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1700 Names to Choose From and Kraft Picks Mondelēz - Saibus Research

Research

1700 Names to Choose From and Kraft Picks Mondelēz

Kraft Foods (KFT) plans to change the corporate name of its global snacks company to Mondelēz International to better encapsulate the idea of a “delicious world” and its ongoing global push in advance of a split of the company into two. Mondelēz was inspired by the suggestions of two Kraft employees. It is intended to evoke the idea of a “delicious world” as “monde” is derived from the Latin word for “world” and “delez” as an expression of “delicious.”

Kraft said it asked employees from around the world to suggest names for the new company. More than 1,000 employees submitted more than 1,700 names for consideration. Mondelēz International is a mix of suggestions from two employees — one in Europe and one in North America. Kraft spokesman Michael Mitchell Mitchell explains some version of Mondelēz—pronounced “Mohn-dah-LEEZ”—was suggested by two employees in different parts of the world. The first was Johannes Schmidt, a 35-year company veteran working in information systems in Vienna. The other was Marc Firestone, Kraft’s general counsel.

The company’s shareholders will have to approve the name at a meeting in May. If approved, the name will take effect before the end of the year. The company has also reserved the stock symbol “MDLZ” for trading under the new name. The new stock symbol for its grocery business will be revealed at a later date. Sweets and chocolate manufacturers have for years played on this nostalgic power in advertising, leading to legendary brand names like Hershey, Cadbury, Tootsie Roll, Wrigley’s, Mars, Russell Stover, See’s and Nestlé’s. Mondelēz seems like a name that was chosen by that same committee that designed the camel. In this case it was inspired by an American lawyer and a Teutonic IT guy.

I think Warren Buffett, who owns 5% of KFT through Berkshire Hathaway (BRK.A) and (BRK.B), Bill Ackman of Pershing Square (1.2%) and Nelson Peltz of Trian Fund Management (0.8%) need to have a sit-down with Irene to discuss this silly brand name. For starters, how about Cadbury Foods International? We would expect this name to evoke the high quality English candy-making heritage of John Cadbury, who founded that company in 1824, as well as memories of the candy-shop scene in that delightful movie Willy Wonka and the Chocolate Factory. The Cadbury candy company even served as the inspiration for Roald Dahl’s book Charlie and the Chocolate Factory.

Milton Hershey’s name is still on the company he founded even though he had no heirs and the Cadbury’s had three generations of family members in the business (John, George and Egbert). Like Hershey, the Cadburys were noted philanthropists and shared a similar religious heritage, as Hershey (Mennonite) and Cadbury (Quakers) were part of peace faiths born out of a movement of groups who objected to basic tenets of the Church of England. Hershey manufactures and distributes Cadbury-branded chocolate in the US and evenexpressed interest in buying it.

If Cadbury sounds too British, how about Cadbury-Suchard Group as another alternative? The Suchard relates to Philippe Suchard, who founded Chocolat Suchard in 1824 and became a success in 1842 with a bulk order from Frederick William IV, king of Prussia, who was also the prince of Neuchâtel. This triggered a boom and soon his chocolates won prizes at the London Great Exhibition of 1851 and the Paris Universal Exposition of 1855. Seventeen years after his death in 1884 in Neuchâtel, his company produced the famous Milka chocolate for the Swiss market. Though the company’s most famous product is a milk chocolate candy bar (Milka), we would expect other legacy Suchard brands like Toblerone and Cote d’Or to evoke thoughts of a rich, decadent, premium European dark chocolate product in the minds of consumers.

If Cadbury Suchard doesn’t convey the message that the company offer more foods than sweets, how about Cadbury-Jacobs International? The Jacobs part relates to the Jacobs coffee company founded by Johann Jacobs in 1895 and which saw its biggest growth under Klaus J. Jacobs, who led the company from 1973-1990, acquired Interfoods to form Jacobs Suchard and sold it to Kraft in 1990. We would expect Jacobs to remind consumers of rich, premium creamy coffee.

It was suggested that Kraft chose the name because the international divisions had shown faster growth and would reinforce the global nature of this company, as well as serve as a corporate umbrella for the brands of the global snacks business. We think that Kraft should have used one or two of its iconic, incumbent brand names instead. Mondelēz in Russian refers to a vulgar slang term. For a company that seeks to be all things to all the peoples of the world, Kraft may have benefited from due diligence on what the term meant in the market(s) the company is in or seeks to enter.

Maybe Mondelēz could be a catch-phrase and even part of an advertising campaign by the new company. “Cadbury chocolates, Trident gum, Jacobs coffee Mondelēz!” But for a unifying corporate brand name, Irene Rosenfeld needs to scrap Mondelēz International and go back to the drawing board. The image Mondelēz may evoke amongst consumers may get lost in translation.

We were not only the only ones to mispronounce the name. Is it pronounced mon-dah-LAY? Mon-dah-LEZZ? Oh, it’s mohn-dah-LEEZ. That, according to corporate naming expert Nina Beckhardt, is the first problem with Mondelēz, the name Kraft Foods Inc. plans to give the new company. The second problem: What does it mean? The name is a combination of the word “monde,” derived from the Latin for “world,” and “delez,” an expression for delicious. The name might suit a company commanding $32 billion in revenue from Beijing to Berlin if the connection was apparent. It’s not, Beckhardt said. “The public gets sick of compressed words if the words aren’t intuitive,” said Beckhardt, founder and president of the Naming Group, a firm that has named shoes for Puma SE and high-end stereos for Sony Corp. “When the pronunciation isn’t accessible, it looks bad. It’s not intuitive.”

Despite this brand name snafu, we still like Kraft Foods Inc and the soon to be spun-off global snacks business due to the stable of iconic, billion dollar product brands in both companies, the above average dividend yield of Kraft Foods, strong turnaround by Irene Rosenfeld and we expect this transaction will create two leading food products companies within each company’s applicable market segments. However, we think Kraft needs a better corporate name for the global snacks business than Mondelēz.

Disclaimer: Under no circumstances must this document be considered an offer to buy, sell, subscribe for or trade securities or other instruments.

Disclosure: The author is long KFT shares.