Cadbury parent Mondelēz International missed expectations for second-quarter revenue, as budget-conscious customers opted for lower-priced alternatives amid sticky inflation.
While consumer packaged goods companies like Mondelēz International, Hershey have beefed up prices to counter higher costs of raw materials such as cocoa and sugar, demand for their products faltered.
Mondelēz's sales volumes dropped as lower-income consumers preferred cheaper private-label brands over its more expensive products including Chip Ahoy! and Oreo cookies.
The company's quarterly volumes fell 2.2 percentage points, while its prices were up 4.7 percentage points.
'Rethink Its Strategy'
Mondelēz "will have to rethink its strategy going into the second half of the year to keep shoppers from switching to cheaper competitors," Rachel Wolff analyst with eMarketer said.
Higher costs of transport, consumer promotions, as well as impact from 2023 divestiture of the developed market gum business have pushed Mondelēz's gross profit margins down by 590 basis points to 33.5%.
Larger industry peer General Mills also saw quarterly sales drop and warned of macroeconomic uncertainty leading to "value-seeking" behaviours of consumers.
However, consecutive price hikes as well as easing manufacturing helped the company surpass quarterly profit estimates.
Quarterly Highlights
On adjusted basis, Mondelēz earned a profit of 86 cents per share, topping estimates of 79 cents per share, according to LSEG data.
The company posted net revenue of $8.34 billion in the quarter ended 30 June, compared with analysts' average estimate of $8.45 billion, according to LSEG data.
Dirk Van de Put, chair and chief executive officer, stated, “We continued to execute against our strategic growth agenda in the second quarter with strong profitability and attractive cash flow generation.
“Our performance was fuelled by our commitment to reinvesting in our brands, capabilities, ongoing price execution and cost discipline.”
Outlook
The company expects organic net revenue growth to be at the upper end of 3%- 5% for full-year 2024.
Van de Put added, “We are well positioned for the second half of the year with the completion of European pricing, the addition of new value offerings in the US and significant distribution runway across key emerging markets.
“Our teams remain focused on delivering our long-term growth agenda while remaining agile in this dynamic operating environment.”
News by Reuters, additional reporting by ESM.
