Mondelez to lock horns with Mars & Nestle with its Cadbury 'Fuse'

The Cadbury distributors in Gujarat have gone on a boycott against the Cadbury-maker Mondelez International. The Gujarat Mondelez-Cadbury Distributors Forum has not engaged in any business with Mondelez India Foods Private Limited since six days now over issues ranging from its opposition to expanding distribution network through alleged phantom outlets to GST evasion through these outlets.

As per the estimates, there are 52 distributors of Mondelez in the state doing business worth Rs 400 cr per annum. Trouble has been brewing up between the two since February when the distributors formed a group to begin what they call a non-cooperation movement against the company.

“To show its retail penetration, the company forced each one of us to open multiple outlets periodically and linked incentives to the same. Since beyond a point that was not possible, we were forced to open dummy outlets through a company helpline number. Currently, there are about 10,000 bogus or non-existing outlets in Gujarat alone and we want the company to close them,” a representative from the forum said.

Mondelez India spokesperson said, “These allegations are false and baseless. As an ethical company, we never conduct business in a non-compliant manner. Our relationship – like many in the FMCG industry – is with our distributor partners to whom we sell stock. We work on an auto replenishment mode and our revenue is based on what we sell to these distributors – who in turn sell stock to retailers. No GST benefit can accrue to the company from fake outlets as alleged, since our systems are only enabled to sell to our distributor partners who are GST registered. Any inflation of retail outlets has no positive benefit, directly or indirectly, for our business.”

With GST now in place, distributors concerned feel this vicious cycle will collapse and they may come under tax scrutiny. “Mondelez has been showing expansion at our cost – these are bogus outlets – and are evading GST. We have become risk-managers for the brand and it is time we put an end to the malpractices.”

Chocolate maker Mondelez India and FMCG major HUL have  introduced the co-created 'Cornetto Oreo' in the frozen dessert cone category in the Indian market.

Cornetto is an ice cream brand owned by HUL's step down firm Kwality Wall's, while Oreo is a premium cookie brand owned by Mondelez India, the maker of popular chocolates like Dairy Milk, 5 Star and Gems.

Cornetto Oreo will be sold at Rs 60 across all major stores coming up in the country.

Mondelez India Head a Biscuits Category, Sudhanshu Nagpal said, "Cornetto too, with its smooth creamy texture, crispy wafer cone all the way to the chocolatey tip has garnered tremendous consumer love over the years. We believe in bringing delicious moments of joy to our consumers and the Cornetto-Oreo partnership will be an exciting one.”

According to the company, Oreo was introduced here by Mondelez India six years back and in such a short span, India has emerged among its top-five markets by volume.

Himanshu Kanwar, GM at Kwality Wall's at HUL said: "As a brand it is our continued effort to innovate and create products that consumers love. Through this launch, we wish to give romance and love a new expression."

Mondelez India Foods (formerly Cadbury India) owned by global confectionery major Mondelez International. Besides chocolates, its portfolio consists of beverage brand as Tang and Bournvita. Under its candy portfolio, It has also has HallsA and A Choclairs GoldA.

Cornetto is one the world's leading ice cream brands launched in 1960 in Italy and is owned by Unilever.

Mondelez said Indian business will be crucial to building its global ecommerce sales as the maker of Cadbury and Oreo strives for $1 billion in online sales by 2020.

Ganesh Kashyap, head e-comm, AMEA at Mondelez International said “As a company, we have taken a big bet to build a billion dollar business online in snacking by 2020. A third of that would come from Asian, the Middle Eastern and African regions and India will really be a key market for us. By 2020, online business will get to about 5% of our overall sales in India from less than 1% now. But the company also expects additional revenues to come from newer platforms it launched its own portal in India, marking its entry into the ecommerce business, especially to cash in on the premium gifting market. “We don't expect to be a retailer, but in gifting, there’s a real opportunity for personalisation of gifts. We as a company want to push the frontier in the space”.

Until now, the country’s largest confectioner has been selling its products online through marketplaces such as Big Basket and Amazon. Since last year, it has been deepening its relationship with them by having product customisation and promotions, exclusive to online. For instance, it set up a virtual chocolate store on Amazon India, launched Bournvita biscuits, Cadbury Fuse, Marvellous Creations and Silk Oreo first on various online portals before rolling them out at traditional retail stores.

The digital push comes at a time when health-conscious consumers are cutting back on discretionary spend, forcing chocolate and confectionery makers in India to post near-decade-low growth in sales last fiscal. Mondelez saw sales rise by about 6% in the year to March 2017, better than a year ago but far from the double-digit growth it had posted in most of the past decade.

Mondelez said e-commerce is showing signs of leapfrogging modern trade. In 2016, the company’s e-commerce net revenue grew more than 35% globally. China remains one of its biggest growth drivers with online sales already accounting for 10% of the country’s overall revenue.

It has been a long-running battle for snack maker Mondelez International, Inc. The company, maker of button-shaped Gems candy-chocolate and Dairy Milk chocolate bars, has been trying to convince the US and Indian regulators for seven years that allegations of it having set up a phantom factory in Himachal Pradesh and paid bribes to regularise it were just that — mere allegations.

