producers in the world (picture source: Yizi 2022 investor day conference materials)
“So I can predict that we will become the leader of chocolate.” Fengpude said that the driving forces behind Yizi include that Yizi is a highly global company with a rich portfolio of global and local brands.
“If you go to my hometown Belgium, we have Cote
d’Or. In Sweden, we have Marabou, in Britain, Cadbury, etc.” He said that more than 75% of Yizi’s business is outside North America, and it also covers all other major markets in the world, “and has done well”.
Although Yizi chocolate and biscuits are in the leading position in the world, they are still “partial” in some regions. “Some markets have a strong share of chocolate, but not so strong in biscuits. The reverse also exists. What are the overall opportunities in this market?” Asked the moderator.
In this regard, fengpude said that if you want to find a market where Yizi chocolate and biscuits rank first or second, “you can probably count it with one or two hands”. However, it also stressed that if Yizi has business in one market, it will be easier to develop another category because of the accumulation of brand and professional knowledge.
“Perhaps Oreo is an example. At this stage, 60% of Oreo’s business comes from the United States and China. But we think Oreo can grow by $1billion every three years.” He said that this growth mainly comes from the market where Yizi already has a place in chocolate or biscuits. At present, Oreo is a brand with nearly $4billion (about RMB 26.838 billion).
Cross border baking
According to Yizi’s idea, the great potential of chocolate and biscuits lies in that they can easily “pry” another big market: Bakery.
As introduced by the snack generation, Yizi’s long-term goal is to bring 90% of its income through chocolate and biscuits (including baked snacks), and to continue to “buy and buy” for this purpose. Its acquisition aims to expand its influence in chocolate, biscuits and baked desserts.
Yizi’s chocolate and biscuit brands rank first in many countries and even the world（
Speaking about the cross-border logic at the meeting, fengpude pointed out that, on the one hand, in consumer cognition, the boundary between biscuits and baked cakes is actually very vague, which makes Yizi have “inherent advantages”.
“When you walk in the supermarket aisle, you may think you are in the biscuit area you know, but it is actually a place selling soft cakes. The same brand will appear in that (two areas) and the shelves are adjacent to each other. Therefore, (baking cakes) belongs to the extension of biscuit shelves.” He also stressed that Yizi usually refers to a single package product, rather than a large cake.
On the other hand, fengpude pointed out that the selling price and profit of bakery products are higher, and the market scale and growth rate are very close to biscuits, which means that Yizi “has almost doubled the opportunities”. Taking Europe as an example, Vince Gruber, President of Yizi Europe, introduced at the meeting that the European biscuit market was about US $18.0 billion and US $19.0 billion, while the cake and pastry market was about US $17.0 billion and US $18.0 billion.
Gruber also pointed out that baked cakes can create synergy for Yizi chocolate, including taste, taste and brand value creation. Fengpude revealed that the company’s chocolate brands miaoka and Cadbury have launched packaged baked cakes.
In China, baked cakes are also regarded by Yizi as the “third driving force” for future growth.
Xiaoshidai introduced that in November last year, Yizi China signed and reached a strategic cooperation and investment agreement with Enxi village industry, a roaster. Yizi China will make minority equity investment in Enxi village industry. This is the first time Yizi has invested in a Chinese local food enterprise. This cooperation will help it expand its product category portfolio in the Chinese market and develop low-temperature and short shelf-life baking products of Yizi’s brands.
When attending the public event in March this year, Joost
Vlaanderen, President of Yizi Greater China, said that the two sides would launch a series of Oreo cakes from this year. “The scale of this category (Note: refers to packaged cakes) is very large, and the current growth rate has reached a high single digit.”.