Mondelēz International posted a rise in fourth-quarter sales, but price hikes took a toll on volumes as it squeezed demand for the Cadbury parent's chocolates and salty crackers.
While price hikes have helped the Toblerone parent improve its profit margin through fiscal 2023, it is now starting to see softer demand as cash-strapped consumers cut back spending.
In the North America segment, Mondelēz saw volume decline 5.5 percentage points (pp) in the fourth quarter owing to weaker biscuit sales and inventory control, down from a 4.6 pp rise in the previous quarter. Product prices in the region rose 7.4 pp.
Customer Disruption
The Ritz cracker maker said it 'expects customer disruption during the first quarter and potentially into the second quarter' in Europe, owing to still-high inflation.
The company reported an overall volume decline of 0.4 pp in the quarter, joining other consumer staples firms such as McCormick in facing the brunt of significant price increases.
"While other CPG brands that leaned on price hikes to drive growth had seen volumes decline in Q3, Mondelēz managed to grow its volumes. But now Mondelēz's price hikes are catching up to it," said Insider Intelligence analyst Zak Stambor.
Quarterly Highlights
Gross profit margin of 37.3% exceeded market expectation of 36.7%, but was lower than 38.7% it logged in the prior quarter.
Net revenue rose 7.1% to about $9.31 billion (€8.61 billion) in the quarter ended 31 December compared with $8.70 billion (€8 billion) a year ago, meeting analysts' average estimate, according to LSEG data.
Mondelēz also joined Starbucks to flag a hit to its business due to the Israel-Hamas war.
"There is some tensions in the Middle East, and that has some effect on Western brands, and we have some of those Western brands," Mondelēz executives said in a post-earnings call.
For 2024, it projects organic net revenue growth of 3% to 5% and a high single-digit rise in adjusted profit per share on a constant currency basis.
Read More: Consumer Goods Giants Could See Margin Recovery Halt As Price Hike Benefits Abate