According to a source at the Central Bureau of Investigation (CBI), a team from the US Department of Justice (DOJ) is likely to visit India in the next few days to interview former and current employees of Mondelez India, formerly Cadbury India.

Apart from an anti-corruption unit of the CBI assisting DOJ, the Indian agency’s local unit in Himachal Pradesh and India’s Central Vigilance Commission are also conducting separate investigations under the Indian Prevention of Corruption Act of 1988.

The case may also pit two of the most celebrated FCPA personalities against each other — Daniel Kahn who joined the DOJ in 2010 and Mark Mendelsohn who left the department in the same year for private practice.

Peter Carr in the office of public affairs, DOJ, said, "As a matter of policy, the department generally neither confirms nor denies whether a matter is under investigation."

The spokesperson of the company said, "We continue to cooperate with all authorities to address this matter, which relates back to 2010-11, through the administrative and judicial process. This includes providing our executives with appropriate legal support during the process. We firmly believe that the decision to claim excise tax benefit is valid and that our executives acted in good faith and within the law in the decision to claim excise benefit in respect of our plant in Baddi. We are not aware of any criminal proceedings having been initiated by any authority against our company or ex-employees."

The CBI source said DOJ officials may visit India soon and the employees would be called then for interviews.

US markets regulator the Securities and Exchange Commission (SEC) has charged snack-maker Mondelez International, Inc. with poor internal controls and violation of the Foreign Corrupt Practices Act (FCPA) in India.

Mondelez has agreed to pay USD 13 million (approximately Rs 90 crore) in civil penalties without admitting or denying charges that its subsidiary Cadbury India (now Mondelez India Foods) paid a consultant who was suspected to have bribed government officials and possibly top state politicians to obtain licenses and approvals for a chocolate factory in Baddi, Himachal Pradesh.

A company spokesperson said in a statement, "Mondelez International Inc. and Cadbury Limited are pleased to have reached an agreement with the SEC to settle charges related to internal controls and books-and-records provisions of the FCPA, without admitting or denying the charges. As part of the settlement, Mondelez International Inc. has agreed to pay a civil penalty of $13 million to resolve the investigation."

The issue relates to Cadbury India's largest manufacturing plant located in Baddi, Himachal Pradesh, which makes Bournvita, 5-Star bars and button-shaped Gems. According to the company's investigation, it sought to designate production lines of 5-Star and Gems as a separate unit (Unit II) to claim excise and income tax benefit of more than 60 million pounds (Rs 600 crore) over 10 years. It would have helped the company make an internal rate of return of 58.5 percent, documents show. It was suspected that the agent paid bribes to get the licences and approvals for the plant.

As of September 30, 2016, Indian tax authorities have demanded a total of Rs 820 crore in unpaid excise duties, penalty and interest, according to company filings with SEC.

A Mondelez spokesperson said, "We continue to hold that the decision to claim excise tax benefit is valid and that our executives acted in good faith and within the law in the decision to claim excise benefit in respect of our plant in Baddi. The matter is currently in the legal domain and therefore it would be inappropriate for us to comment at this time."

Maker of Cadbury chocolates and Oreo biscuits, India business of Mondelez, has witnessed the slowest growth in more than a decade last fiscal when demand for most discretionary products took a hit due to sluggishness in the economy.

According to its filling with the registrar of companies (RoC) , Mondelez India Foods posted a 4 percent growth in net sales for the year ended March at Rs 5,411 crore. Net profit dropped significantly to Rs 35 crore against Rs 98 crore in the previous year. The company had changed its financial cycle from December to March in the previous year.

For 15 months ended in March 2015, it had reported sales of Rs 6,507 crore. Mondelez maintained that India remains a high priority market for the firm.

A Mondelez India spokesperson, said, "We recognise that in the short term, the overall business environment has remained slack as demand was tepid in the domestic market. But as we invest into selling, marketing and people, we continue to protect our leading share positions in the near term."

The company spokesperson said, "Given our pace of growth we also need to attract the best talent from the market. So, when our former MD expressed a desire to move on, we decided an experienced leader from outside the business with extensive knowledge of the market was important for us to make the most of the significant opportunities for growth we see in India."

Mondelez International Inc, the owner of the Cadbury chocolate brand, has engaged bankers to explore the sale of a number of confectionery products including Terry's Chocolate Orange and Terry's All Gold, reported Sky News.

According to the report, of late Mondelez has realised that Terry’s brand chocolate is not its core business.

The group is planning to sale products in parts of United Kingdom, France, Spain and the Netherlands.

Terry’s which has its route back in 18th century was bought by Kraft Foods in 1993. And today, the sale is being he sale is being handled by Lazard, the investment bank that led Kraft's takeover of Cadbury in 2010, Sky News said.

And today, the sale is being undertaken by Lazard, the investment bank that led Kraft's takeover of Cadbury in 2010, added Sky News.

Kraft Foods Kraft Foods bought Cadbury for 11.7 billion pounds to create the world's top confectioner and has split its snacks and grocery businesses in 2012.