In an exclusive podcast interview for WARC’s Marketer’s Toolkit, Mondelez’s Global Senior Vice-President for Consumer Experience and Digital Commerce, Jonathan Halvorson, spoke to WARC’s Anna Hamill about pricing strategies through inflation, the artificial intelligence revolution, and brand purpose in a polarised world.
This is an edited excerpt. To listen to the full interview on The WARC Podcast, click here.
Mondelez has been really bullish about growth over the last 12 months despite the wider macro challenges in a lot of the markets that you operate in. What's driving that optimism?
The optimism really comes from a few things. First of all, the strength of the brands. We know that the consumer is facing a more difficult environment, and they're having to make choices, but they continue to prioritise these indulgences and these moments of joy and pleasure that many of the brands inside of our portfolio provide. Ultimately, people are still sticking with Cadbury and Oreo and for many of those, it’s because it's an important part of their daily rituals and lives.
We're also in snacking, which is a growing category… Many people are shifting from having three meals a day towards snacking. It's just more of a commonplace behaviour. Third is, we're well-positioned from a geographic perspective. We have an enviable footprint in emerging markets, and in those markets we continue to win. That, coupled with our strong position in mass retail inside developed markets, is a winning formula.
How has that inflationary environment impacted how you marketed your brands over the last 12 months?
You have to be on top of what's happening in the macro environment. You execute in that macro environment, and it heavily impacts the consumer… I'd say what's really changed, first of all, is there's a huge focus on pricing. If you're going to ultimately be winning in this environment, you need to be very closely following your pricing, hitting key price points and making sure that you're meeting those pieces.
Second, I think that you need to be investing in revenue growth management (RGM). Do you have the right price/pack architecture? Do you have the right promotion levels? How are you ultimately bringing forth a really valuable bundle?
The third thing is you have to make sure you're investing behind your brands. (We’ve) been very clear about the need to invest behind our brands, and that that investment is what gives us the ability to price and go execute in the market. And then, lastly, you have to be managing your costs very carefully.
If you've built a really good winning business model, then the best thing you can do is put scale behind it. But I think all the work that we've done on cost discipline over the last several years is allowing us to accelerate and be confident about putting more scale behind the business.
How big of a role has building those strong brands played in minimizing price sensitivity for your consumers and also competing against private label brands?
Ultimately, the great assets of Mondelez are the brands. It is an unbelievably powerful portfolio and truly the envy, I think, of many other people in the marketplace. Your ability to have strong brands is what enables you to price because consumers have a clear demand for that and don't accept substitutes.
Closely behind it, though, I would call out product quality. The work that we have done in terms of building the right recipes, renovating those products, improving their quality versus competition is absolutely essential. And if you have the right product, and you build really strong brands and market them well, the consumers are gonna reward you on a very consistent basis.
Where do you see the growth potential for your brands going forward? And how does marketing play a role in making that happen?
We're a portfolio that has a lot of brands - there's over 240 unique brands inside the Mondelez portfolio… in a lot of other companies, a handful of brands would represent 80% of their revenue. In our organisation, it's a much broader portfolio. Oreo still has massive potential, Cadbury has massive potential… but there's also all these brands which are between $400 million and a billion dollars that we think can be powerhouse billion dollar brands.
That gets us really excited, because there you don't have just one or two choices in the portfolio, we have this huge, beautiful stable of brands that we think have huge growth opportunities. I've got to spend a little time with Clif, which is one of our recent acquisitions. There's a lot that they've done in sustainability, in terms of real brand discipline, and around distinct assets. That's super exciting for us.
We're seeing an evolution in the idea of what the purpose-driven brand is in 2023 and moving forward. How does Mondelez think about brand purpose for its brands?
One of the things that my boss Martin did really brilliantly when he came in is we defined a single way of work. He wanted to make sure that every brand could be cleanly and clearly articulated on a single page.
How we think about brand purpose is that it is born of two things: the first is a product truth. Every one of our great brand purposes are born out of a product truth. The second element is a human tension. Without the human tension, the brand purpose kind of becomes flabby and it's not that exciting. It's not that real, it doesn't have tension, and you're not going to be able to create great work or great marketing from that brand purpose. If you look at Oreo, the product truth is very simple: it's a black and white sandwich cookie that begs to be played with. The human tension is probably quite obvious - it's that as people age up, they lose their imagination in the world and they lose that sense of playfulness.
