Mondelez CEO brushes off talk of merger with PepsiCo, refuses to 'comment on the chatter'; comments come following disclosure by investor Nelson Peltz of increased positions in both companies

Nevin Barich

CHICAGO , May 8, 2013 (Chicago Tribune) – Mondelez International CEO Irene Rosenfeld sought to side-step speculation that her newly formed company may be on the brink of its third major event in as many years in a call with investors Tuesday.

"There's no question that there's lots of chatter out there, and I'm not going to comment on the chatter," Rosenfeld said, alluding to rumors that investor Nelson Peltz has been amassing stock in Mondelez to merge it with the snack-foods business of PepsiCo Inc. "We have created a very unique company with tremendous opportunity for growth."

She added that "consumer demand for snacking is growing at a very healthy rate around the world, especially in emerging markets," a primary factor in the decision to focus on that part of the business.

Mondelez, the Deerfield-based package food maker of Oreo, Triscuit and Tang, was known as Kraft Foods until October, when it spun off its North American grocery business including Philadelphia, Kraft, Maxwell House and Planters.

Last month, activist investor Peltz disclosed increased positions in Mondelez and PepsiCo, leading to speculation that he may be on the verge of pushing for a merger of the food and beverage giants. Peltz is widely seen as the architect of Kraft's Cadbury acquisition. As a significant Cadbury investor, he pushed for the spin-off of what's now known as Dr Pepper Snapple Group.

In early 2011, Rosenfeld acquired Cadbury, and products including Milka and Toblerone chocolates and gums such as Trident, Dentyne and Stride.

PepsiCo CEO Indra Nooyi has for years faced concerns about the long-term prospect of its bottled beverage business, as soda consumption is expected to decline. Pepsi's Frito-Lay division, whose stable includes Doritos, Tostitos and Lay's, however, has been a dependable growth driver.

Rosenfeld is a former CEO of Frito-Lay.

"While Mondelez is only beginning to exploit the potential opportunities that should result from operating as a focused global snacks business, the looming question is whether management would view a tie-up with PepsiCo favorably, as has been suggested," Morningstar analyst Erin Lash wrote in a research note.

She added that while her firm believes "any deal could unlock additional value for shareholders," it remains to be seen whether the two companies could reach a deal, credit markets would support "the nearly $46 billion of debt needed to consummate" it or whether regulators would approve it.

Peltz's Trian Fund Management did not immediately respond to a request for comment.

Tuesday, Mondelez International reported first quarter earnings up 9 percent, to 34 cents per share, thanks in part to favorable tax rates.

Sales excluding the effect of currency and divestitures rose 3.8 percent to $8.9 billion for the quarter ended March 31.

Rosenfeld has a stated long-term goal of increasing sales 5 to 7 percent, without acquisitions, divestitures and currency. Lower coffee commodity prices hurt the company in the first quarter, reducing by 1.3 percent.

Sales in its gum business declined 1 percent overall and in the "high teens" in North America.

Its North American gum sales have been slipping since the recession, and the category has been contracting. Rosenfeld has often pointed to declining disposable income among teenagers, gum's most loyal users. Mondelez is the No. 2 gum maker, behind Wrigley.

Rosenfeld said the company is testing a number of ways to reverse these trends, including smaller packs at lower prices, larger packs providing value for the money and advertising that stresses the functional benefits of gum, such as oral health.

However, she said, "we're not counting on a significant turnaround in the gum business this year."

Mondelez raised full-year earnings guidance three cents, to $1.55 to $1.60.

Shares rose 1 percent to close at $31.41 following the late-afternoon release.

eyork@tribune.com -- twitter: @emilyyork

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