USA- Mondelez International, a leading snacks and confectionery company, is beginning to observe early indicators of volume recovery as it navigates the complexities of rising cocoa prices and consumer pricing sensitivity.
During the Barclays Global Consumer Conference on September 4, 2024, CEO Dirk Van de Put addressed the company’s performance and future strategies, emphasizing the importance of balancing pricing with market share retention.
The company has experienced a challenging fiscal environment, particularly in the chocolate and biscuit segments, where it implemented a 4.7% price increase in the second quarter.
Despite this, Mondelez reported a 2.2% decline in volume-mix for the quarter ending June 30, marking the third consecutive quarter of negative growth.
Van de Put highlighted the disconnect between consumer reactions to pricing in Europe and the United States, noting, “In the US, I would say the frustration is much bigger than it is in Europe.”
He explained that while European consumers are experiencing inflation, they also see wage increases, which may mitigate their purchasing concerns.
In addressing the company’s pricing strategy, Van de Put stated, “We will have to do more pricing in chocolate,” while also acknowledging the need for a selective approach to avoid alienating customers.
He indicated that Mondelez is exploring various revenue growth management techniques, including introducing new products at different prices to optimise revenue without overwhelming consumers with price hikes.
“We won’t line price everything. We will launch some new items at different price points,” he explained.
CFO Luca Zaramella echoed these sentiments, expressing optimism about the potential for volume recovery in the latter half of the fiscal year.
He noted that cocoa prices have recently declined from their historical highs, and early indications suggest that the upcoming cocoa harvest in Africa could be 20-25% higher than last year.
“The goal is really to protect volume, to protect our share,” Zaramella emphasized, indicating that the company aims to maintain its competitive edge while managing costs.
In addition to pricing adjustments, Mondelez is eyeing potential mergers and acquisitions (M&A) to expand its presence in the cakes and pastries market, which Van de Put described as a “massive category” with significant growth potential.
He pointed out that cakes and pastries often share shelf space with biscuits, making it a natural extension for Mondelez.
“It’s a space that’s very fragmented. It’s about an US$80 billion market globally,” he noted, highlighting the strategic importance of this category.
Despite the challenges posed by inflation and shifting consumer behavior, Mondelez remains committed to innovation and marketing to drive growth.
The company has recently launched new products, including a low-calorie Cadbury treat aimed at health-conscious consumers, and is focusing on expanding its cookie and chocolate franchises.
Van de Put remarked, “We see a more optimistic view,” citing low unemployment and easing inflation in Europe as positive indicators for future growth.
As Mondelez navigates this complex landscape, its leadership remains focused on adapting to consumer needs while ensuring sustainable growth.
The combination of strategic pricing, potential M&A activities, and a commitment to innovation positions Mondelez to capitalize on emerging opportunities in the snack and confectionery market
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