So the Oreo brand purpose is all about playful connections between people and making sure that comes to bear. That creates really brilliant work that you can ultimately play off: brand purpose can be as simple as creating playful connections. They're not all about changing the world and ultimately tackling every single issue. Playful connections gives the Oreo brand a lot of room to execute in a lot of different areas.
In today's world, there's a high degree of polarisation around a variety of different topics. How do you think that has impacted how marketers look at the opportunity for either social good campaigns or thinking about brand purpose?
Ultimately, your brand purpose is what guides you into these places. There is more polarisation in the world, there is more divisiveness, there's fewer homogeneous audiences in the world. What I think is important is that as you go into these spaces, it's being done quite intentionally… if your product truth and the human tension that you work against take you to those places that you need to go. What's important is that you do it in a very thoughtful way, that you really think out what your plan will be in terms of contingencies, and how you're going to execute. And then as you go into those spaces, you really demand executional excellence.
In our portfolio, you can look at what Oreo has done inside the US around diverse audiences born of an execution of a rainbow cookie well over 10 years ago, and how they built up that authentic execution space. I'd also point to Clif Bars as a great example in sustainability, where I think there's really authentic actions. It's really coming from a deep place of product truth and the brand purposes as to why they go into those spaces. They tend to be rewarded for their actions because of their real commitment to it.
How are you using Gen AI tools at the moment? Are you still getting the foundations in place?
I think everyone's still getting the foundations in place, inside the CPG world at least… I think there's a few places where it's interesting.
You can point to Cadbury’s Shah Rukh Khan-My-Ad work which won at Cannes again, this year in the creative effectiveness section. A real shout out to the entire India marketing team for continuing to push the envelope on that side, all the guys on the brand team are constantly pushing what I think is possible. Australia has done some great work. Our teams in Europe are exploring some opportunities, the US as well. But those are all isolated pilots. The question is, who is going to build a core competency and a real ability to produce assets at scale through Gen AI?
Very quickly, you can imagine a world in which every single one of our boards or creative test assets were generated out of Gen AI. That's probably something that should happen sooner rather than later, but I think will massively accelerate our ability to test….I think those are the big immediate use cases.
The question is, how do you build it into a scaled organisational competency? That is the obsession of every single day and every single week from here for the next 18 months, because it's a race you have to win. And I think what people don't realise is Gen AI is going to be a true form of competitive advantage. Because once someone starts running it, Gen, their advertising and marketing through Gen AI, with a really strong success signal, their marketing will just get honed and get so much better every single day, every single minute of it.
It's not just about the foundations of marketing science anymore. It's about being able to blend all of these different skill sets.
Yeah, and I think this has been going on for a while. I think the principles matter - like the more distinct your brand is, the better it will be on the outside. If you are not clear about your brand, AI will only distort that fuzziness and slow you down. Distinct brands still matter. Brand clarity, strategy, foundations, etc are more important than ever, even more important than perhaps in classical marketing.
We're going to have to learn all new skills. We had to learn new skills as we shifted from on to the internet, as we shifted from desktop onto mobile, and as we now move into a new age.
Sustainability and climate change is another really big, hot topic within your company. What are some of the key sustainability challenges that your company has?
The key thing in sustainability, first and foremost, is to have a strategy. This is where our leader on sustainability has done just an absolutely brilliant job of focusing on where things actually matter, i.e, a big focus on ingredients and on CO2 admissions. She's been unbelievably detailed as she rolled out our commitments on CO2 to make sure that there was a path to get there, and it wasn't just built on hopes and dreams in terms of what we're going to do. It’s across factories, across the organisation, across suppliers.
Ultimately, you need to be able to have a consistent supply chain with agricultural stability around all of these products that you have, right?
It's an imperative. The consumer wants both: they want a high-quality product at a reasonable price and they want it to be sourced sustainably. This is a place where they accept no compromise, and I think it's just absolutely essential.