Mondelēz struggles to keep pace with the global chocolate market in Q1

According to Nielsen, the global chocolate category grew 6.5% in Q1 as Easter shifted into the quarter, but Mondelēz’s chocolate business grew far below the overall market. Lagging behind the chocolate market “Our sales only increased slightly more than 1% with only about 35% of our revenue gaining or holding share. The softness was due primarily to our European business, which accounts for half of our global chocolate sales,” said Mondelēz chairman and CEO Irene Rosenfeld in the firm’s earnings call yesterday. “We've continued to experience some negative volume elasticity as a result of our decision to lead pricing to recover of higher input costs, especially in chocolate. However, we expect this pressure to ease in the back half,” she continued. Priced ahead of competitors The Cadbury and Milka brand owner introduced wholesale chocolate price increases last year in response to rising commodity prices ahead of its competitors Nestlé, Mars and Hershey later increased chocolate prices as well, but Mars only did so in North America. The company’s price hikes dented its earnings last year. In February, Mondelēz reported a 44% dip in 2014 net earnings, which it directly attributed to negative consumer response to price hikes negatively. The firm also said at the time it would exit some retail outlets in Europe that had refused to accept Mondelēz’s price increases. The price increases were met with retailer resistance in some European markets, especially France. Indian demand setback In Q1 2015, Rosenfeld said Mondelēz’s chocolate price hikes hit demand in Europe, but also India, where the company commands 62% of the chocolate market. But she said consumers would adjust to industry wide price hikes throughout the year. Despite the pricing setback, Mondelēz’s Indian sales were up mid-single digits and Cadbury Dairy Milk reached its highest market share of around 40%. Overall performance and chocolate outlook The company’s overall net revenues, including its biscuits and gum & candy businesses, fell 10.2% to $7.8bn in Q1 with the greatest losses in Europe and Eastern Europe, Middle East & Africa. But organic net revenues were up 3.8% and net earnings doubled to $312m compared to the same period last year. Rosenfeld said most of her firm’s competitors had now increased chocolate prices, but said it would take at least another quarter for those actions to be felt. “But I feel quite confident that we will see our chocolate shares rebound in the back half of the year,” she said.

Mondelēz struggles to keep pace with the global chocolate market in Q1

Mondelēz International has continued to grow below the overall chocolate market in first quarter of 2015 after it was the first to raise wholesale prices last year. However, it expects its chocolate business to rebound in H2.

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