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Mondelez spends $85m on Chinese biscuit plant expansion

By Oliver Nieburg+

14-Jun-2013
Last updated the 17-Jun-2013 at 11:29 GMT

China the #2 market for Oreo
China the #2 market for Oreo

Mondelez International has announced that it has begun expanding an Oreo and Chips Ahoy! biscuit plant based in the second largest market for both brands - China.

The firm’s existing biscuit plant in Suzhou, China, will double in capacity and add 340 new jobs in a bid “to meet the growing demand from Chinese consumers”.

The site will be 30,000 m2 when the project is completed by August 2014. 

China #2 market for Oreo

Shawn Warren, president of Kraft Foods China, said:"Since the introduction of Oreo and Chips Ahoy! to China in 1996, the country has become our second-largest market for these brands globally, after the United States, due to our consistent focus on quality, innovation and marketing.

“After this project is completed, the expanded plant will be a model in our global supply chain network."

Mondelez currently operates two manufacturing plants and a regional biscuit R&D center in Suzhou.

The Kraft Foods snack spin-off entered the Chinese market in 1984. It currently operates in the country as Kraft Foods China but plans to legally change its name this year. The company has around 5,000 employees in China across eight factories in Beijing, Suzhou, Shanghai, Guangzhou and Jiangmen.

Oreo growth in China

Mondelez biscuit strategy. Source: Barclays Back to School Conference (Sept 2012)

The China plant expansion is consistent with the firm’s emerging market strategy.

Mondelez’s global biscuit division is led by Lorna Davis who said at the September 2012 Barclays Back to School Conference that BRIC markets were the focus for the division – which is not the case for the chocolate and gum & candy divisions. 

The Oreo brand has grown rapidly in China. It has seen a 68% compound annual growth rate (CAGR) between 2009 and 2011 as sales rose from $130m to $375m.

The company has launched products to the market that cater to local tastes, including Oreo Wafer and Oreo Green Tea.

Mondelez’s biscuits arm, which also includes salty and other snacks, is the largest part of its business accounting for 30% of sales. Chocolate, through the Cadbury business makes up 27% of sales, while the gum and candy segment accounts for around 16%. Other categories are beverages, cheese and grocery.

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